Aircraft repossession will be smoother in India |

The Federal Cabinet has cleared a proposal to make it easier for leasing companies to repossess aircraft from Indian airlines that default on lease rentals. This has been a long-standing challenge. While there is still no official word on this, sources indicate that the Federal Cabinet has approved the Protection of Interests in Aircraft Objects Bill. The Bill will prioritize the Cape Town Convention if it conflicts with local law. The dismissal of the Cape Town Convention in India has a long history. Before it comes into effect, the bill must be presented to and passed by the federal parliament. It was not immediately clear when the Federal Parliament would pass the Bill. Incidentally, the budget session of the Federal Parliament is set to convene on January 31 and continue until February 13. One reason for introducing the Bill is the National Company Law Tribunal’s (NCLT) ruling in the GoFirst case, which put a moratorium on lessors repossessing the airline’s aircraft. Constituted in 2016, NCLT is a quasi-judicial body in India that handles cases related to Indian companies. It also adjudicates arbitration, compromise, arrangements, reconstructions, and company winding-up cases and handles companies' insolvency resolution processes. The bill is likely to reduce the moratorium period to a maximum of 40 days after an airline is admitted to bankruptcy. Lessors must also clear pending dues, such as airport charges, for up to 60 days before recovering their aircraft. India acceded to the Cape Town Convention in 2008, but no domestic laws can enforce its provisions. Further, though India is a signatory to the Convention, the Parliament has not ratified it. This has often led to Indian courts’ judgments being more critical than the convention's norms. The NCLT ruling in GoFirst’s case shook lessors' confidence in leasing aircraft to Indian carriers, sparking debates about whether the premium for other Indian carriers would increase. India’s poor aircraft repossession history Since the early 2000s, leasing companies have reported difficulty attempting to take back aircraft from Air Sahara because they are not paying lease rentals. In 2016, before Kingfisher Airlines stopped operations, the Airports Authority of India (AAI), the state-run airport operator, allowed leasing companies to recover aircraft deployed with the Indian airline on payment of $750,000 for a turboprop. AAI sought $1.5 million for a widebody aircraft. The logic was that once the leased asset was out of the country, AAI would not get back any of the dues that Kingfisher Airlines owed the state entity. Eventually, the Indian courts struck down AAI’s order.

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