Under Indian law, as long as there is an offer by one party that is accepted by another for consideration, such an act or series of acts shall constitute a transfer of title via a valid contract.

A bill of sale is an effective document to prove the transfer of title. A bill of sale should ideally note that a valid contract has been entered into, namely, that there has been an offer by the seller, the offer has been accepted by the buyer and consideration has been received by the seller.

Enforceability of a bill of sale / sale agreement will not be affected by the language it is written in. However, should a sale agreement need to be submitted to a court or a government entity, it is always recommended that it is translated into English and notarised (in certain cases apostillation may be required).

Furthermore, if a document is not properly stamped, courts in India have the power to detain a document and refuse to admit it into evidence unless and until it is properly stamped.

A potential purchaser of an aircraft must check the aircraft register maintained by the Directorate General of Civil Aviation (“DGCA”) as well as the International Registry maintained under the Cape Town Convention and Aircraft Protocol.

Under the general applicability of Indian law, the sale of an ownership interest in an entity that owns an aircraft or engine shall be recognised as a sale of that entity only. The rights of both – the owner of the airframe as well as the owner of each of the engines are recognized as separate (and distinct).

As such, India being a common law jurisdiction, title annexation does not apply, hence title to an engine does not automatically vest in the owner of a host aircraft.

The DGCA records the details of both the owner and the operator. The various parameters in relation to an aircraft such as details of ownership, the details of the lease interest (if different from the owner), the details of the operator and mortgagee are recorded in the aircraft register.

There are no other registries (apart from the International Registry) where an ownership interest may be registered.

A person or entity claiming to be owner of an aircraft must be able to prove ownership by way of a valid title document in its favour.

To record an ownership interest in an aircraft, the DGCA requires a number of documents. Apart from a document of title (duly notarised), the DGCA will require no objection letters from all other parties denoted on the certificate of registration of the aircraft (if the aircraft is already registered on the aircraft registry) and evidence of authority in favour of the signatories of such documents.

For recording an ownership interest, a fee is payable and the DGCA may take up to four weeks for issuance of a new certificate of registration.

In the case of a change of ownership of an aircraft already registered in India, it is illegal for anyone to operate an aircraft without the name of the new owner having been endorsed on the certificate of registration. Therefore, specific permission must be sought from the DGCA to operate the aircraft pending the processing of the application for endorsement of the new owner on the certificate of registration. Costs may also vary, depending on what supporting documentation the DGCA may request. All documents to be submitted with the DGCA must be notarised.

The register maintained by the DGCA contains the name of the owner and that shall be taken as a conclusive proof (prima facie) of ownership by Indian authorities. The effect of registration in India acts as notice to all third parties including a person claiming to be a bonafide purchaser for consideration with no notice. Third parties could rely on the accuracy of the public registration of the ownership interest as recorded on the certificate of registration. However, double verification from the records of the DGCA is always recommended.

If the title is defective, the actual owner attempting to enforce its rights against the person claiming to be the owner will have to prove its title on the basis of valid title documentation. The actual owner would then need to apply to the DGCA for amendment of its records, failing which, an aggrieved party would have to approach a court of law for determination of rights.

The register is known as the Indian aircraft register and is a federal register, maintained by the DGCA in New Delhi, India. Aircraft registered on the Indian aircraft register are given a three-letter registration number prefixed with the letters ‘VT’, for example ‘VT-XYZ’.
The register is open to inspection by the general public.

The DGCA further issues a certificate of registration in relation to an aircraft on being registered.

The details that are contained in the certificate of registration and the aircraft register are:

• the type of aircraft;
• the MSN / Certification Number;
• the year of manufacture;
• nationality and registration marks;
• the full name, nationality and address of the owner or lessor;
• the full name, nationality and address of the lessee;
• the usual station of the aircraft;
• the date of registration;
• the period of registration; and
• the full name and address of the mortgagee or hypothecator.

The applicant applying for the registration of an aircraft is required to file the CA-28 aircraft registration form electronically on the DGCA’s online portal e-GCA and provide documents like:

• customs clearance certificate/bill of entry of the aircraft;
• certificate of de-registration from the previous registering authority (if applicable);
• evidence to the effect that the aircraft has been purchased or wholly owned by the applicant;
• in case of aircraft purchased from a previous owner, then an affidavit to that effect;
• in case aircraft is taken on a dry lease, then a copy of the lease agreement is to be annexed;
• in case the aircraft is owned by a company or corporation, then a document of registration of the company and the names, addresses and nationalities of the directors;
• a copy of the permission for import of aircraft issued by the Ministry of Civil Aviation/DGCA;
• in cases where the aircraft has been mortgaged/hypothecated, the owner/operator shall submit his or her consent for the same and the papers to this effect; and
• from each of the owner and lessor, a no binding certificate stating inter-alia that nothing in the lease agreement is binding on the DGCA.

