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Published by Enhelion, 2020-07-04 01:33:06

Module 4

Module 4

MODULE 4
REPOSSESSION AND EXPORT OF LEASED AIRCRAFT

4.1 INTRODUCTION

Earlier, majority of the airlines were government owned, hence, the funds for aircraft acquisition were
backed by the government itself.1 From 1990s privatization in India, the doors of airline sector are
open for the private entities. The private players do not have a strong backbone like government
owned airlines and they have to figure out their own ways to arrange funds for aircraft acquisition and
other operations. Arranging hefty amount of funds have always been a major financial distress for
such entities. Even globally, the airlines suffered same financial difficulties in their operations. Being
private players, airlines had to figure out their own ways of arranging exorbitant funds for aircraft
acquisition for several years until the arrival of financing and leasing option in the market. Gradually,
this alternative business method became most popular among the players of the aviation market.

Historically, aircraft objects2 used to hold a share of 80-90 per cent of total capital expenditure of the
aircraft operators.3 In the past few decades, business strategies and methods have evolved and airlines
have shown their steep inclination towards leasing and financing the aircrafts.4 Like every business
method, this option also come up with its own pros and cons. The option of repossession, re-sell or re-
leasing has been a censorious factor in the financing of aircraft acquisitions. The default leading to the
steady step of repossession entails a breach by a counterparty or failure of the counterparty to comply
with the terms and conditions of a lease agreement. The common events of default occurring are
failure to meet the lease rental obligations, insolvency/bankruptcy of the airline. Other defaults which
persist are failure of payment of navigation charges or any other obligated charges, suspension of
operations and revocation of license or permits held by the aircraft operator.5 Occurrence of such
events, provides right to the lessor to initiate repossession proceedings against the lessee.

Access to the remedies mentioned under a lease agreement were not as simple as it looked while
reading the lease agreement. It was filled with various legal hurdles, complications, sloppiness,
financial and mental distress for the lessors. In 2001, to fast track and standardize the access to such

1 Arijit Mazumdar, Deregulation of the Airline Industry in India- Issues, Causes and Rationale, The Indian
Journal of Political Science, Vol. LXX, No. 2, April-June, 2009.
2 Article I (2) (c) and II (1) of the Protocol.
3 Peter S Morell, Airline Finance, 4 Edition, p. 107.
4 INSOL International, Aircraft repossession upon a default- a review of the issues in the United Kingdom, USA,
India and Nigeria (Technical paper series no. 45), November 2019.
5 INSOL International, Aircraft repossession upon a default- a review of the issues in the United Kingdom, USA,
India and Nigeria (Technical paper series no. 45), November 2019.

1

remedies, a diplomatic conference was held in Cape Town, South Africa which led to the introduction
of the Convention on International Interests in Mobile Equipment (hereinafter referred to as “ the
Convention”) and the Protocol on Matters Specific to Aircraft Equipment (hereinafter referred to as “
the Protocol”).6

4.2 RELATION BETWEEN REPOSSESSION AND EXPORT OF AN AIRCRAFT

Repossession means taking back the control and possession of the aircraft. Typically, the lessor
repossesses its leased aircraft upon occurrence of any event of default by the lessee prescribed under
the lease agreement. After receiving the legal clearance to repossess the aircraft (Deregistration
permission), the lessor makes arrangements of exporting it from the State it was deregistered from to
the state it will be registered under after exportation (lessor decides). Export of an aircraft provides for
certain legal requirements which are deemed to be fulfilled before the aircraft is finally exported from
the country.7

4.3 OVERVIEW OF THE REPOSSESSION MECHANISM

General steps involved in aircraft repossession upon default are:
a) Breach of Event of Default mentioned under the lease agreement and issuance of grounding
notice in respect of the aircraft;
b) action of arrest of the aircraft, which includes access to the airport;
c) deregistration of the aircraft from the Registry of the State holding its registration;
d) export of the aircraft upon completion of deregistration procedures; and
e) access to the aircraft’s original documents.8

4.3.1 Default and Grounding notice
When the default is established, the lessor serves a notice of default in accordance with the terms of
the agreement. The notice clearly specifies that if such default is not corrected within a specified
period of time, the agreement will stand terminated and the operator must not fly the leased aircraft
and it shall be grounded on a specified airport by the operator. The term “grounding of aircraft”
means cessation of the commercial operation or regular operations of the aircraft. upon, event of
default, the lessor may simply issue a “grounding notice” to the lessor (in accordance to the terms of
the agreement). The grounding notice serves the purpose of keeping the leased aircraft in a particular

6 Discussed under Chapter 2.
7 Sarin & Co., Aircraft Repossession in India: An 2017 Overview, May 21, 2017.
8 See Supra Note 8.

2

preferred location of the lessor, meanwhile, the lessor pursues the repossession procedures. In case the
aircraft operator, ignores the notice of the lessor, it will amount to further breach and the lessor may
seek the help of the Court to enforce such notice. The rights such as grounding of aircraft, accrues
from the lease agreement between the lessor and the lessee.9

4.3.2 Arrest or seizure
The arrest or seizure of aircraft is sought with the grounding the aircraft with the assistance of the
court order from the court in whose jurisdiction the aircraft is located. The seizure order may not
necessarily grant the right to the lessor to change the seizure location of the aircraft.10 Upon seizure of
the aircraft, the lessor typically, initiate repossession proceedings via. Irrevocable Deregistration and
Export Request Authorization (IDERA) mode prescribed for such circumstances.11

4.3.3 Deregistration of the aircraft
Upon receiving the permission of deregistration of aircraft, the aircraft is deregistered from the state’s
Registry12. Under Chicago Convention,13 each aircraft has its nationality to the state where it is
registered. An aircraft cannot be registered in more one state but its registration can vary from one to
another,14 provided that such registration is in compliance with the laws and regulations of the
Contracting State where the aircraft is registered.15

4.3.4 Export of the aircraft
The export of the aircraft is extremely essential as it is final stage of the repossession procedures. It
involves involvement of various aviation authorities. The export clearance is not provided unless all
the dues of the aircraft due to various authorities are paid.16
4.3.5 Access to the aircraft’s original documentation
The aircraft operators are heavily regulated due to the requirements they have to meet for the airline’s
safety operations. An aircraft value becomes questionable in absence of its supporting
documentations. Document such as logbooks and records, documents expected at the time of
redelivery of the aircraft, from suitability to back-to birth traceability documents for aircraft
components, airworthiness documents, documents providing for ownership and proprietary or security

9 INSOL International, Aircraft repossession upon a default- a review of the issues in the United Kingdom, USA,
India and Nigeria (Technical paper series no. 45), November 2019.
10 Ibid.
11 Article XIII of the Aircraft Protocol.
12 DGCA maintains the Aircraft Registry in India.
13 The Convention on International Civil Aviation, December 7, 1944.
14 Ibid. Article 18.
15 Ibid. Article 19.
16 See Supra Note 12.

3

interests, maintenance and operations history etc. The point where the access to such documents is
gained is the most critical part of a successful repossession.17

4.4 INTERNATIONAL STATUS OF AIRCRAFT REPOSSESSION

As on May 29, 2020, there are 80 parties to the Convention on International Interests in Mobile
Equipment.18 As years pass by, issues related to aircraft repossession were piling up, and it hit the top
in various states resulting in their accession to the Convention. In the following years since
introduction of the Convention in 2001, the countries significantly found the application of this
instrument pragmatic and utilitarian.

