INDIA Law and Practice Contributed by: Nitin Sarin and Vistasp Irani, Sarin & Co
2.9.9 Ipso Facto Defaults Ipso facto defaults are regular inclusions in lease transactions relating to aircraft in India and would be recognised to repossess an aircraft during lessee insolvency proceedings. Defaults under the Code that arose during the COVID-19 pandemic have been excluded from the period from 25 March 2020 to 24 March 2021. 2.9.10 Impact of Domestic Lessees’ Winding-Up In cases where a domestic lessee is wound-up, an aircraft on an operating lease may be taken back by its owner, and the lease agreement would no longer sub - sist. All rights flowing from the lease – rent, security deposit and maintenance reserves – would also end. 2.10 Cape Town Convention and Others 2.10.1 Conventions in Force The 2001 Cape Town Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment (Aircraft Proto - col) are in force in India. However, several implementa - tion issues have been dealt with over the years by the Ministry of Civil Aviation, which has been holding fre - quent consultations with the Aviation Working Group. Various amendments have been made to India’s subordinate legislation – ie, the Aircraft Rules, 1937, Civil Aviation Requirements (CARs) and AICs, which enshrine the tenets of the Cape Town Convention. The Aircraft Objects Act was recently passed by the Indian Parliament and came into force in May 2025. This legislation gives legal effect to the Cape Town Convention and its Aircraft Protocol within India, thereby aligning India’s domestic laws with interna - tional standards for aircraft financing and leasing. The key provisions of the Act include the following. • Legal effect: the Convention and Protocol now have the force of law in India, subject to the decla - rations made by India. • Registry authority: the DGCA is designated as the registry authority responsible for the registration and deregistration of aircraft. • Remedies in case of default: creditors are entitled to exercise remedies under the Convention or Pro - tocol upon declaring a default to the DGCA. These
• an insolvency resolution process; or • liquidation.
A creditor or the corporate debtor itself must apply to the NCLT to initiate the CIRP of the debtor company. Once a corporate debtor is admitted into the CIRP, its board of directors is suspended and its management is placed under an independent “interim resolution professional”. Simultaneously, a moratorium takes effect, which prohibits: • the continuation or initiation of any legal proceed - ings against the corporate debtor; • the transfer of its assets; • the enforcement of any security interest; • the recovery of any property from it by an owner or lessor; and • the suspension or termination of the supply of essential goods and services to it. However, as per the notification dated 3 October 2023, this moratorium shall not apply to transactions, arrangements or agreements under the Cape Town Convention and the Protocol relating to aircraft, air - craft engines, airframes and helicopters. The moratorium lasts for the duration of the CIRP peri - od – ie, 180 days extendable by another 90 days (or any further time the tribunal may deem fit, not exceed - ing 330 days in total). The interim resolution profes - sional will then invite and verify claims made by the corporate debtor’s creditors, classify them, and form a committee of creditors comprised of all the financial creditors of the corporate debtor, who shall, in turn, appoint an independent professional to function as the “resolution professional”. Any resolution plan for the revival of the company needs to be approved by financial creditors holding 66% of the voting share. If no plan is approved by the committee within the timeframe available, it may opt for liquidation. The NCLT is then required to order the liquidation of the corporate debtor. If an order of liquidation is passed, a liquidator will be appointed to sell the assets of the corporate debtor and distribute the proceeds among the creditors.
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