Introduction

Aircraft flown by Indian carriers are mostly leased from foreign lessors. Their pricing is determined by one question. What happens if the airline fails, how quickly can the aircraft be recovered? This position was not settled as per the Indian law.

In 2008, India acceded to the Cape Town Convention and its Aircraft Protocol, but the Insolvency and Bankruptcy Code, 2016 (“IBC”) prevented the repossession of the leased aircraft once an airline entered into insolvency. The conflict peaked in the Go First insolvency case in 2023, when lessors could not recover their aircraft for nearly a year despite holding irrevocable de-registration and export request authorisations (“IDERAs”).

In view of these developments, Parliament passed the Protection of Interests in Aircraft Objects Act, 2025 (“CTC Act”), and the Central Government notified the Protection of Interests in Aircraft Objects Rules, 2026 (“CTC Rules”) on 30 January 2026. Taken together, they give statutory effect to the Cape Town regime and limit the IBC moratorium over qualifying aircraft at two months.

This article examines the earlier position, the key changes and the issues that remain open.

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What was the Position Before the CTC Act?

Under Article XI of the Aircraft Protocol to the Cape Town Convention, India opted for Alternative A which requires the insolvency administrator or debtor to give possession of the aircraft to the creditor by the end of a fixed “waiting period”, unless defaults are cured and future obligations assumed. India declared this period to be two calendar months.

However, India did not accord Article XI the force of law domestically. The IBC did not create a carve-out for aircraft. Adding to this, the following provisions operated against lessors:

  • Section 14(1)(d), which prohibits “the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor”;
  • Section 14(4), which keeps the moratorium in force until completion of the corporate insolvency resolution process (“CIRP”), subject to the 330-day outer limit under Section 12; and
  • Section 238, which gives the IBC overriding effect over inconsistent laws.

For lessors, the result was unpaid rentals and an idle, depreciating asset.

In the Jet Airways insolvency of 2019, lessors who acted quickly used their IDERAs to recover aircraft before State Bank of India’s petition was admitted by the NCLT, Mumbai in June 2019. The airline was eventually liquidated on the Supreme Court’s direction in November 2024. But, the proceedings produced no ruling on whether the IBC could override India’s Cape Town Convention obligations. That issue arose for consideration in the Go First case.

The Go First Insolvency

Go First filed for voluntary insolvency under Section 10 of the IBC on 2 May 2023, and the National Company Law Tribunal, New Delhi (“NCLT”) admitted the application on 10 May 2023. The resolution professional (“RP”) took the position that the leased aircraft were core business assets and could not be returned. Lease terminations effected before the filing were also challenged as mala fide, relying on Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209, which recognised the NCLT’s power to restrain termination of a contract central to the debtor’s survival solely on the ground of insolvency.

Lessors invoked their IDERAs under Rule 30(7) of the Aircraft Rules, 1937, which then required the Directorate General of Civil Aviation (“DGCA”) to cancel registration within five working days. Citing the moratorium, the DGCA did not act, and lessors approached the Delhi High Court.

While those proceedings were pending, the Ministry of Corporate Affairs issued Notification S.O. 4321(E) dated 3 October 2023 under Section 14(3)(a) of the IBC. It exempted Convention and Protocol transactions relating to aircraft, aircraft engines, airframes and helicopters from the Section 14(1) moratorium, but remained an executive measure capable of withdrawal.

On 26 April 2024, in Accipiter Investments Aircraft 2 Ltd. v. Union of India, 2024 SCC OnLine Del 3125, the Delhi High Court held that Rule 30(7) cast a mandatory obligation on the DGCA and that, since the leases had been terminated before the moratorium was imposed, the moratorium could not be invoked to block deregistration. The DGCA was directed to process the deregistration of 54 aircraft within five working days. With no fleet remaining, Go First was ordered into liquidation by the NCLT on 20 January 2025.

A legislative solution was still required.

What has Changed?