4.4.1 World Aircraft Repossession Index
As per November, 2018 data of World Aircraft Repossession Index,19 India attains very bad position
among the leading nations when it comes to aircraft repossession. The data was calculated
considering all the relevant factors, namely, Repossession, Insolvency, Deregistration, Export,
Judgements and Arbitral Awards, Preferential Liens and Political Stability in the State. These factors
form the repossession risk in a State. The factors have their respective weighting shares which in total
comprise of their score out of 100 per cent.20 The evaluating sub-factors under the abovementioned
factors along with their contribution in the total share are produced below:

Factor 1: Repossession (22.5%) includes evaluating factors such as self-help remedies, requirement
for a deposit, bond or other security in judicial proceedings, repossession taxes and fees, speed of
repossession, legal cost of repossession and ASU Cape Town Discount or Qualifying OECD Status.
Factor 2: Insolvency (12.5%) includes evaluating factors such as sophistication of insolvency laws,
insolvency moratorium and overriding of the lessee’s insolvency estate.
Factor 3: Deregistration (10.0%) includes evaluating factors such as third party deregistration rights
and convenience of deregistration
Factor 4: Export (10.0%) includes evaluating factors such as third party export rights and export
license and permits.

17 INSOL International, Aircraft repossession upon a default- a review of the issues in the United Kingdom,
USA, India and Nigeria (Technical paper series no. 45), November 2019.
18 UNIDROIT, Convention on International Interests in Mobile Equipment, https://www.unidroit.org/status-
2001capetown.
19 Worlds Aircraft Repossession Index, Pillsbury, Third Edition, November 2018. See
https://www.pillsburylaw.com/images/content/1/2/v3/120554/BOOK-World-Aircraft-Repossession-Index-
Third-Edition.pdf.
20 Ibid.

4

Factor 5: Judgements and Arbitral Awards (7.5%) includes evaluating such as enforceability of
judgements and enforceability of arbitral awards.
Factor 6: Preferential Liens (7.5%) includes evaluating factors such as onerous and unusual
preferential liens-non possessory liens, onerous and unusual preferential liens- fleet-wide liens,
onerous, unusual preferential liens- liens in favor of a lessee or debtor and government requisition and
confiscation.
Factor 7: Political Stability ( 30.0%) includes evaluating factors such as OECD status, sovereign
credit rating, world justice project- rule of index (2017-2018), Heritage Foundation- 2018 index of
economic freedom and World Economic Forum.21

Figure 1: Data provided under World Aircraft Repossession Index22

Countries Total

New Zealand 97.1%

Australia 96.6%

United States 96.3%

Netherlands 96.0%

Canada 95.8%

Singapore 92.9%

United Kingdom 89.6%

Singapore 89.6%

Ireland 88.4%

Germany 87.1%

Spain 85.5%

Israel 85.5%

France 79.4%

Sweden 78.3%

Italy 68.9%

Japan 68.3%

South Africa 63.8%

China 62.4%

Pakistan 61.3%

India 43.2%

21 Worlds Aircraft Repossession Index, Pillsbury, Third Edition, November 2018. See
https://www.pillsburylaw.com/images/content/1/2/v3/120554/BOOK-World-Aircraft-Repossession-Index-
Third-Edition.pdf.
22 Ibid.

5

In Figure 1, it can be observed that where India’s neighboring countries, Pakistan and China, hold
61.3% and 62.4% score respectively, India is limited to 43.2% under the same Index. The data given
below contains few States for basic comparison.23 No doubt India has to pull up its sock to come
among the top.

Figure 2: Data provided under World Aircraft Repossession Index24

Total Weighting of Factors Factors Score Attained
22.5% Repossession 21.4%
12.5% 40.0%
10.0% Insolvency 0.0%
10.0% Deregistration 75.0%
7.5% 100.0%
7.5% Export 50.0%
30.0% Judgements and Arbitral Awards 48.6%
43.2%
TOTAL- 100% Preferential Liens
Political Stability

The snail walk demonstrated by India for approximately two decades in giving proper validity to the
Convention and the Protocol under Indian legal system has attracted an international perception
towards the nation’s priorities. After accession to the instruments in 2008 and passing an decade of
struggles upon lessors, in 2018 India introduced the Cape Town Convention Bill which is still lying in
the parliament for enactment procedures.

Further, the given data provides for 0 percentage to the deregistration’s in India. As prior to Jet
Airways case25, it became a common notion that aircraft deregistration’s in India is a path full of legal
battles and struggles. The hard time faced by lessors during the Kingfisher Airlines insolvency and
SpiceJet’s financial troubles in 2015 created this impression among the members of finance and lease
industry.

4.5 ISSUES RELATED TO AIRCRAFT REPOSSESSION IN INDIA

23 Worlds Aircraft Repossession Index, Pillsbury, Third Edition, November 2018. See

https://www.pillsburylaw.com/images/content/1/2/v3/120554/BOOK-World-Aircraft-Repossession-Index-

Third-Edition.pdf.
24 Ibid.
25 Discussed under Chapter 3.

6

The supreme reason establishing the need of the Cape Town Convention Bill, 2018 by the Ministry of
Civil Aviation (MOCA) was achieving the full implementation of the Convention and the Protocol in
India. The accession to the Convention and the Protocol, and few modifications in the law does not
sufficed the needs of the industry as some provisions of the Convention and the Protocol are in strict
quarrel/inconsistency with the provisions of other existing laws in India (Insolvency and Bankruptcy
Code, 2016, Company Law, 2013, etc.).26 Among such laws IBC plays the role of the Voldemort,27 it
provides for many legal hindrances for the lessor in repossessing its aircraft. When a lessee defaults
on payment or on any other obligation required by the lease agreement, it gives lessor, a right to
initiate an aircraft repossession proceeding.28 The lessor faces certain issues during the process of
repossession and export of an aircraft under Insolvency and Bankruptcy Code, 2016 as follows:

1) When the bankruptcy court declares insolvency, as per Section 14(1)(d)29, the recovery
of the property (where such property is occupied by or is in the possession of the
corporate debtor30) by the lessor is prohibited for the duration of the moratorium
period31.

The bankruptcy courts have not interpreted the enforcement of prohibition in context of the aircraft
leases. This provision disable lessors to regain possession of their aircrafts during the imposition of
moratorium period. Many lessors put their efforts to de-register their aircraft before the aircraft
operator is declared insolvent and the moratorium period starts. Airlines were successfully able to
traumatize the lessor under Kingfisher airlines case and SpiceJet in 2013 and 2015 respectively until
the lessors seek the help of courts which anyways prolonged the repossession proceedings even if the
judgement was in their favour. However, Jet Airways case has shown the fastest pace of
deregistration’s of the aircraft in Indian history, clearly describing the current urge of the government
towards resolving the prevailing issues related to aircraft repossession. The urge is not sufficient
unless the government fast track the enactment procedure of the Cape Town Convention Bill, 2018.32
This provision under IBC has caused great chaos among lessors leasing aircraft to Indian operators in

26 Mondaq, Insolvency in Indian Aviation: What Does India’s New Cape Town Convention Bill Mean for
Recovery and Re-possession of leased Aircrafts?, December 5, 2018.
27 Voldemort was the lead antagonist in the popular Harry Potter series.
28 Sarin & Co., Aircraft Repossession in India: An 2017 Overview, May 21, 2017.
29 Section 14(1)(d) of the IBC: Moratorium (relevant part of Section is provided herein)
(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating
Authority shall by order declare moratorium for prohibiting all of the following, namely:—
(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession
of the corporate debtor.
30 Section 3(8) of the IBC: Corporate Debtor
"corporate debtor" means a corporate person who owes a debt to any person;
31 Moratorium means a period wherein no judicial proceedings for recovery, enforcement of security interest,
sale or transfer of assets, or termination of essential contracts can be instituted r continued against the corporate
Debtor, https://ibclaw.in/all-about-the-moratorium-under-ibc-including-judicial-pronouncements/.
32 Discussed under Chapter 3.

