The government has announced that transactions involving aircraft, plane engines, airframes, and helicopters are now exempt from the Insolvency and Bankruptcy (IBC) code.
According to a notification issued by the Ministry of Corporate Affairs, 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.
Section 14 of the IBC addresses the adjudicating authority (NCLT) jurisdiction to issue a moratorium when admitting a company to the insolvency resolution procedure.
When an asset transactions moratorium is imposed, activities such as instituting suits, continuing pending suits, executing judgments, transferring/ disposing of assets, and recovering or enforcing security interest are prohibited.
The news comes while grounded carrier Go First is undertaking voluntary insolvency proceedings and battling its aircraft lessors in court.
With the most recent notification, lessors will be allowed to reclaim their aircraft from a defaulting airline in the future.
If the amendment is adopted retroactively, it may have an impact on Go First.
Last week, the Aviation Working Group (AWG) downgraded India’s compliance with international law governing aircraft leasing, citing lessors’ continuing efforts to reclaim jets leased to the now-grounded Go First.
The AWG is a not-for-profit legal company made up of major aviation manufacturers, leasing companies, and financial institutions.
Lessors can reclaim custody of aircraft leased to airlines under the Cape Town Convention (CTC).
India is a signatory to CTC but has yet to ratify it.
A moratorium is in force while Go First is pursuing insolvency resolution, and lessors are embroiled in a legal battle with Go First to reclaim the leased planes.
AWS stated in an update that CTC remedies have not been made available to lessors nor have lessors been able to access aircraft to ensure that their aircraft are being maintained in accordance with the leases as required by CTC.
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