The Ministry of Corporate Affairs issued a notification on Wednesday saying that the sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, shall not apply to transactions, arrangements or agreements, under the Convention and the Protocol, relating to aircraft, aircraft engines, airframes and helicopters.
The order is referring to: 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, which were adopted in 2001 in Cape Town, of which India is a signatory.
Section 14 of the IBC deals with the power of adjudicating authority to issue a moratorium while admitting a company under the resolution process. The court may halt the recovery of any property by a creditor or lessor, which is in the possession of a corporate debtor.
Post the issue of the notification, the moratorium will not include agreements relating to aircraft, aircraft engines, airframes and helicopters.
The notification, however, doesn’t mention that it applies to pending cases. If applied retrospectively, the new notification may affect Go First’s insolvency resolution proceedings. The National Company Law Tribunal in May had granted Go First a blanket moratorium to protect it from lessors and creditors. The NCLT had also restrained the Directorate General of Civil Aviation (DGCA) from accepting any applications for de-registration of aircraft from any lessors.
Go First, had filed for insolvency in the NCLT on May 2 under Section 10 of the IBC. The airline had said that it was forced to ground its fleet because of faulty engines supplied by US manufacturer Pratt & Whitney.
Currently, the airline’s lessors are fighting an application at the NCLT. The lessors are asking to be exempt from the moratorium, as they claim that they had terminated their leases with the airline prior to the moratorium.
Last week, the Aviation Working Group, a global aviation watchdog, had cut India’s rating in terms of compliance with the international law governing the leasing of aircraft. Under the Cape Town Convention (CTC), lessors can take back the possession of aircraft leased to airlines.