7

several occasions. The Kingfisher Airlines and SpiceJet case study is discussed under the last part of
the Chapter in brief.

2) The Section 14(1)(d) simply barres the lessor to recover the possession and makes no
mention regarding termination of the lease arrangement between the parties (lessors &
lessee).

As there is no judicial precedent yet, Indian court may find the termination of the agreement
prohibited as well under the same Section unless certain dreadful circumstances exists such as non-
maintenance of the aircraft. After the enactment of the Bill,33 this situation shall resolve as Article
1034 of the Convention provides that the lessor may terminate the lease agreement and take
repossession on an event of default by the lessee. The ambiguity was resolved immediately unlike
other issues persisting under the IBC. The lease agreement, parties enter into suggests for the
termination clause, which provides for the events which will ponder the right to terminate the
agreement upon the parties to the agreement.

3) The treatment to lease rentals under IBC clearly depends upon its existence (whether
the lease rental due to the lessor falls under pre-moratorium or post-moratorium
period).

When insolvency proceedings have been initiated, all the payments due to the lessor for the pre-
moratorium period can be rightfully claimed from the corporate debtor as “operational debt”.35 These
due payment of the lessor forms part of “insolvency resolution process costs” (IRP Costs) which are
treated as pre-eminent debts36. Under Indian law, IRP costs are given the treatment of supreme debt
and are paid prior to the payment of other debts in the queue. Such debts of the corporate debtor are
given this treatment under the guise of Regulation 31(b) of the Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations).

Regulation 31: Insolvency resolution process costs

33 The Cape Town Convention Bill, 2018.
34 Article 10 of the Convention: Remedies of conditional seller or lessor
In the event of default under a title reservation agreement or under a leasing agreement as provided in Article
11, the conditional seller or the lessor, as the case may be, may:
(a) subject to any declaration that may be made by a Contracting State under Article 54, terminate the
agreement and take possession or control of any object to which the agreement relates; or
(b) apply for a court order authorising or directing either of these acts.
35 By submitting a claim in the insolvency process.
36 Debts to be paid prior to any other debts of the corporate debtor under Regulation 31(b) of the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP
Regulations).

8

“Insolvency resolution process costs” under Section 5(13)(e) shall mean-
(a) amounts due to suppliers of essential goods and services under Regulation 32;
[(aa) fee payable to authorised representative under [sub-regulation (8)] of regulation 16A;

(ab) out of pocket expenses of authorised representative for discharge of his functions under [section 25A];]

(b) amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed
under section 14(1)(d);
(c) expenses incurred on or by the interim resolution professional to the extent ratified under Regulation 33;
(d) expenses incurred on or by the resolution professional fixed under Regulation 34; and
(e) other costs directly relating to the corporate insolvency resolution process and approved by the
committee.

In the case of Rave Scans. Pt. Ltd.,37 the court suggested that there is no bar on lessors being receiving
the payment of their due rentals on a current basis during the moratorium period.38 Even in practical
applications, the Resolution Professionals (RPs) make payment of such due rentals from the cash
flows of the corporate debtor, if the payment is necessary to maintain the corporate debtor as a going
concern.39

4) As per Section 14(2)40, the supply of “essential goods or services” to the corporate debtor
cannot be terminated, suspended or interrupted during the moratorium period.

The amount due to the supplier of essential goods and services is also treated as the costs at par with
IRP costs discussed under the previous point. Regulation 3141 of the CIRP Regulations provides for
the definition of the “essential goods and services”. The definition is very narrow and specific and it
does not include the aircraft leases. However, in few cases, the National Company Law Appellate
Tribunal (NCLAT) has held that the supplier of such services can terminate the agreement/contract if
its dues are not paid despite making repeated requests for such payment.42

37 Company Petition No. (IB)-01 (PB0/2017 9Principal Bench, New Delhi).
38 Even if the
39 Mondaq, Insolvency in Indian Aviation: What Does India’s New Cape Town Convention Bill Mean for
Recovery and Re-possession of leased Aircrafts?, December 5, 2018.
40 Section 14(2) of the IBC: Moratorium (relevant part is produced herein)
(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating
Authority shall by order declare moratorium for prohibiting all of the following, namely:—
(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated
or suspended or interrupted during moratorium period.
41 The Section is produced under previous point.
42 Uttrakhand Power Corporation Ltd v M/s ANG Industries Ltd, Company Appeal (AT) (Insolvency) No. 298
of 2017; Innoventive Industries Ltd v Maharashtra State Electricity Distribution Co Ltd, Company Appeal (AT)
(Insolvency) No. 156 of 2017; Dakshin Gujarat VIJ Co Ltd v ABG Shipyard Ltd Company Appeal (AT)
(Insolvency) No. 334 of 2017.

9

4.6 IMPACT OF THE CAPE TOWN CONVENTION AND THE AIRCRAFT PROTOCOL

Before IBC was enacted, Indian courts have applied the provisions of the Convention and the Protocol
to allow repossession of the aircraft.43 But post enactment, it projected constant contradiction on
India’s agreed position under the Convention and the Protocol so far. It took away critical protections
available to the lessors.44 The issues faced by the lessors are globally prevalent, hence acknowledging
the global concern and need, the Convention and the Protocol came so that there can be a speedy and
standard procedure for aircraft repossession and export. The Convention and the Protocol establishes
the concept of international interest, international registry, Irrevocable Deregistration and Export
Request Authorization, remedies in the event of default, insolvency proceedings method etc. It
revamped the unwell structure of global aircraft leasing industry.45

4.7 IMPACT OF CAPE TOWN CONVENTION BILL, 2018

The Bill46 when enacted will override the moratorium power of the IBC as it will arrive later to IBC
which was enacted in 2016. The Supreme Court has held in the case of KSL and Industries Limited v.
Arihant Threads Limited47 that a non obstante clause in the later enactment will prevail over the
earlier enactment (also containing the non-obstante clause).48 Hence, the Bill’s non-obstante clause
will clearly override the IBC’s non-obstante clause after successful enactment. In addition, the Bill is
structured in a manner that it will curb the issues by revamping changes in connection with
repossession, de-registration and export of an aircraft at the time of default and insolvency of an
aircraft operator (discussed under Chapter 3).49 The Article XI of the Protocol, permits the lessor to
repossess the aircraft if dues of the lessor are not cleared within 2 months of initiation of insolvency
proceedings against the lessee.

