Transactions involving aircraft, plane engines, airframes and helicopters have been excluded from the Insolvency and Bankruptcy (IBC) code, the government has notified.
"...the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), shall not apply to transactions, arrangements or agreements, under the Convention and the Protocol, relating to aircraft, aircraft engines, airframes and helicopters," as per a October 3, 2023 notification issued by the Ministry of Corporate Affairs.
Section 14 of the IBC deals with the power of adjudicating authority (NCLT) to issue a moratorium when admitting a company to insolvency resolution process.
Once the moratorium on asset transactions is imposed, activities such as institution of suits, continuation of pending suits, execution of judgments, transferring/ disposing off assets and recovery or enforcement of security interest are prohibited.
The notification has come at a time when grounded carrier Go First is undergoing voluntary insolvency proceedings and fighting a legal battle with its aircraft lessors.
With the latest notification, lessors will be able to possess back their aircraft from a defaulting airline going forward.
If the amendment is implemented with retrospective effect, this may have a bearing on Go First.
Last week Aviation Working Group (AWG) cut India's rating in terms of compliance with the international law governing the leasing of aircraft amid lessors' continuing efforts to take back planes leased out to the now-grounded Go First.
AWG is a not-for-profit legal entity consisting of major aviation manufacturers, leasing companies and financial institutions.
Under the Cape Town Convention (CTC), lessors can take back the possession of aircraft leased to airlines.
India is a signatory to CTC but is yet to ratify the convention.
Since Go First is undergoing an insolvency resolution process, a moratorium is in place and lessors are locked in a legal battle with Go First for taking back the leased planes.
In an update, AWS said CTC remedies have not been made available to lessors nor have lessors been able to access aircraft to determine that their aircraft are being maintained in accordance with the leases as required by CTC.