The National Company Law Tribunal ( NCLT ) sought the response from the Ministry of Corporate Affairs ( MCA ) on the issue concerning aircraft lessor moratorium exemption in the Insolvency and Bankruptcy Code, 2016 ( IBC ).
The NCLT has sought MCA’s perspective regarding a plea filed by a lessor in the Go First insolvency case to reclaim its assets, citing the MCA notification of October 3, 2023.
On October 3, 2023, the Ministry of Corporate Affairs issued a notification (“MCA Notification”) that exempted arrangements relating to aircraft, aircraft engines, airframes and helicopters from the moratorium under Section 14(1) of the IBC.
This notification comes in the aftermath of the international aviation community’s widespread criticism of the insolvency proceedings of Go Airlines (India) Limited (“Go First”), where aircraft lessors complained that the moratorium under the IBC was inconsistent with their rights under the Cape Town Convention/Protocol.
A significant difference between the Cape Town Convention/Protocol and the IBC relates to the rights of the creditor/lessor to repossess the leased aircraft upon the lessee/debtor’s insolvency. The moratorium that comes into effect upon a corporate debtor being admitted to insolvency under the IBC prohibits various actions, including actions to enforce security or repossess the corporate debtor’s assets, during the corporate insolvency resolution process (“CIRP”) that can last for upto 330 days.