4.8 UNCITRAL MODEL LAW

43 AWAS 39423 Ireland Ltd & Ors. v Directorate General of Civil Aviation & Anr, WP(C) 871/2015 (High
Court of Delhi); Corporate Aircraft Funding Company LLC v Union of India & Ors, WP(C)792/2012 (High
Court of Delhi).
44 Mondaq, Insolvency in Indian Aviation: What Does India’s New Cape Town Convention Bill Mean for
Recovery and Re-possession of leased Aircrafts?, December 5, 2018.
45 Refer Chapter 2.
46 The Bill was introduced in 2018, but yet not cleared by either of the houses of the Parliament.
47 (2008) 9 SCC 763 [70], [92].
48 Section 5 of the Bill (Non-obstante clause).
49 Mondaq, Insolvency in Indian Aviation: What Does India’s New Cape Town Convention Bill Mean for
Recovery and Re-possession of leased Aircrafts?, December 5, 2018.

10

UNCITRAL Model Law deals with the cross-border insolvency issues. Cross-border insolvency
refers to a scenario when multinational companies, enterprises or corporate house possess the assets in
different countries and in the event of insolvency they encompass coordination and cooperation
among statutory authorities of different jurisdictions in respect of the insolvency proceedings of any
corporate debtor.50 Basically, the cross-border insolvency deals with three aspects:

i. It protects the rights of the foreign creditors over the assets with the debtor, who is established
in a different jurisdiction where the insolvency proceedings have being initiated;

ii. in situations, where the asset of the debtor is located in different jurisdictions and the creditor
intents to involve such assets located in different jurisdictions under the insolvency
proceedings; and

iii. the insolvency proceeding has commenced on the debtor in more than one jurisdiction.51

In India, Section 234 and 235 of the IBC deals with this concept of cross-border insolvency.
However, the sections provide for the cooperation between Indian and the said foreign jurisdiction
only if India has a bilateral agreement with them. India barely has bilateral agreement with any State
in this respect. Therefore, the provisions are incapable of giving recognition to foreign insolvency
proceedings. To protect the interests of foreign investors it is very essential for India to adopt the
Model Law. The government has established an Insolvency Law Committee (ILC) headed by Mr.
Injeti Srinivas to provide recommendations on the adoption of UNCITRAL Model Law. The model
law was framed by United Nations Commission on International Trade Law (UNCITRAL).

Section 234: Agreements with foreign countries52

234. (1) The Central Government may enter into an agreement with the Government of any country outside
India for enforcing the provisions of this Code.
(2) The Central Government may, by notification in the Official Gazette, direct that the application of
provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal
guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with
which reciprocal arrangements have been made, shall be subject to such conditions as may be specified.

Section 235: Letter of request to a country outside India in certain cases53

235. (1) Notwithstanding anything contained in this Code or any law for the time being in force if, in the

50 See https://blog.ipleaders.in/uncitral-model-law-on-cross-border-and-jet-airways-insolvency/.
51 The insolvency and the Bankruptcy Code, 2016.
52 The Section came into force w.e.f. from April 1, 2017.
53 The Section came into force w.e.f. from April 1, 2017.

11

course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under
this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion
that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are
situated in a country outside India with which reciprocal arrangements have been made under section 234,
he may make an application to the Adjudicating Authority that evidence or action relating to such assets is
required in connection with such process or proceeding.

(2) The Adjudicating Authority on receipt of an application under sub-section (1) and, on being satisfied that
evidence or action relating to assets under sub-section (1) is required in connection with insolvency
resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an
authority of such country competent to deal with such request.

Under the Jet Airways insolvency case, in May 2019, few of the Dutch based creditors, led the Jet
Airways to become first Indian company to undergo Cross Border Insolvency proceedings.54 The
resolution professional of a creditor seized the aircraft of the airline which was parked at the Schiphol
Airport, nearby Amsterdam. When the group of creditors approached the Netherland’s Bankruptcy
Court, the court passed an order declaring the insolvency of Jet Airways. The order was further taken
to NCLAT for consideration with limited hope. NCLAT permitted the Dutch Court administrator
appointed by Noord District Court in Holland for Jet Airways to attend the meetings of the bankrupt
airline’s Committee of Creditors (CoC). Further, its stated that proceedings shall be held under the
dual auspices of IBC and Cross Border Insolvency Protocol55. Here, the airline’s insolvency has set
another alarm for the Indian government to understand the need of the Model Law. The foreign
investors of several sectors are losing interest and patience due to the constant over hauling behavior
of legal system at times of insolvency.56

4.9 PROCESS OF AIRCRAFT DEREGISTRATION AND EXPORT FROM INDIA

The entire process is deemed to be an strenuous task until the aircraft is finally exported to the lessee
or the locations lessee intends the exportation to be. Proper legal awareness, documentation and
consultation can minimize the time period involved starting with application for Irrevocable
Deregistration and Export Request Authorization (IDERA) of the aircraft into quite of a short span.

54 Livemint, Jet Airways to become first Indian company to undergo Cross Border Insolvency proceedings,
October, 18, 2019.
55 UNCITRAL received the consent of Model law on Cross Border Insolvency issues on May 30, 1997 and
further passed to United Nations General Assembly on December 15, 1997. See
https://www.uncitral.org/pdf/english/texts/insolven/1997-Model-Law-Insol-2013-Guide-Enactment-e.pdf; See
https://www.indialawjournal.org/cross-border-insolvency.php.
56 Sarthak Jain & Anushka Sheth, India Law Journal, Cross Border Insolvency: Why India Should Adopt the
Unicitral Model law. See https://www.indialawjournal.org/cross-border-insolvency.php.

12

The action of the party to repossess its lease aircraft is a result of default by either of the parties.
Typically, such event of default occurs when the lessee fails to fulfill its obligation towards the lease
agreement such as default on lease payments or any other obligation mentioned therein. This part will
provide the information and the analyze the aspects of successful aircraft repossession in India. The
legal options available with the stressed lessor as follows:

Firstly, the aircraft can be repossessed via DGCA process. 57
The Rule 30(7) of the Aircraft Rules, 1937 provides for the procedure of deregistration. As per the
Rule, an application will be filed by the IDERA Holder along with an original or notarized copy of
IDERA recorded with the DGCA. In addition to the these requirements, a priority search report from
the International Registry58 as required by the Rule shall be furnished as well. The DGCA is mandated
by the Rule to de-register the aircraft if it meets all the requirements within 5 working days. In India,
IDERA was not formally recognized before, but as on June 12, 2020,59 an amendment was made
under Civil Aviation Requirements (CARs), which gave official acknowledgement to the IDERA.60

Secondly, In case DGCA refuses to deregister the aircraft, the lessor can initiate legal action to
repossess the aircraft. The Article 226 of the Constitution of India, empowers the High Courts in India
to entertain writ61 petitions. The Article empowers the High Court to question the person, authority or
the Government for enforcement of the rights conferred by the Part III of the Constitution.62 The High
Court also entertain the same power when there is violation of a legal right. If DGCA63 refuses to
deregister an aircraft, provided that lessee meets all the requirements of the authority, it violates the
legal right of the lessor in respect of repossession. The lessor, thereby, has the right to file a writ
petition in the High Court (within whose jurisdiction the DGCA passed the order of refusal).64 The
lessor may seek under his petition to quash the DGCA’s order and further, issue directions to the
DGCA to rehear the application for deregistration and repossession.65

4.9.1 Circumstances Leading to Initiation of Repossession Proceedings

57 AZB & Partners, Lexology, Aircraft repossession and enforcement of security in India, May 30, 2019. See
https://www.lexology.com/library/detail.aspx?g=f5755316-57d3-4e05-a020-6a9104bbc96d.
58 Article 1(p) of the Convention.