India has entered into article 83-bis agreements; however these are sparingly used and in fact, permitted only in extraordinary circumstances.

There is no separate registry for aircraft engines in India. The title of the owner of an engine, though not registerable in any registry in India, shall be recognised on the basis of a valid title document.

India is an exchange-controlled country. The relevant enactment is the Foreign Exchange Management Act, 1999 which is administered by the Reserve Bank of India (RBI). There are very strict regulations and restrictions on loans from foreign lenders, especially in foreign exchange.

The RBI is the relevant regulator, prior approval is required before any borrowings can be made under the approval route. Any financing or repatriation of realisation of proceeds under a loan, guarantee or security document would require the approval of the RBI.

The usual practice permitted is the issuance of bonds as subordinated debt instruments. There are extensive RBI guidelines on what forms for subordination are permissible and restrictions on the percentage of debt that may be subordinated.

The transfer of outstanding debt is permissible and recognised, subject to RBI approval, which may be required on a case-to case-basis.

Depending on the nature of the transaction, there may be limits imposed by the RBI on the amount of interest that may be charged.

The concept of agency and the role of an agent under a syndicated loan is recognised.

Guarantees, especially for foreign exchange denominated transactions, are regulated by the RBI’s Foreign Exchange Management (Guarantees) Regulation, 2000 and other Regulations. In most case, prior approval of the RBI would be required for a borrower to grant security to foreign lenders by an Indian entity.

Typical forms of security granted in aviation finance transactions in India could include the taking over of security of immovable property by way of a mortgage or movable property/ bank accounts, etc, by way of a deed of hypothecation.

A security document may be in any form as required by the parties to it, provided however, the document must be a valid contract under Indian law. Parties are free to choose the language of the security document (English is perfectly acceptable). As stated, the document may be in any form, however it should contain a maximum secured amount and the various terms and conditions (economic and otherwise) agreed to between the parties.

A security agreement, if executed properly – and if it satisfies the test of being a valid contract between two parties competent to contract – would be upheld as being valid in relation to the aircraft, engines, warranties or insurances.

The aircraft being a movable asset, there is no mandatory requirement to register any mortgages, liens, encumbrances, etc, on them in India. However, it is recommended that the security assignment should preferably be filed and recorded with the DGCA.

Since December 2006 the DGCA has started endorsing a security interest on the Certificate of Registration in accordance with the amended rules. The DGCA will endorse on the Certificate of Registration the name of the mortgagee and/or details of the hypothecation. Such registration shall result in notice to all third parties as to the interest of the security trustee or mortgagee in the aircraft.

The typical documents that are required are a copy of the security document and request letters from the mortgagee, the owner of the aircraft and the operator of the aircraft, etc. The time taken by the DGCA to endorse the name of a mortgagee on an aircraft’s certificate of registration is between two and four weeks. Costs may also vary according to the documentation requested by the DGCA and the time taken by the authority to clarify whatever queries it may have from the parties concerned. Further, the DGCA shall also always require the consent of the mortgagee/ security trustee named on the certificate of registration/aircraft register for any amendment of the entries in relation to the aircraft.

Once registered, the same shall constitute public notice to third parties. Further, as per Indian law, the registration of a security interest in the aircraft shall also constitute persuasive value against any third party claiming to be a bona fide purchaser without notice. Registration of a security interest with the DGCA does not establish any priority.

In cases where it is mandatory under Indian law for a charge to be registered under section 77 of the Companies Act, 2013, the law mandates that no liquidator or creditor shall take notice of such a charge unless such charge is duly registered.

Generally speaking, a security assignment is not required to be registered in India. However, the aircraft mortgage can be registered with the Sub-Registrar of Assurances under the Indian Registration Act, 1908 within four months of its execution. The registration with the Sub-Registrar of Assurances (of movables) constitutes persuasive value against a claim by a bona fide purchaser without notice.

If one of the parties is an Indian entity incorporated under or governed by the Companies Act, 2013, then registration of a charge under section 77 of the Companies Act, 2013 may be necessary. However, this varies on a case to case basis. It should be noted that is not compulsory if the mortgagor of the aircraft is not an Indian entity having its registered place of business in India.

