Govt keeps aircrafts, helicopters out of ambit of moratorium under IBC

In a big move which could have bearings on the ongoing Go First CIRP, the Ministry of Corporate Affairs has said that moratorium clause of the Insolvency and Bankruptcy Code will not be applicable to transactions, arrangements or agreements relating to aircraft, aircraft engines, airframes and helicopters.

The MCA noted that the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment were adopted under the joint auspices of International Civil Aviation Organization and the International Institute for the Unification of Private Law concluded at Cape Town on 16th November, 2001.

It also noted India, is a signatory to and having acceded the Convention and the Protocol by depositing with the International Institute for the Unification of Private Law the instruments of accession on 31 March 2008.

Therefore, it said that the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), shall not apply to transactions, arrangements or agreements, under the Convention and the Protocol, relating to aircraft, aircraft engines, airframes and helicopters.

Subsection (1) of the Section 14 says:

On the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

This order from the government is significant for insolvency cases related to airlines. Recently, lessors of Go First had cited Cape Town Convention and the Protocol to the Convention on International Interests in Mobile Equipment and pleaded to the NCLT that DGCA should have deregistered the airlines within 5 working days of receipt of an application from the IDERA holder.

Irrevocable Deregistration and Export Request Authorisation, or IDERA, empowers lessors to get their aircraft deregistered from the registry of DGCA.

However, NCLT had rejected their request citing moratorium provisions under the IBC.

Also See: NCLT allows Go First to use aircrafts; denies lessors access to planes for maintenance