59 June 12, 2020, Civil Aviation Requirements, Section 2-Airworthiness, Series F, Part1 on Rev. 9.

60 Discussed under Chapter 2, Irrevocable Deregistration and Export Request Authorization (IDERA), Head no.
7.
61 There are five writs: Habeas Corpus, Mandamus, Prohibition, Quo Warranto and Certiorari. See
https://www.india.gov.in/sites/upload_files/npi/files/coi_part_full.pdf.
62 Part III of the constitution of India provides for the fundamental right of the citizens of India.
63 A government body.
64 AZB & Partners, India: Aviation Law 2020. See https://www.azbpartners.com/bank/india-aviation-law-2020/.
65 See Supra Note 56.

13

When the lessee defaults on lease payments, the lessor is triggered to terminate the agreement and
seek for aircraft repossession. In some cases, the lessor brings action upon single default and in some
cases, multiple defaults upon lease payments entices the action of aircraft repossession. Sometimes,
the default leads to the imposter of the lessor trying to cannibalize the leased aircraft, acting upon that
behavior, the lessor waits for no time to initiate repossession proceedings.66

4.9.2 Necessary Documentation

For the purpose of successful repossession, superlative documentation is a very important key. The
parties to an aircraft lease agreement should strive for preempt preparation of documentation which
shall be required in case of aircraft repossession. Such preparation is marked as sharp-witted eyesight
which saves plenty of time and money of the lessor. Furthermore, this prepares the party in advance
for the requirements of the Airport Authority of India67 (AAI) at the situation of hostile repossession
of the aircraft or at the end/termination of a lease with an uncooperative lessee.68

Documents which should remain in hand during the full term of the lease agreement are as follows:
a) Irrevocable Deregistration and Export Request Authorization (IDERA);
b) Deregistration Power of Attorney (DPoA)
c) Deregistration request letters from the lessee addressed to the DGCA;
This must remain with undated since the date the Deregistration is unknown in the beginning
of the lease agreement and it’s requirement depends upon certain unforeseen events. The
letter should be prepared in the format which is acceptable by the DGCA. It is important to
make sure that the signature of the lessee’s representative is same as that already held on file
by the DGCA as the authority do compare the signatures.
d) Custom export letters addressed to the Custom authorities;
The letter must remain undated for the same reason as aforementioned and it must request for
export of the aircraft along with the permission to file an advance manual shipping bill.69

4.9.3 Recovery of Aircraft Records

66 Sarin &Co., Aircraft Repossession in India: A 2017 Overview, May 21, 2017. See
https://sarinlaw.com/aircraft-repossession-in-india-a-2017-overview/.
67 Airport Authority of India (AAI) was constituted by an Act of Parliament entrusted with creating, upgrading,
maintaining and managing civil aviation infrastructure both on ground and air space in the country. See
https://www.aai.aero/en/corporate/organization.
68 DGCA, Aeronautical Information Services (AIC) No. 12/2018 dated November 15, 2018. Sarin &Co.,
Aircraft Repossession in India: A 2017 Overview, May 21, 2017; See https://sarinlaw.com/aircraft-
repossession-in-india-a-2017-overview/.
69 Sarin &Co., Aircraft Repossession in India: A 2017 Overview, May 21, 2017. See
https://sarinlaw.com/aircraft-repossession-in-india-a-2017-overview/.

14

Generally, parties to the lease agreement agree on the lessor’s power to inspect the aircraft records but
this may be an difficult path when the lessee has the knowledge regarding the repossession
proceedings which may get started any time. The lessor used to strive for arranging the records in the
very beginning of the initiation of the proceedings. Among several documents the procurement of
original Certificate of Registration of the aircraft was very prominent until August 27, 2018.70 On this
date, an amendment to Rule 30(7) of the Aircraft Rules, 1937 came into existence, it provided that an
IDERA application can be filed for deregistration of the aircraft “without seeking consent or any
other document from the operator of the aircraft or any other person.”71

4.9.4 Deregistration of the Aircraft

The Aircraft rules, 1937 lays down rules for aircraft registration as well as deregistration in India.
Precisely, Rule 30(1) to (5) deal with registration of the aircraft whereas Rule 30(6) and rule 30(7)
deals with the deregistration of the aircraft.72 The DGCA has the power to cancel a registration at
any time provided that it is satisfied as per Rule 30(6) of the Aircraft Rules, 1937:

a) such registration is not made in conformity with Rule 30(2)73 of the aircraft rules;
b) the registration was obtained by furnishing false information;
c) the aircraft could more suitably be registered in some other jurisdiction;
d) the aircraft has been permanently withdrawn from use or destroyed;
e) it is inexpedient in the public interest that the aircraft should remain registered in India;
f) the lease in respect of the registered aircraft:

i. has expired;
ii. has been terminated by mutual agreement between the lessor and lessee;

70 The requirement changes after amendment under Rule 30 (7) of the Aircraft Rules, 1937.
71See
https://dgca.gov.in/digigovportal/?dynamicPage=aircraftRulesContent2Req/1/3146/viewDynamicRuleContLvl2
&mainaircraftRules1937/1/0/viewDynamicRulesReq.
72 Sarin &Co., Aircraft Repossession in India: A 2017 Overview, May 21, 2017. See
https://sarinlaw.com/aircraft-repossession-in-india-a-2017-overview/.
73 Rule 30(2) of the Aircraft Rules, 1937: An aircraft may be registered in India in either of the following
categories, namely:
(a) Category A Where the aircraft is wholly owned either
(i) by citizens of India; or
(ii) by a company or corporation registered and having its principal place of business within India; or
(iii) by the Central Government or any State Government or any company or any corporation owned or
controlled by either of the said Governments; or
(iv) by a company or corporation registered elsewhere than in India, provided that such company or corporation
has given the said aircraft on lease to any person mentioned in sub-clause (i), sub-clause (ii) or sub-clause (iii);
and
(b) Category B Where the aircraft is wholly owned either
(i) by persons resident in or carrying on business in India, who are not citizens of India; or
(ii) by a company or corporation registered elsewhere than in India and carrying on business in India.

15

iii. has been otherwise terminated in accordance with the provisions of the lease
agreement or the terms of the lease; or

g) the Certificate of Airworthiness in respect of the aircraft has expired for a period of five years
or more.74

Rule 30(7) provides for:

“(7) The registration of an aircraft registered in India, to which the provisions of the cape Town
Convention and the Cape Town Protocol apply, shall be cancelled by the Central Government, within
five working days, without seeking consent or any document from the operator of the aircraft or any
other person, if an application is received from the IDERA Holder along with:

(i) the original or notarised copy of the IDERA recorded with the Director-General; and

(ii) a priority search report from the International Registry75 regarding all Registered
Interests in the aircraft ranking in priority along with a certificate from the IDERA
Holder that all registered interests ranking in priority to that of the IDERA Holder in the
priority search report have been discharged or that the holders of such interests have
consented to the deregistration and export of the aircraft:

Provided that such cancellation of registration of the aircraft shall not affect the right of the Central
Government or of any entity thereof, or any inter-governmental organisation in which India is a
member, or other private provider of public services in India, to arrest or detain or attach or sell an
aircraft object under its laws for payment of amounts owed to the Government of India, any such
entity, organisation or provider directly relating to the services provided by such aircraft in respect of
that object.”76

The Rule 30(6) provides of the reasons which may result in cancellation of the aircraft from Registry
in India and Rule 30(7) mandates the central government and DGCA regarding the deregistration of
aircraft in India. It provides for the documents which shall be required along with the application of
IDERA Holder prior to the expiry of lease agreement.

