Recently, the National Company Law Tribunal (NCLT) reserved its order on low-cost airline Go First’s urgent plea for voluntary insolvency resolution proceedings and a moratorium on its obligations, aircraft lessors moved quickly and sought deregistration and repossession of 20 aircraft leased to the Wadia Group airline.
- They did so by filing applications with the Directorate General of Civil Aviation (DGCA) using their Irrevocable Deregistration and Export Request Authorisation (IDERA).
- An admission of Go First’s plea under Section 10 of the Insolvency and Bankruptcy Code (IBC) would have led to an immediate and complete moratorium on recovery of assets leased to the debtor (Go First), making it extremely difficult for lessors to repossess their aircraft.
- IDERA empowers lessors to get their aircraft deregistered from the registry of the country where the lessee is based, repossess them, and fly them out, in cases like those of lease payment defaults.
Cape Town Convention (CTC)
- The Convention on International Interests in Mobile Equipment, commonly known as the Cape Town Convention (CTC), and the related 2001 protocol on matters specific to aircraft equipment, are key elements of the global aviation structure that aim to protect lessors’ interests in case of defaults by the lessee.
- As per the CTC, the lessor can seek deregistration and export of aircraft without consent of the airline using IDERA.
- The airline has no power to revoke the lessor’s IDERA rights without the latter’s consent.
- The objective is to simplify and improve the efficiency of aircraft leasing operations, while providing comfort to lessors that their assets (planes) would not get stuck for extended periods due to legal issues.
- Although India ratified the CTC back in 2008, its incorporation in India’s legal framework has been a work in progress. The last CTC-related amendments to India’s aviation rules took place in 2018, simplifying deregistration and export of aircraft through IDERAs.
