Much needed relief for the Lessor community in the fastest growing Aviation economy inthe world!
Eleven months since the admission of the Go First insolvency, the Delhi High Court has passed a significant orderon April 26, 2024, allowing the writ petition filed by certain aircraft lessors of Go First to deregister a total of 54aircraft.
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 respectiveaircraft, 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 stresswhile facilitating business continuity / asset value protection - would lose its spirit, if applied in a sector agnosticway. Aviation being a sector linked to the growth and sustenance of commerce, trade and community on a domesticand global level, perhaps should not be hit by disruption of business from interpretation or application of law. ThisOrder of the Hon'ble Delhi High Court reassures the business community / stakeholders at large - that the spirit ofbusiness laws such as the Insolvency and Bankruptcy Code, 2016 is understood and protected in India, especiallyfor a cross-jurisdictional and nationally significant sector such as Aviation.
Furthermore, this Order provides the much-needed clarification of lessor rights during airline insolvencies byreinforcing the legal framework for aircraft leasing and deregistration and thereby, sets a much-needed precedentfor aiding asset reclamation during insolvencies. Also, some colour and clarity on the interplay of the Cape TownConvention with the domestic Indian insolvency laws on the same lines as was done in the order of Hon'ble JusticeRajiv Shakdher in 2015.
Managing Partner Anand Srivastava's quote: "Without lessor confidence, the Indian aviation market may facechallenges in realising its projected growth. And thus, this order of the Delhi High Court is a much needed andwelcome step in the direction of business growth. With the insolvencies of Jet Airways and Go First, it may not bewrong to say that debt resolution is best done in a constructive manner. Insolvency of an airline not only impacts itsown stakeholders, but the aviation community at large (as was seen when the Go First insolvency led todowngrading of India's rating by the Aviation Working Group). Therefore, in each insolvency matter, while applyingthe Letter of the law of IBC, one has to consider the spirit of such law and the interest of all stakeholders involved".
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