74 Rule 30(6), Aircraft Rules, 1937.See https://dgca.gov.in/digigov-
portal/?dynamicPage=aircraftRulesContent2Req/1/3146/viewDynamicRuleContLvl2&mainaircraftRules1937/1
/0/viewDynamicRulesReq.
75 Article 16 of the Convention. See https://dgca.gov.in/digigov-
portal/?dynamicPage=aircraftRulesContent2Req/1/3146/viewDynamicRuleContLvl2&mainaircraftRules1937/1
/0/viewDynamicRulesReq.
76 Rule 30(7) of the Aircraft Rules, 1937.

16

4.9.5 Cancellation of Registration of Aircraft

The Ministry of Civil Aviation has delegated power upon the civil aviation authority of India i.e.
DGCA to frame Civil Aviation Requirements (CAR). The Section 2, Airworthiness Series F, Part 1,
Issue II paragraph number 9, deals with cancellation of registration of aircraft is produced below:

“9.1 The registration of an aircraft registered in India may be cancelled at any time by the DGCA, if
it is satisfied that: –

3. such registration is not in conformity with para 3.177 of this CAR; or
4. the registration has been obtained by furnishing false information; or

iii. the aircraft could more suitably be registered in some other country; or

1. the aircraft has been destroyed or permanently withdrawn from use; or
2. it is inexpedient in the public interest that the aircraft should remain registered in India; or
3. the lease in respect of the aircraft registered pursuant to paragraph 3.1(iv)
4. a) has expired, or
5. b) has been terminated by mutual agreement78 between the lessor and the lessee, or
6. c) has been otherwise terminated in accordance with the provisions of the Lease Agreement,

or terms of lease.79

vii. the Certificate of Airworthiness in respect of the aircraft has expired for a period of five years or
more.

9.2 The registration of an aircraft registered in India, to which the provisions of the Cape Town
Convention or Cape Town Protocol apply, shall be cancelled by the DGCA, as provided in the Cape
Town Protocol, if an application is received from IDERA Holder prior to expiry of the lease along
with-

(i) the original or notarized copy of the IDERA; and

(ii) a certificate that all Registered Interests ranking in priority have been discharged or the holders
of such interest have consented to the deregistration and export.

77 Paragraph 3 specifies for two categories under which an aircraft may be registered in India.
78 This is where the undated deregistration request letter stating that the lease agreement has been mutually
terminated.
79 This provision attracts hurdles as it envisages that the DGCA (discretion power) shall satisfy itself that lease
agreement has been terminated in accordance with the clauses of the said agreement.

17

Provided that the deregistration of an aircraft by the DGCA under para 9.1 and 9.2 shall not affect
the right of any entity thereof, or any inter-governmental organization, or other private provider of
public services in India to arrest or detain or attach or sell an aircraft object under its laws for
payment of amounts owed to the Government of India, any such entity, organization or provider
directly relating to the services provided by it in respect of that object.

9.3 The registered owner or his authorized representatives may apply to DGCA, New Delhi for
cancellation of registration, enclosing original C of R80. The applicant should also specify the clause
of Rule 30 and the relevant paragraph of this CAR under which cancellation is sought. In case, it is
proposed to invoke para 9.1(vi)(c) of this CAR, the request for deregistration shall be supported by
full explanation regarding the relevant provision of the lease agreement and the justification for using
the provisions.”81

As the existing regulations were in no conformity with the Cape Town Convention and the Protocol,
MOCA introduced Rule 30(7) which mandated the Central government upon the matter of export of
aircraft after the deregistration certificate is obtained.

“32A. Export of Aircraft. – Without prejudice to the provision to rule 30, the Central Government
shall, consequent upon cancellation of registration of an aircraft under sub-rule (7) of rule 30, if an
application is made by IDERA Holder for export of the same aircraft, take action within five working
days to facilitate the export and physical transfer of the aircraft, along with spare engine, if any,
subject to compliance with application safety rules and regulations relating to that aircraft
operation.”82

4.9.6 Precise Outlay of the Process in Deregistration and Export of an Aircraft under India
Cape Town Convention Rules and Regulations83

On November 16, 2018, DGCA issued Aeronautical Information Circular (AIC)84 which dealt with
“Standard Operating Procedure for Implementation of Rule 32A Relating to Export of Aircraft

80 The DGCA, in all circumstances whether the agreement is mutually terminated or IDERA route, the Original
certificate of Registration is to be returned.
81 Section 2, Airworthiness Series F, Part 1, Issue II paragraph number 9 of Civil Aviation Requirements
(CAR).
82 Rule 32A of the Aircraft Rules, 1937.
83 Nitin Sarin, Expert Guides, Deregistration and Exporting an Aircraft under India’s Cape Town Convention
Rules and Regulations, May, 17, 2019. See https://www.expertguides.com/articles/deregistering-and-exporting-
an-aircraft-under-indias-cape-town-convention-rules-and-regulations/arfafjcf.
84 AIC No. 12 of 2018.

18

Covered under Cape Town Convention.”85 The procedure provided for the process of receipt of an
application to the DGCA for deregistration of the aircraft. Together, it provided for the format in
which an IDERA Holder is required to make application to the authority.86 The procedure for the
same as follows:

Table 387

STEP 1 Application to the The IDERA Holder shall file an application as per the format
STEP 2
DGCA provided by the DGCA.88
STEP 3
STEP 4 DGCA shall publish The DGCA shall immediately post the information of

the application and application being filed by an IDERA Holder on its website.

email all the The information posted should contain the date of receipt of

airports the request, type, registration details and name of the

operator. The DGCA shall also inform all the designated

officers of all the airport operators via email.89

DGCA shall The DGCA shall deregister the aircraft in accordance with

deregister within 5 Rule 30(7) of the Aircraft Rules, 1937 i.e. within 5 working

working days days of receipt of application from the IDERA Holder. It

shall also inform the designated officers of all the airport

operators, the date of such deregistration.90

Airports shall The airport operators on such information, calculate the

calculate dues for 3 outstanding dues of the concerned aircraft for the last 3

months preceding months, before the date of receipt of application from the
IDERA Holders IDERA Holder. In easy terms, date of “declared default”.

application The dues calculated shall not include the period prior to the 3

months of the date of declared default.91

85See
https://dgca.gov.in/digigovportal/?dynamicPage=dynamicPdf/130577350&mainaeronauticalInformationCircula
rs/119/0/viewDynamicRulesReq.
86 Ibid.
87 Table Source: Expert Guides, Nitin Sarin, Deregistration and Exporting an Aircraft under India’s Cape Town
Convention Rules and Regulations, May, 17, 2019. See https://www.expertguides.com/articles/deregistering-
and-exporting-an-aircraft-under-indias-cape-town-convention-rules-and-regulations/arfafjcf.
88 DGCA, Standard Operating Procedures (SOP), Guideline 2, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
89 DGCA, Standard Operating Procedures (SOP), Guideline 3, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
90 DGCA, Standard Operating Procedures (SOP), Guideline 4, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
91 DGCA, Standard Operating Procedures (SOP), Guideline 5, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.

