Indian Aviation and Cape Town: Part II

In Part I of this series, we explored the historical landscape that led to significant regulatory development in Indian aviation and the passage of the Protection of Interest in Aircraft Objects Bill, 2025. In Part II, we take a closer look at the key features of the Protection of Interest in Aircraft Objects Act, 2025.

The DYNAMISM CONTINUES

Indian regulatory dynamism continued at full pace as the Protection of Interest in Aircraft Objects Bill, 2025, received the presidential assent and was notified in the official gazette of India, thereby completing the remaining formalities to bring into force the Protection of Interest in Aircraft Objects Act, 2025 (CTC Act) on 1 May 2025.

As previously discussed in this series, this law fully implements the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (Cape Town Convention) into the local regulatory landscape. With the CTC Act in force, India is now at par with other jurisdictions on Cape Town Convention protections being available to creditors and investors.

CTC ACT - A DEEPER DIVE

The CTC Act is a landmark piece of legislation for various reasons (historical landscape, potential impact on Indian aviation, passed in record-breaking time, etc.); however, it is important that stakeholders understand its key factors as set out below.

Fully Implements the Cape Town Convention and the Aircraft Protocol

The CTC Act clearly states that the Convention and Protocol shall have the force of law in India, in accordance with the declarations deposited by India. It may be worthwhile to note that India while submitting the accession declaration to the Cape Town Convention identified the following interest to have priority over any “registered international interest” whether in or outside insolvency proceedings:

• Liens in favour of airline employees for unpaid wages arising since the time of a declared default by that airline under a contract to finance or lease and aircraft object
• Liens or other rights of an authority of India relating to taxes or other unpaid charges arising from or related to the use of that aircraft object and owed by the owner or operator of that aircraft object, arising since the time of a default by that owner or operator under a contract to finance or lease that aircraft object
• Liens in favour of repairers of an aircraft object in their possession to the extent of service or services performed on and value added to that aircraft object

Further, while acceding to the Aircraft Protocol, India had chosen to apply Alternative A with a waiting period of two calendar months for all types of insolvency proceedings, thereby agreeing to a strict time driven process.

Precedence of the CTC Act Over Other laws

In the case of any inconsistency between a provision of the CTC Act and any other law in force in India, the provisions of the CTC Act shall prevail to the extent of such inconsistency. This is a critical and important provision, given the complex regulatory regime in India and competing interests vis-a-vis creditor-protections (for instance, foreign exchange regulations, insolvency laws, labour, and workmen protections).

High Courts Are the Main Judicial Authority for Issues on CTC Act and DGCA Is the Registry Authority

Identifying the High Courts (and not any other tribunal or courts of lower jurisdiction) as the main judicial authority to ensure the implementation of the CTC Act is a welcome position that ensures a strict implementation and avoids any surprise departures from the regulatory intent. It must be noted that it was one of the High Courts (Deli High Court) which allowed for retrospective application of the October 2023 notification and directed the Directorate General of Civil Aviation (DGCA) to deregister all 54 aircraft leased to Go First within five working days, streamlining the repossession process for lessors. DGCA, in an expected development, is nominated as the registry authority under the CTC Act.

The Debtor to Maintain Records of Debt Due and Specified Forms for Declaring Defaults

The CTC Act requires that all debtors maintain and submit to the DGCA, records of dues arising from, related to or owed in regard to the ownership or use by the owner or operator of the aircraft object. Further, a creditor shall not be entitled to exercise any remedy under the Convention or Protocol unless such creditor declares the occurrence of default by notifying the DGCA in a prescribed form and manner. While we still await the actual forms and rules in relation to the aforementioned notifications, creditors must be mindful of such requirements.

STEPS IN THE RIGHT DIRECTION

Over the last three years, Indian regulatory developments have supplemented significantly the growing aviation landscape in the country and paved a way to create a more creditor-friendly environment, fostering confidence among foreign lenders and investors, while aligning India’s aviation framework with international best practices. Such steps signify the policy goal to develop India as an aviation finance and leasing centre with a robust regulatory regime; however, it is critical that the regulatory proactiveness and the industry support be a more sustained exercise.