Update: Practice Groups - Aviation & Aerospace and Insolvency & Restructuring

Much needed relief for the Lessor community in the fastest growing Aviation economy in the world!

Eleven months since the admission of the Go First insolvency, the Delhi High Court has passed a significant order on April 26, 2024, allowing the writ petition filed by certain aircraft lessors of Go First to deregister a total of 54 aircraft.

Synopsis: In this Order, the Delhi High Court, inter-alia: (i) directs the Directorate General of Civil Aviation ("DGCA") to deregister the aircraft within five working days; (ii) permits the export of the aircraft pursuant to the Aircraft Act, the Aircraft Rules, and other applicable laws, with the DGCA facilitating the export by providing the Export Certificate of Airworthiness and other documentation; (iii) restrains Go First from disassembling parts of the aircraft; (iv) dismisses the petition filed by Go First's Committee of Creditors ("CoC") and allows lessors to inspect their respective aircraft, with the DGCA and Airports Authority of India ("AAI") facilitating the process; (v) directs that all maintenance tasks be performed by the lessors until deregistration is complete, thereby, granting them access to their respective aircraft, parts, and documents; and (vi) directs Go First's Resolution Professional to provide updated information / documentation related to such aircraft, while being restrained from entering the aircraft or removing parts / documentation.

Order vis-a-vis perspective / key takeaways of our Aviation and Aerospace Group: This landmark decision reinforces the advocacy, that interpretation and application of laws, the spirit of which was intended to resolve stress while facilitating business continuity / asset value protection - would lose its spirit, if applied in a sector agnostic way. Aviation being a sector linked to the growth and sustenance of commerce, trade and community on a domestic and global level, perhaps should not be hit by disruption of business from interpretation or application of law. This Order of the Hon'ble Delhi High Court reassures the business community / stakeholders at large - that the spirit of business laws such as the Insolvency and Bankruptcy Code, 2016 is understood and protected in India, especially for a cross-jurisdictional and nationally significant sector such as Aviation.

Furthermore, this Order provides the much-needed clarification of lessor rights during airline insolvencies by reinforcing the legal framework for aircraft leasing and deregistration and thereby, sets a much-needed precedent for aiding asset reclamation during insolvencies. Also, some colour and clarity on the interplay of the Cape Town Convention with the domestic Indian insolvency laws on the same lines as was done in the order of Hon'ble Justice Rajiv Shakdher in 2015.

Managing Partner Anand Srivastava's quote: "Without lessor confidence, the Indian aviation market may face challenges in realising its projected growth. And thus, this order of the Delhi High Court is a much needed and welcome step in the direction of business growth. With the insolvencies of Jet Airways and Go First, it may not be wrong to say that debt resolution is best done in a constructive manner. Insolvency of an airline not only impacts its own stakeholders, but the aviation community at large (as was seen when the Go First insolvency led to downgrading of India's rating by the Aviation Working Group). Therefore, in each insolvency matter, while applying the Letter of the law of IBC, one has to consider the spirit of such law and the interest of all stakeholders involved".