19

STEP 5 Airports are The airport operators are required to raise bill within 5

STEP 6 required to raise working days of the receipt of the mail by the DGCA. The

STEP 7 bills within 5 airport operators after calculating shall forward such
STEP 8
STEP 9 working days outstanding bills to the IDERA Holder by an email with a
STEP 10
copy to the DGCA as well. It will also facilitate by

providing the details of bank or any other mode for

electronic payment.92

Other Government Any other government entity, other than central government

entities may also or inter-government organization of which India is a

raise bills within 5 member, or any private provider of services in India can

working days raise bill if they have any outstanding due by intimating the

DGCA within 5 working days of the date of declared default

by the IDERA Holder. The DGCA is required to inform the

IDERA Holder of any such liability by email if received

within 5 working days. The authority shall not be held

responsible for any dues not notified to it within the period

of 5 working days.93

IDERA Holder to The IDERA Holder, on receipt of any bills by email, if

make payment of received, may make such payment.94

such raised bills

Payment Certificate Once the payment is made by the IDERA holder, the

to be issued by the person/entity whose bills are paid shall issue a certificate to

recipient the IDERA Holder within 2 working days of receiving such

payment. The certificate should clearly state that bills raised

by them have been duly cleared. The certificate shall also be

forwarded to the IDERA holder and the DGCA via email.95

Certificates to be The IDERA Holder is required to submit the certificate of

submitted to DGCA bill paid to the DGCA along with its request for permission

to export the aircraft from India.96

DGCA shall issue On receipt of that request of permission, the DGCA shall

92 Ibid.
93 DGCA, Standard Operating Procedures (SOP), Guideline 6, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
94 DGCA, Standard Operating Procedures (SOP), Guideline 7, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
95 DGCA, Standard Operating Procedures (SOP), Guideline 7, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
96 DGCA, Standard Operating Procedures (SOP), Guideline 8, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.

20

permissions issue all the necessary permissions promptly as provided in

Rule 32A of the Aircraft Rules, 1937.97

STEP 11 IDERA Holder to On receiving such permission from the DGCA, the IDERA

STEP 12 write to airport Holder shall send an email to the concerned airport operator
STEP 13
operators for forwarding a copy of the DGCA’s permission, indicating the

remaining dues exact date of the flight out of India. The email shall also

after declared date request a bill in respect to any dues accrued in relation to the

aircraft after the date of declared default up to the date of

departure of the aircraft from India.98

Airport operators The airport operator shall raise a bill for such dues within 1

to raise such bills working days of receiving such email and send the same to

the IDERA Holder with a copy to the DGCA along with all

the necessary bank details to make such payment.99

On making final Once the IDERA Holder has made such payment for the

payment, Aircraft dues, the aircraft may depart from India in accordance with
can finally depart the DGCA’s permission. Therefore, no airport shall prevent

from India the aircraft from leaving India at this final juncture after
fulfilling all the requirements and most of all DGCA’s

permission to export.100

4.10 CASE STUDY

In India, the first aircraft repossession attempt was made in decade of 1990’s. The East West Airline
had taken Boeing 737-200 aircraft under an lease arrangement with GPA Group. Thereafter, the
Airline defaulted on lease payments which forced the lessor to repossess the leased aircraft.101

I. Kingfisher Airlines
As the Airline ceased its operations amid insolvency. Various lessors hoarded before the Indian
Courts for the de-registration of their leased aircrafts to the airline but disappointing them, the courts
showed extreme delay in responding to their requests. The Convention and the Protocol could not

97 Ibid.
98 DGCA, Standard Operating Procedures (SOP), Guideline 9, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
99 Ibid.
100 DGCA, Standard Operating Procedures (SOP), Guideline 9, Aeronautical Information Services (AIC) No.
12/2018 dated November 15, 2018.
101 Sarin & Co., Aircraft Repossession in India: An 2017 Overview, May 21, 2017.

21

help the lessors affected in this case because India ratified the instruments post the date on which
these concerned lease agreements were executed. Even though it was ratified in 2008, there was no
law brought in order to give it effect, hence, the lessors were left for the mercy of the local
legislations in India.102

Pre Kingfisher
The Bombay High Court, in the case of Aer Lingus Limited v. Authority of India,103 sympathized with
the with aircraft lessors and opined that aircraft lessors and financers cannot be deprived of their
rights to deregister and repossess their aircraft in circumstances where the lessee has outstanding
airport parking fees to the authority.104 Though the case has different facts from the Kingfisher, it does
highlight the issues before the system.105

Kingfisher-Case Summary
From the time, DGCA suspended the airlines operations as they were unable to pay its debts, which at
that time was reported $1 billion. The airline kept ongoing with expanding its operations neglecting
the financial distress which impacted the global leasing sector.106 Lessors, namely, DVB Aviation
Finance Asia PTE Ltd (DVB)107 and International Lease Finance Corporation (ILFC) were major
hurdled in their experience in during the process of deregistration and export of the aircraft.108

The DVB leased two Airbus 320-232 aircraft to Kingfisher Airlines. This lease agreement was
undertaken before the Convention and the Protocol was ratified by India i.e. March 31, 2008 (which
means that the implications arising from the transaction will face consequences of prospective effect).
Certainly, DVB seized the leased aircraft outside India in turkey at the time when the lease agreement
was already terminated. DVB had the de-registration power of attorney of the aircrafts. Herein, the
only issue was to get the de-registration of the aircraft. For that purpose, DVB wrote letter to DGCA
requesting the de-registration. Parallelly, Kingfisher Airlines also notified their objection to DGCA
regarding DVB’s request contending that termination of the operating lease agreement was an
unilateral will, along with that claiming, that they have competing proprietary interest in the aircraft
as well. Thereafter, the DGCA demanded a certificate from DVB i.e. Kingfisher Airline’s no

102 Stewart B. Herman, Aircraft Deregistration and Repossession in India: Lessons from Kingfisher and
SpiceJet, May 21, 2015. See https://www.jdsupra.com/legalnews/aircraft-deregistration-and-62503/.
103 Writ Petition No. 618 of 1997 & Notice of Motion No. 586 of 1997. Decided on March 9, 2011.
104 Narayanan at 445-60.
105 See Supra Note No. 89.
106 See Supra Note No. 90.
107 DVB is a German leasing company which was taken over by MUFG Bank, a Japanese bank..
108 See Supra Note No. 89.

22

objection confirmation in order to get the de-registration complete. This was indeed impossible. DVB
moved to court109 against Kingfisher Airlines and DGCA seeking reliefs as follows:

a) direction to DGCA to immediately de-register the aircraft.
b) Kingfisher Airline’s confirmation is not required for de-registration as DVB has the de-

registration power of attorney.