It is also advisable to notarise the security assignments; where they are executed abroad, preferably they should also be authenticated by an Indian consular or other diplomatic officer. Although India is a signatory to the Hague Convention, consularisation is still recommended for practical purposes. This is because some of the government offices continue to insist on consularisation although it is not technically required any more. In recent experience, it has been observed that most government departments, including the DGCA, accept notarised copies of documents thereby making the requirement for consularisation more or less redundant.

Mortgages governed by foreign law are fully valid and binding in India. Therefore, in most circumstances, there may be no requirement for the foreign parties to enter into a local law mortgage, especially when the mortgagee and mortgagor are non-resident foreign parties.

A domestic law mortgage over an aircraft or engine is not required in India. A bank account can be charged by way of hypothecation. The deed of hypothecation would need to be filed with the bank maintaining the account which is to be charged for it to be perfected.

Indian Law recognises the concept of a trust and the relevant national legislation is the Indian Trusts Act, 1882. The nature of the security is a right in personam and the trustee may hold the security for a changing group of beneficiaries without affecting the security. Registrations are required to be made only if there is going to be a change to the owner of the aircraft.

India is not a party to the Hague Convention on Trusts, 1986. A borrower may assign to a security trustee pursuant to a security assignment or a mortgage its rights to the aircraft of under an aircraft lease.  It is possible to assign the rights and benefits only without also assigning the attendant obligations of the lessor.

In case the identity of the secured parties under a security assignment changes, the document evidencing the same may be filed with the DGCA on its creation.

If an aircraft is owned by a trustee and is sold to another third party requiring a change of name of the aircraft certificate of registration, then the procedure for amendment of certificate of registration must be followed to endorse the name of the new owner. If there is a change in beneficiaries resulting in no change of the aircraft certificate of registration then no action is required.

The question of whether a third party could take or register a lien over an aircraft or engine would depend on who is trying to discharge the lien.

In case the lessee seeks to discharge this lien, it would be liable to pay the total outstanding amount payable to that third-party contractor/repairer. However, if a lessor or secured party seeks to discharge a lien then in all probability it would have to bear only the value of the work actually done on that particular aircraft asset.

In case of deregistration and export under India’s Cape Town Convention regulations, the IDERA holder must bear the cost of all charges accrued three months prior to the date of submission of the IDERA, owed to the central government, or any entity thereof, or any inter-governmental organisation in which India is a member, or other private provider of public services in India.

Under the new Cape Town Convention and Aircraft Protocol regulations, a fleet lien is not recognised.

Third parties which are government entities have the right to arrest, detain, attach or sell an aircraft for payment of amounts owed. However, under the new Cape Town Convention and Airport Protocol regulations, these dues are limited to three months prior to the date of application by the IDERA holder.

The laws of India do provide for liens, these are extensive and have been listed below.

Third party lien/detention:

• The Airports Authority of India and private airports deriving their rights from the authority may exercise a lien on the aircraft for any unpaid dues, such as landing and parking charges.
• An unpaid bailee can exercise a mechanics lien.
• Similarly, statutory dues such as taxes, workmen wages etc, form the first charge on the asset.
• The government or its agencies can confiscate, detain or requisition aircraft (whether foreign owned or otherwise) under certain circumstances.

Detention under the Aircraft Act:

Under the Aircraft Act, the Central Government may, in the interest of public safety or tranquillity, direct that any aircraft or class of aircraft be delivered forthwith or within a specified time to such authority named by the Central Government, to be at the disposal of the government for public service. Any person who suffers direct injury or loss by reason of such order shall be entitled to compensation, as determined by an authority appointed by the Central Government.

Any authority so authorised by the Central Government can detain any aircraft, if in the opinion of such authority, the flight of such aircraft would involve danger to persons in the aircraft or to any other person or property or such detention is necessary to secure compliance with any of the provisions of the Aircraft Act and or the Aircraft Rules applicable to such aircraft or such detention is necessary to prevent a contravention of any Rules made under section 5(2)(h) and (i) of the said Act.

Detention during emergency:

The government or its agencies can confiscate, detain or requisition aircraft (whether foreign owned or otherwise) during a general emergency.

The Central Government is also empowered to seize any aircraft belonging to the enemy or any aircraft or class of aircraft that is owned or operated by, or in the possession or custody of any person domiciled or resident in an enemy territory or any aircraft or class of aircraft, the operation of which is likely to aid or assist the enemy or is likely to be prejudicial to the defence of India or to public safety. Such an order may also require any aircraft or class of aircraft to be placed at the disposal of any authority specified therein.

Any person authorised by the Central Government can, where it appears necessary in the interest of the defence of India and civil defence to do so, order that any particular aircraft at any place in India shall not leave that place until permitted to do by such authority or person as may be prescribed in that order.

