It’s a court case that could potentially destabilise the growth currently being witnessed in India’s booming aviation sector. And it involves a minor player, Go First, which saw its passenger share drop from 10.53 per cent in January to 0.4 per cent by May 3, when it filed for bankruptcy under Indian laws.
Yet, two separate judgments by courts have queered the pitch for the aviation sector in the world’s fastest-growing aviation market.
The insolvency court National Company Law Tribunal (NCLT), New Delhi, in an order on July 26 allowed Go First to use the aircraft for which leases were terminated by lessors on the grounds that the aviation regulator Directorate General of Civil Aviation (DGCA) had not deregistered the aircraft. This meant the aircraft are, therefore, available to the Mumbai-headquartered low-cost carrier (LCC) for use as it looks to resume operations, the court ruled.
Further, it also rejected lessors’ applications to inspect their aircraft.
“The court also observed that the lessors who are party before this forum were not part of the writ petitions filed before the Delhi High Court, involving eight lessors and 30 aircraft and that the order passed by the Delhi High Court was an interim order and no law has been are laid by the upper court,” Salil Arora, founding partner at the law firm AviLeague Partners, said while summarising the judgment on a request from Business Today.
However, weeks earlier, on July 5, the Delhi High Court allowed lessors to access their aircraft.
“It is to be noted that two lessors who had petitioned the NCLT also approached the Delhi High Court following its interim order for eight lessors and were granted the same relief. But now they have two contradicting orders in hand,” a lawyer told BT, requesting anonymity.
Approve Cape Town Convention at earliest
A total of 30 aircraft of 14 lessors are at stake. “The lessors who filed the petition with Delhi High Court did so as they decided NCLT had no jurisdiction in the matter as they had already terminated the lease agreements with Go First. There is going to be utter confusion, with no clarity on which order to follow,” another noted lawyer said.
Two additional petitions were filed before the Delhi High Court by Jackson Square Aviation and Bank of China Leasing, both registered in Ireland.
Legal and industry experts say this situation could have easily been pre-empted had Parliament ratified the Cape Town Convention Bill pending since 2018, which is aimed at resolving the challenge of obtaining certain unopposable rights to high-value assets such as airframes, aircraft engines and helicopters that, by their very nature, have no fixed location.
While India became a contracting state to the Convention in 2008, some of its provisions are in conflict with the country’s bankruptcy laws. Interestingly, India today stands alongside Afghanistan and South Africa among only three nations that have not aligned their legal framework with CTCP.