The court granted both reliefs to DVB and empowered DGCA to de-register the aircrafts which it
certainly did. This journey of getting de-registration done costed DVB great losses.110 Like DVB,
ILFC faced similar issues in regaining possession of their six leased aircrafts to Kingfisher. It took
company a period of 6 months to secure the deregistration of one of its aircraft, A321.111

Kingfisher Airlines case impact on other Airlines and the finance and lease sector
Aftermath Kingfisher case precedence , it was projected that it will set a precedent for the lessors and
the financiers to manage their affairs in Indian market. It was also believed that such insecurities
among the members of the finance and lease industry will lay rise in lease rentals and interest on loans
for the Indian aviation particularly.112 The insecurities became effective and the lessors started
demanding premiums to cover their risks in leasing aircraft to the Indian aircraft operator.113 For
instance, one year security deposits was demanded rather than three months security deposit as
demanded earlier. The terms for the agreement also included term period of the aircraft for not more
than 9 years. Some lessors were also demanding government guarantees for the aircraft to be leased to
the Indian aircraft operator.114

II. SpiceJet
There was a time when SpiceJet was undergoing appalling financial difficulties which eventually
resulted in termination of leasing agreements by the several lessors, followed with demand of export
of aircrafts in the period of 2014-15.115 The incident took the lessors to Delhi High Court seeking de-

109 DVB Aviation Finance Asia PTE Ltd. V. Directorate General of Civil Aviation, WP (C) 7661/2012 AND CM
No. 4208/2013.
110 INSOL International, Aircraft repossession upon a default- a review of the issues in the United Kingdom,
USA, India and Nigeria (Technical paper series no. 45), November 2019.
111 See Supra Note No. 89; A321 is an Airbus model of an aircraft.
112 India's Misbehaviour Undermines Cape Town Convention, Air Finance (March 13, 2013),
http://www.airfinancejournal.com/Article/3341264/Indias-misbehaviour-undermines-Cape-Town-
convention.html [hereinafter India's Misbehavior].
113 Karthikeyan Sundaram, Kingfisher Default Said to Raise Airline Costs: Corporate India, Bloomberg
(September 20, 2013), http://www.bloomberg.com/news/articles/2013-09-19/kingfisher-default-said-to-raise-
airline-costs-corporate-india [hereinafter Kingfisher Default].
114 Stewart B. Herman, Aircraft Deregistration and Repossession in India: Lessons from Kingfisher and
SpiceJet, May 21, 2015. See https://www.jdsupra.com/legalnews/aircraft-deregistration-and-62503/.
115 See https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/the-comeback-act-of-
spicejet-founder-ajay-singh/articleshow/51131193.cms?from=mdr.

23

registration and repossession of their aircrafts. The two major lessors were Willington Trust SP
Services (Dublin) Limited116 and AWAS117. They both brought proceedings before court and the court

held that the DGCA is under obligation to de-register the aircraft and has no further discretion in the

matter, as long as the conditions in the sub-rule are met. The court proceedings resulted in prolonged

delay and caused impression of uncertainty to financiers and lessors of aircraft in India. The court
held that the decision whether the aircraft is to be de-registered or not is the decision of the DGCA.118

The DGCA has the power to cancel a registration at any time provided that it is satisfied as per Rule

30(6) of the Aircraft Rules, 1937:
a) such registration is not made in conformity with Rule 30(2)119 of the aircraft rules;

b) the registration was obtained by furnishing false information;

c) the aircraft could more suitably be registered in some other jurisdiction;

d) the aircraft has been permanently withdrawn from use or destroyed;

e) it is inexpedient in the public interest that the aircraft should remain registered in India;

f) the lease in respect of the registered aircraft:

iv. has expired;

v. has been terminated by mutual agreement between the lessor and lessee;

vi. has been otherwise terminated in accordance with the provisions of the lease

agreement or the terms of the lease; or

g) the Certificate of Airworthiness in respect of the aircraft has expired for a period of five years
or more.120

116 See https://www.wilmingtontrust.com/wtcom/index.jsp?section=Corp&fileid=1378740089066.
117 The company was acquired by Dubai Aerospace in August 2017. See https://dubaiaerospace.com/wp-
content/uploads/2018/07/RatingsDirect_ResearchUpdateDubaiAerospaceEnterpriseLtdUpgradedToBBOnSucce
ssfulIntegrationOfAWASAviationCapitalOutlookStable_39453341_Jul.pdf.
118 Wilmington Trust SP Services (Dublin) Limited v. Directorate General of Civil Aviation & Anr., Delhi High
Court, W.P.(C)—747/2015.
119 Rule 30(2) of the Aircraft Rules, 1937: An aircraft may be registered in India in either of the following
categories, namely:
(a) Category A Where the aircraft is wholly owned either
(i) by citizens of India; or
(ii) by a company or corporation registered and having its principal place of business within India; or
(iii) by the Central Government or any State Government or any company or any corporation owned or
controlled by either of the said Governments; or
(iv) by a company or corporation registered elsewhere than in India, provided that such company or corporation
has given the said aircraft on lease to any person mentioned in sub-clause (i), sub-clause (ii) or sub-clause (iii);
and
(b) Category B Where the aircraft is wholly owned either
(i) by persons resident in or carrying on business in India, who are not citizens of India; or
(ii) by a company or corporation registered elsewhere than in India and carrying on business in India.
120 Rule 30(6), Aircraft Rules, 1937.See https://dgca.gov.in/digigov-
portal/?dynamicPage=aircraftRulesContent2Req/1/3146/viewDynamicRuleContLvl2&mainaircraftRules1937/1
/0/viewDynamicRulesReq.

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Despite the fulfilment of all of the above consents and authorization, a lessor is required to obtain
permission of:

i. the Airport Authority of India; and
ii. the DGCA121.122

For the purpose of acquiring consent of the abovementioned authorities, the lessor is required to make
sure he possess following documents:

i. export license from the Director General of Foreign Trade (DGFT);
ii. proof of deregistration of the aircraft from the DGCA;
iii. temporary Certificate of Registration for flying out of India from DGCA (more commonly

referred to as “ferry flight permit”); and
iv. export Certificate of Airworthiness issued by the DGCA123.

4.11 CONCLUSION

In the first part of the Chapter, we discussed, how and why the fashion of aircraft leasing and
financing emerged in the global aviation market. However, the active usage of this practice brought it
under a spotlight, discharging major concerns for the players of this industry typically, lessors at times
when lessee defaults on its commitments under the lease agreement leading to the move of aircraft
repossession by the lessor and legal hurdles coming in the way restricting the lessor to repossess its
aircraft. The next part briefly elaborates upon the basic overview of how repossession proceedings
work from tip to toe, vaguely in every jurisdiction.

A very significant part of this Chapter is devoted for discussing the prevailing issues related to
repossession of an aircraft in India. The issues which has conquered deep discomfort upon lessors for
several years. Though the situation has improved for the first time in India under Jet Airways case,
where it was observed that aircrafts were deregistered quickly without any delay duly under the
parameters of law laid down under Aircraft Rules, 1937.124 Unfortunately, the slow change is helpful
but the Convention and the Protocol ratified by India won’t serve its purpose unless India enacts the

121 To physically export the aircraft out of India.
122 Ravi Nath Aircraft Repossession enforcement, Practical Aspects, Edited by Ravi Nath and Berend Crans,
Kluwer International Law, 2009, p. 388.
123 Ibid.
124 Rule 30(6) and Rule 30(7) of the Aircraft Rules, 1937.

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Cape Town Convention Bill, 2018. It is high time for the State to realize the importance of this Bill
and prioritize its enactment.125
The last part of the Chapter, briefly entails the entire process of the deregistration and export of
aircraft from India. The documents, preparations and requirements which are required by the Indian
authorities, a preempt knowledge and correct legal assistance will surely able the lessor to achieve
successful repossession in short time. This part further provides the detailed case study of Kingfisher
Airlines and SpiceJet in relation to repossession. These cases played prominent role in revamping and
shaping of the current laws with respect to the subject matter. The fruits of the lessons learned from
these cases is clearly visible in the current Jet Airways case.

125 We discussed under Chapter 3, the Bill was introduced October, 2018 and is still lying in the parliament.

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