In a recent and significant judgment by the Delhi High Court, multiple writ petitions involving the deregistration of aircraft leased to Go Air (India) Ltd. were adjudicated. This judgment elucidates the interplay between the Indian Bankruptcy Code, 2016 (IBC) and the Aircraft Rules, 1937.
The Heart of the Matter
The principal issue at the heart of W.P.(C) 6569/2023 and connected petitions was the failure of the Directorate General of Civil Aviation (DGCA) to deregister aircraft despite the lessors' compliance with the stipulated deregistration procedures under the Aircraft Rules, 1937. This situation arose following the initiation of a Corporate Insolvency Resolution Process (CIRP) against Go Air under the IBC, leading to a statutory moratorium, despite the fact that the owners/ lessors had made the request for de-registration prior to the imposition of moratorium.
Judicial Reasoning and Decision
The Delhi High Court, in its detailed judgment, made several key observations and rulings:
1. Jurisdiction and Powers of DGCA:
The Court clarified that the powers to deregister aircraft are squarely within the purview of the DGCA under the Aircraft Rules, independent of the insolvency proceedings under the IBC. It emphasized that deregistration is a statutory obligation that does not necessitate the consent of the lessee, Go Air in this instance, once the requisite conditions are fulfilled.
2. Interplay between IBC and Aircraft Rules:
A significant portion of the judgment was dedicated to discussing the relationship between the IBC and the Aircraft Rules. The Court noted that while the IBC provides a comprehensive framework for insolvency and bankruptcy matters, it does not supersede specific provisions of the Aircraft Rules concerning the deregistration of aircraft, which are governed by international treaties such as the Cape Town Convention.
3. Impact of the Moratorium under IBC:
The Court observed that the moratorium under IBC Section 14 does not prohibit the deregistration of aircraft. The ruling clarified that the moratorium is intended to preserve the assets of the debtor during the insolvency process but does not override the lessors' rights under international conventions and specific aviation regulations.
Implications for the Aviation Industry
This landmark judgment has several implications for the aviation sector, particularly concerning the leasing and financing of aircraft:
• Clarity on Legal Procedures: The decision provides much-needed clarity on the procedures and rights related to the deregistration of aircraft, affirming the supremacy of international treaties and custom over domestic insolvency laws in specific contexts.
• Reinforcement of Lessors' Rights: It reinforces the rights of aircraft lessors, ensuring that their interests are safeguarded during the insolvency proceedings of domestic carriers. This is pivotal for maintaining foreign lessors' confidence in the Indian aviation market.
• Streamlining of Insolvency Processes: The judgment streamlines the interplay between insolvency proceedings and sector-specific regulations, which could lead to more efficient handling of similar disputes in the future.
The Delhi High Court's judgment in the case of aircraft deregistration amidst insolvency proceedings marks a critical juncture in Indian commercial jurisprudence. It not only reaffirms the autonomy of regulatory authorities like the DGCA in their statutory functions but also harmonizes the application of insolvency laws with international aviation agreements. This ruling is a step forward in enhancing the predictability and reliability of Indian legal processes concerning the global aviation finance industry.
Set of Petitioners in the batch of 14 Writ Petitions were represented by advocates Mr. Ankur Mahindro, Mr. Rohan Taneja and Mr. Aditya Kapur.
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