This power was exercised by the government during the state of emergency declared in India in 1962 and 1971 under Defence of India Acts, 1962 and 1971 and the Rules made thereunder. The Acts and the Rules remained in force till six months after revocation of the emergency order.

Rule 42 of the Aircraft (Security) Rules, 2023 also permits the Director General or any other person authorised in this behalf by the Central Government to detain an aircraft for security purposes if so required.

Aircraft may also be detained and in extreme circumstances sold under the Customs and other tax laws of India.

Detention under other legislations:

Under the Narcotic Drugs and Psychotropic Substances Act, 1985 any conveyance, including aircraft, used for transportation of illegal drugs may be detained unless it is proved that it was so used without the knowledge of the owner and all reasonable precautions were taken against such use.

Under Section 2A of the Epidemic Diseases Act, 1897, as amended by the Epidemic Diseases (Amendment) Act, 2020, the Central Government is empowered to take measures to inspect and detain any conveyance, including aircraft, leaving or arriving at any land port or port or aerodrome of India, as the case may be.

Though India has made the relevant declarations under the Cape Town Conventions stating that self-help remedies are available to a creditor, in practical terms, a court order may be necessary

Peaceful repossession of the aircraft however can be obtained without judicial intervention. In cases where there is no co-operation, the secured party has the option to apply to a court.

The court in which enforcement action under a security agreement/aircraft mortgage is decided would depend on the jurisdiction in India where the lis arises, the nature and value of the claim. Summary judgment may only be an effective method in cases where a secured party seeks to recover debt and other monies under the security agreement.

However, from a practical standpoint, since the courts in India are over-burdened with work, lenders have preferred to have security documents governed by English law and any enforcement takes place in England. The UK is a reciprocating territory and money decrees passed in the UK may be enforced in India much more easily than decrees from non-reciprocating territories.

If validly executed, operating/wet/finance leases or leases concerning only engines or parts are permissible and will be recognised under the law of India.

A lessor does not need to be licensed or otherwise qualified in India to do business with a domestic lessee. Plainly, a foreign lessor based in a prohibited country would not be permitted to do business in India.

Leases are not subject to any consent from any government entity. Before a lessee may import an aircraft into India, it must seek the consent of the DGCA and/or the Ministry of Civil Aviation (MoCA). The DGCA or MoCA shall grant its “in principle” approval for the import of the aircraft subject to it being satisfied about the safety of the aircraft intended to be imported. While there is no consent required as a pre-requisite to execution of a lease, the “no objection” of the DGCA/MoCA is required before import of an aircraft on lease will be permitted.

A lease agreement can cover parts that are installed or replaced on an aircraft or engine after its execution provided that the agreement itself contemplates such inclusion/coverage. For parts that are not covered under the lease, or which could not be anticipated at the time of execution of lease, a simple side letter or short lease amendment agreement may be entered into by the parties. There are no mandatory terms required to be in a lease.

While there is no specific register, at the time of registration of an aircraft taken on lease, the applicant is required to submit a notarised copy of the lease agreement to the DGCA as an aircraft taken on lease by an Indian operator from a foreign lessor cannot be registered in India unless the applicant submits a copy of the lease to the DGCA. The consequence of failing to file the lease with the DGCA is that the aircraft would not be registered in India.

The aircraft register records certain particulars relating to the lease such as period of validity of the lease and the names, nationalities and addresses of the lessor and the lessee. The whole process may take up to four weeks from the date of application. All supporting documentation (as may be requested by the DGCA) must be notarised.

The applicant applying for the registration of an aircraft must, along with the CA-28 aircraft registration form which is now completed electronically on the DGCA’s online portal e-GCA website, as well as other documents, file a copy of the lease agreement with the DGCA. There is no specific form in which a lease must be for it to be registrable on the aircraft registry. A lease needs to be translated into English in case it is executed in a different language. Further, a notarised copy of the lease would suffice to be valid and registrable on the aircraft registry.

There are DGCA requirements that state that any lease amendments or novation’s must also be filed with the DGCA. There is no requirement to submit a lease in relation to an aircraft engine to any authority in India.

Registration of the lease, and thus consequent issue of the certificate of registration in relation to the aircraft, may take anywhere from two to four weeks. There is a fee for registration of an aircraft on the Indian aircraft registry which is based upon the weight of the aircraft. Apart from this fee, there are no other taxes or duties payable for registering a lease.

