Securing India’s Aviation Future: Analysing the Protection of Interests in Aircraft Objects Bill 2025

Authored by: Aaditya Bhatt, Advocate
Bhatt & Joshi Associates

Introduction

In a significant move for India’s burgeoning aviation sector, the Parliament has passed the Protection of Interests in Aircraft Objects Bill, 2025. Following its passage in the Rajya Sabha, the Lok Sabha approved the Bill on Wednesday, April 3, 2025. This landmark legislation aims to align India’s domestic laws with its international commitments under the Cape Town Convention and its Aircraft Protocol, addressing critical gaps highlighted by recent airline insolvencies. Once brought into force, the Act is set to have an overriding effect over other laws in case of inconsistencies, marking a pivotal shift in the legal landscape governing aircraft financing and leasing in India.

The Global Context: The Cape Town Convention (CTC)

India acceded to the Convention on International Interests in Mobile Equipment (commonly known as the Cape Town Convention or CTC) and the Protocol to the Convention on Matters Specific to Aircraft Equipment (the Aircraft Protocol) back in 2008. Signed in Cape Town on November 16, 2001, the CTC framework seeks to:

1. Establish a uniform international legal regime for creating, enforcing, registering, and prioritizing international interests in high-value mobile assets, specifically aircraft objects (airframes, engines, helicopters).
2. Enhance legal predictability for creditors and lessors.
3. Facilitate asset-based financing by reducing risks associated with cross-border transactions and debtor defaults or insolvencies.
4. Ultimately, lower the cost of financing for operators by mitigating creditor risk.

Despite India’s accession in 2008, the full benefits and protections offered by the CTC, particularly specific insolvency-related remedies that India declared it would adopt, remained largely inaccessible due to the absence of enabling domestic legislation.

The Catalyst for Change: Airline Insolvencies and the IBC Conflict

The urgency for enacting domestic legislation became starkly evident following recent high-profile airline insolvencies, most notably Go First (in 2023) and earlier, Jet Airways. The core issue stemmed from the conflict between the objectives of India’s Insolvency and Bankruptcy Code, 2016 (IBC) and the specific creditor protections enshrined in the CTC’s Aircraft Protocol.

Under the IBC, particularly Section 14, the initiation of insolvency proceedings triggers a moratorium. This moratorium prohibits, among other things, the recovery of assets by owners or lessors from the corporate debtor. While designed to preserve the debtor’s assets as a going concern and maximize value for all creditors collectively, this directly clashed with the remedies available to aircraft lessors/financiers under the CTC framework, which prioritizes their ability to regain possession of their specific, high-value assets promptly upon default or insolvency.

The Go First crisis exemplified this conflict. Lessors were legally barred by the IBC moratorium from repossessing their aircraft, leading to protracted legal battles and significant financial uncertainty. This situation prompted the global Aviation Working Group (AWG), which monitors CTC compliance, to downgrade India’s compliance score in 2023. The perception of India as a high-risk jurisdiction for aircraft leasing intensified, potentially jeopardizing future financing and leasing arrangements crucial for the country’s massive fleet expansion plans (with over 1100 aircraft currently on order by Indian carriers, supplementing the approximately 840 aircraft already operating, a large majority of which are leased).

Key Features of the Protection of Interests in Aircraft Objects Bill, 2025

Enacted under the constitutional power granted by Article 253 (allowing Parliament to legislate for implementing international treaties), the Bill translates India’s CTC commitments into enforceable domestic law. Salient features include:

1. Implementation of CTC & Aircraft Protocol: The Bill’s primary objective, as stated in its preamble, is to give legal force to the Convention and Protocol within India.
2. Overriding Effect (Clause 9): Crucially, the Bill stipulates that its provisions will prevail over any other inconsistent laws. This is vital for ensuring that the CTC-mandated remedies are not negated by conflicting domestic legislation, such as aspects of the IBC concerning aircraft assets. However, it preserves the right of government entities to detain aircraft for unpaid dues related to services provided directly to that aircraft object.
3. Default Remedies (Article 8, Chapter III): The Bill explicitly empowers secured creditors (chargees) and lessors to exercise remedies upon default, including taking possession or control of the aircraft object. This aligns Indian law with the internationally accepted standards for aircraft repossession under the CTC.
4. Jurisdiction of High Courts (Article 53 / Chapter XII): The Bill designates High Courts as the competent courts for granting relief sought under the Convention (e.g., orders for repossession). This provides a clear and established judicial forum for enforcing rights.
5. Designated Registry Authority: The Bill formally appoints the Director General of Civil Aviation (DGCA) as the entry point/registry authority in India for the purposes of the Convention, streamlining registration and de-registration processes in line with CTC requirements.
6. Preservation of State Rights (Article 39): The Bill acknowledges the existing rights of State entities or service providers to arrest or detain aircraft under specific conditions for payment of amounts owed relating to services rendered to the object.

Why Ratification Through Domestic Law Matters: Expected Impacts

The enactment of this Bill is anticipated to yield substantial benefits:

1. Strengthened Creditor Confidence: Provides robust legal protection and clear enforcement mechanisms for international lessors and financiers, significantly reducing legal uncertainty and perceived jurisdictional risk.
2. Potential for Lower Leasing Costs: By mitigating risks associated with repossession delays and asset deterioration during insolvency, the Bill is expected to lower the risk premium charged by lessors. Experts anticipate this could lead to reduced lease rental costs (potentially by 8-10%), making aircraft financing more affordable for Indian carriers and potentially benefiting passengers through competitive airfares.
3. Facilitating Fleet Expansion: With massive aircraft orders pending, ensuring access to predictable and cost-effective financing/leasing is critical for the Indian aviation industry’s growth trajectory.
4. Improved International Standing: Aligning with global best practices under the CTC enhances India’s reputation in the international aviation finance market, potentially improving its AWG score and attracting further investment.
5. Enhanced Ease of Doing Business: Creates a more predictable and stable legal framework, fostering a more encouraging climate for complex, high-value aircraft transactions.
6. Efficient Asset Utilisation: Prevents valuable aircraft assets from being indefinitely grounded and potentially deteriorating during prolonged insolvency proceedings, allowing them to be redeployed more quickly.

Conclusion: Impact of the Aircraft Objects Bill, 2025 on Aviation Law

The Protection of Interests in Aircraft Objects Bill, 2025 represents a watershed moment for Indian aviation law. By effectively domesticating the Cape Town Convention and its Aircraft Protocol, India addresses a critical vulnerability exposed by recent insolvencies. This legislation is poised to restore international confidence, reduce financing costs, and provide a stable legal foundation essential for supporting the ambitious growth plans of the Indian aviation sector. The focus now shifts to the effective implementation and interpretation of this Act by regulatory authorities and the judiciary to fully realize its intended benefits.

Disclaimer: This article is authored by Aaditya Bhatt Advocate, Bhatt & Joshi Associates, for informational purposes only. It does not constitute legal advice. The information provided is based on the details available regarding the Protection of Interests in Aircraft Objects Bill, 2025, as presented in the provided source material and general legal principles. Readers should consult with qualified legal counsel for advice specific to their circumstances. Bhatt & Joshi Associates assumes no liability for any reliance placed on this article.