Aviation News

Moratorium provisions under IBC not to apply to aircraft, engines: Govt, ET Infra

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<p>Representative Image</p>
Representative Image

NEW DELHI: The Ministry of Corporate Affairs on Wednesday in a notification exempted aircraft, aircraft engines, airframes and helicopters from select provisions of Insolvency and Bankruptcy Code, 2016, as per which when a corporate debtor is under the IBC process, the adjudicating authority can place a moratorium on a legal claim seeking back possession or disposing of any assets by debtors.

As per the notification, the relevant provisions in IBC related to moratorium on assets will now not apply to transactions, arrangements or agreements, under the Cape Town Convention and Protocol, with regard to aircraft, aircraft engines, airframes and helicopters. The protocol makes it easier for aircraft, engine lessors to get back their assets in case of bankruptcy faced by a client airline. Though India is a signatory to the convention, the Parliament is yet to ratify it, which allows IBC law to prevail in such cases.

The exemption comes in the aftermath of Go First’s insolvency and bankruptcy resolution process, under which the National Company Law Tribunal has barred the airline’s aircraft and engine lessors from possessing back their assets.

“This is a very welcome move just as India’s score on the CTC (Cape Town Convention) Compliance Index was downgraded by the Aviation Working Group,” said law firm Sarin & Co in a statement.

Last month, aircraft leasing body, Aviation Working Group, had lowered India’s compliance category and score under the Cape Town Convention Compliance Index to ‘low’ as aircraft and engine lessors’ rights were impacted due to the moratorium placed in the Go First’s case.

The airline in its voluntary filing to the National Company Law Tribunal in May, under section 10 of the Insolvency Bankruptcy Code, had outlined that the GTF engines from Pratt & Whitney operated by it, suffer from a set of serious design and manufacturing flaws resulting in the airline grounding its fleet and halting commercial operations. The airline has claimed Rs 10,800 crore loss in revenues due to faulty engines and forcing it to initiate a corporate insolvency resolution process.

The lessors had appealed that NCLT direct Go First and the Interim Resolution Professional to refrain from operating or flying aircraft and the engines owned by them for commercial use.

  • Published On Oct 4, 2023 at 09:59 PM IST

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