The CTC Act (Act No. 17 of 2025) received Presidential assent on 16 April 2025, and the CTC Rules were notified as G.S.R. 77(E) on 30 January 2026. The key provisions of the CTC Act are:

  • Section 3, which gives the Convention and Protocol the force of law in India, in accordance with India’s declarations
  • Section 6, which applies Article XI of the Protocol to insolvency remedies, provided the debtor is incorporated, registered, domiciled or has its principal place of business in India, the international interest is registered, and the parties have not excluded Section 6 in writing
  • Section 8, which designates the High Court having territorial jurisdiction as the relevant court under Article 53 of the Convention, and
  • Section 9(1), which provides that the CTC Act shall prevail over any other law to the extent of inconsistency.

Three changes under Rule 11 of the CTC Rules stand out.

1. The moratorium over aircraft objects now expires at two months

Rule 11(1) provides that where a debtor is subject to corporate insolvency proceedings under the IBC, the Section 14 moratorium commences on the insolvency commencement date and expires at the end of two calendar months, termed the “waiting period”. Under Rule 11(2), no remedy recognised under the Convention or Protocol shall be prevented or restricted after that period. For qualifying aircraft objects, Section 14(4) of the IBC stands overridden.

The debtor or the RP may retain the aircraft only if, before the expiry of waiting period, all defaults other than those arising from the initiation of insolvency proceedings are cured and the RP agrees to perform all future obligations [Rule 11(4)]. Failing this, the lessor may proceed without the leave of the NCLT, since India’s declaration under Article 54(2) of the Convention (Form No. 13, Second Schedule to the CTC Act) permits remedies that do not expressly require an application to court to be exercised without one.

2. The RP now owes an asset-specific preservation duty

Rule 11(3)(a) requires the RP to preserve the aircraft object and maintain its value in accordance with the underlying contract between the creditor and the debtor. This means that if the lease requires the aircraft to be maintained in a specific way, the RP must fulfil those contractual requirements. Unlike the general duties under Sections 20 and 25 of the IBC, the RP’s obligations are determined by the terms of the lease. Rule 11(3)(b) further requires the RP to give the creditor access to the aircraft, its technical and maintenance records, and information on its physical security. The purpose is to ensure transparency and protection of the lessor’s interest. Further, Rule 11(7) is an important qualification to Rule 11(3)(a). It permits use of the aircraft under arrangements designed to preserve it. Hence, the RP must ensure that its operation is structured in a way that protects the aircraft.

The CTC Rules are silent on who bears preservation costs. The NCLT has not ruled on this yet.

3. Lease terms cannot be modified in a resolution plan without the lessor’s consent

Rule 11(6), which tracks Article XI (10) of the Protocol, provides that an agreement between the debtor and the creditor shall not be modified without that creditor’s consent. Consent of the CoC cannot, by itself, substitute for the consent of the creditor contemplated by Rule 11(6). A resolution plan that restructures lease rentals or otherwise modifies the contractual rights and obligations under the lease without the lessor’s consent would contravene a law for the time being in force and fail to satisfy the requirement under Section 30(2)(e) of the IBC. The proviso to Rule 11(6), however, preserves any authority that the RP may have under the IBC to terminate the agreement. The protection is against modification, not termination.

What does the new Framework not Resolve?

Three issues merit attention.

1. The interplay of the overriding clauses

Section 9(1) of the CTC Act gives it overriding effect, while Section 9(2) provides that, save as otherwise provided, the CTC Act shall be “in addition to, and not in derogation of” any other law. Read with Section 238 of the IBC, this invites argument on which statute prevails. The Supreme Court’s decision in State Bank of India v. Union of India, 2026 INSC 153, offers useful guidance. In that case, while considering the interaction between the IBC and the telecommunications regime, the Court emphasised harmonious construction and held that the relative specificity, subject matter and dominant purpose of the competing enactments must be considered rather than mechanically applying one overriding clause. On that test, the CTC Act has the stronger claim over aircraft objects, a conclusion the words “save as otherwise provided” in Section 9(2) support.

2. Detention for service dues

Section 9(3) preserves the right of the Government, public service providers and certain inter-governmental organisations to detain an aircraft object for dues directly relating to services provided for it. Rule 14 of the CTC Rules further provides that specified dues arising after the information is furnished to the registry authority under Rule 9, including airport operator charges, route navigation and facilitation charges, terminal navigation landing charges, fuel charges payable as a public service, and specified GST, must be paid and settled by the IDERA Holder before the aircraft is permitted to be exported from India. This creates a residual category of statutory dues that may have to be cleared before export, potentially affecting the practical exercise of Cape Town remedies even where the creditor has otherwise obtained the requisite deregistration and export authorisation.

