The Ministry of Civil Aviation has proposed a new law that will help international aircraft leasing companies to reposess and transfer planes out of India incase of a financial dispute with an Indian airline at a time many regional airlines have been refused planes on rent.
The Ministry has sought stakeholders' comments on the draft Protection and Enforcement of Interests in Aircraft Objects Bill, 2022. The Bill implements the provisions of the Convention on International Interests in Mobile Equipment and Protocol on Matters Specific to Aircraft Equipment which was adopted at a conference in Cape Town in 2001. India acceded to the two instruments in 2008. These provide default remedies for the creditor and create a legal regime for disputes.
In its explanatory note, the Ministry says the draft legislation is necessary because several Indian laws such as the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016 are in conflict with the Cape Town Convention and Protocol. It says that Indian entities have also suffered as international financial institutions demand an implementing legislation.
The proposed law provides remedies such as repossession of an aircraft object, or its sale or lease or collection of income from its use as well as de-registration and export of planes. It also suggests remedies pending final adjudication of a claim as well as safeguards a debtor's claim during insolvency proceedings against its Indian buyer.
"Many smaller airlines are finding it challenging to get leased aircraft as lessors see a lot of exposure because the cost of recovery of assets is exorbitant and time consuming" says Vishok Mansingh of Vman on why this legislation is important. International leasing companies also faced challenges in reposessing and exporting aircraft when Jet Airways shut down in 2019 and failed to pay its aircraft rentals.