3. The creditor-initiated insolvency resolution process

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026), which received assent on 6 April 2026, inserted Chapter IV-A into the IBC and introduced the creditor-initiated insolvency resolution process (“CIIRP”). The CIIRP differs materially from the ordinary CIRP. A CIIRP may be initiated by notified financial creditors without an NCLT order, management remains in control and the RP performs a supervisory role.

This creates an unresolved issue under Rule 11. Rule 11(1) was framed around the ordinary CIRP architecture and provides that the Section 14 moratorium commences on the insolvency commencement date and expires at the end of two calendar months, constituting the “waiting period”. If the CIIRP framework operates without an automatic Section 14 moratorium at commencement, it is unclear how the “waiting period” under Rule 11 is to be calculated in a CIIRP. It remains uncertain whether the two months run from the commencement of the CIIRP or from the moratorium order.

Rule 11(3) presents another difficulty. It places the obligation to preserve the aircraft object and maintain its value on the RP, even though management runs the airline in a CIIRP. Hence, the interaction between and the CIIRP framework Rule 11 requires clarification.

What should lessors do now?

Lessors with exposure to Indian carriers may consider the following:

  1. Registration and documentation: Ensure that every international interest is registered with the International Registry, since registration is a condition for the application of the insolvency remedies under Section 6. Lessors should also ensure that IDERAs are duly filed with the DGCA as per the 2026 Rules.
  2. Early engagement with the RP: On the commencement of insolvency, write to the RP without delay, seek access to the aircraft and its technical and maintenance records under Rule 11(3)(b). Ascertain early whether the RP intends to retain the aircraft under Rule 11(4).
  3. Tracking the waiting period: Diarise the expiry of two month waiting period under Rule 11(1). In a CIIRP, also record the commencement date and the date of any moratorium application or order, given the uncertainty revolving around the starting point of the waiting period.
  4. Service dues and forum: Account for dues that may be payable before export under Rule 14. After expiry of the waiting period, identify the appropriate forum and procedural route for each remedy under the CTC Act, the Aircraft Protocol and the IBC, keeping the DGCA’s regulatory role distinct from the NCLT’s insolvency jurisdiction.

The Road Ahead

The framework reflects a clear policy choice in favour of strengthening creditor and lessor protection. A two-month window leaves a distressed airline little time to organise a restructuring, but that is the price of credibility with international financiers. During the passage of the Bill, the Government noted that Indian aircraft leasing costs were 8 to 10 per cent above international benchmarks, a gap that a more predictable regime should intend to narrow. The immediate task is implementation, including reconciling Sections 9(1) and 9(2), determining the treatment of preservation costs and aligning Rule 11 with the CIIRP framework.

Conclusion

Go First exposed the gap between India’s international commitments and its insolvency law, and the CTC Act and CTC Rules address much of that gap. A lessor holding a registered international interest in a qualifying aircraft object now has a statutory pathway to seek the return of the aircraft after the two-month waiting period, subject to the conditions and procedural requirements of the new framework. The next airline insolvency will be the real test of whether these provisions operate in practice as intended.

 

References:

  • The Protection of Interests in Aircraft Objects Act, 2025 (India Code) (https://www.indiacode.nic.in/bitstream/123456789/21133/1/A2025-17.pdf)
  • Protection of Interests in Aircraft Objects Rules, 2026 (MoCA Gazette) (https://www.civilaviation.gov.in/sites/default/files/2026-02/gazette-notification-of-the-protection-of-interests-in-aircraft-objects-rules-2026.pdf)
  • Allen & Gledhill on the 2026 Rules (https://www.allenandgledhill.com/perspectives/articles/32394/sgkh-india-the-protection-of-interests-in-aircraft-objects-rules-2026)
  • AZB & Partners on the 2026 Rules (https://www.azbpartners.com/bank/the-protection-of-interests-in-aircraft-objects-rules-2026/)