India recognises the concept of both a contractual assignment and novation. As long as the New York or English law-governed assignment and assumption agreement or novation agreement is a valid contract under Indian law – i.e., the agreement is not a result of fraud, coercion or misrepresentation and it records an offer, the acceptance of the offer and is for valid consideration – the courts in India will uphold the validity of such an agreement. The consent of the lessee will also be required for such agreement to be valid and enforceable. As long as the agreement itself is not opposed to public policy, there are no mandatory terms that such agreement must contain to be valid under Indian law.

Recently, the DGCA has mandated that all aircraft lease assignment and novation agreements must be filed with the regulator. As such, there is no requirement for an engine lease assignment and novation agreement to be filed with the DGCA, but it is recommended. Such agreements are not subject to any consent from any government entity.

The procedure of filing an aircraft or engine lease assignment and assumption/novation agreement is fairly simple, a notarised copy of the agreement may be filed under a covering letter with a request that the same be placed on the file of the aircraft. It must also be mentioned that a change in the ownership of an aircraft needs to be recorded in the aircraft register, the regulations also state that it is illegal for any person to fly or assist in flying such aircraft until the name of the new owner is not endorsed on the certificate of registration. Permission must specifically be sought from the DGCA to continue flying the aircraft until such activity is carried out.

No consents are required in advance; however, it is usual practice to apply to the DGCA seeking permission to continue flying the aircraft in case of a change of ownership.

It is advisable for the aircraft and/or engine lease assignment and assumption/novation agreement to be translated, in the event that it is not in English, and notarised.

In cases where the ownership interest of an entity owning an aircraft is transferred with legal title to the asset remaining with that entity, a change on the aircraft certificate of registration of the aircraft would not be required and, therefore, the aircraft may continue flying unhindered.

A foreign lessor may terminate an aircraft lease should the lessee be in default of its obligations under the lease. As long as the foreign lessor is acting within the terms of the lease, there are no restrictions on its ability to terminate. A foreign lessor would require the permission of the customs authorities as well as that of the DGCA to re-export the aircraft from India. Sale of the aircraft following such termination is permissible.

In general, it is prudent to factor in a significant amount of time to properly enforce one’s rights in India, mainly due to the country’s complex bureaucracy. Also, in case of any contest by the lessee, enforcement may be delayed.

A lessor would be expected to comply with the terms of the lease. If the terms of the lease provide for a notice period, then such notice period must be adhered to unless specifically waived by the lessee.

There is no remedy of self-help in India. Peaceful repossession of the aircraft can, of course, be obtained without judicial intervention. Legally, the lessor may terminate the agreement and take possession or control of the aircraft. In cases where there is no co-operation, the lessor has the option to apply to a court.

In India, the doctrine of sovereign immunity does not apply to statutory corporations or bodies incorporated under the (Indian) Companies Act, 1956 and 2013 or to any government owned entities. This doctrine applies only to the exercise of certain sovereign functions performed by the state. The execution and performance of its obligations by a company under an agreement will constitute private and commercial acts done for commercial purposes.

There are no specific courts that are specifically competent to decide aviation disputes. The forum would be determined by the value, facts and circumstances of the aviation dispute.

The the Civil Procedure Code, 1908 (CPC) provides that summary procedure provided under Order XXXVII shall apply to the following classes of suits:

• suits upon bills of exchange, hundee (unconditional orders in writing made by a person directing another to pay a certain sum of money to a person named in the order) and promissory notes;
• suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest, arising

1. on a written contract, or
2. on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty, or
3. on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only.

Therefore, summary judgment may only be an effective method in cases where a foreign lessor seeks to recover unpaid rent and other monies under the lease and not to enforce the lease. The courts of law are ready to intervene upon proper proceedings being filed. Interim measures such as grounding of the aircraft can be obtained fairly quickly and usually within a week or two of the initiation of the legal action. Where there is an arbitration clause, the court will pass an interim protection order when the arbitration clause is enforced.

In India, as elsewhere, the grant of an injunction under CPC is a discretionary remedy. It may be granted unconditionally or upon such terms as the court may impose. In exercising its jurisdiction, the court will not enter upon a pre-trial assessment of the lessor’s claim. If the court is satisfied that the lessor has a prima facie case against the lessee and that, in the absence of an injunction, “irreparable injury” or loss, which cannot be compensated for in damages, is likely to be caused to the lessor, it will grant the injunction. Before granting an injunction, the court will direct that notice of the same be given to the lessee, except in cases where it appears that the object of granting the injunction would be defeated by such delay as would result from this.

If a court in India is requested and if the court is satisfied that there is sufficient cause to do so, it would render a judgment in a foreign currency.

As long as the court does not form the opinion that the default interest or the penalty imposed on the lessee is excessive or uncalled for, there are no limitations on a lessor’s ability to recover default interest or to charge additional rent following the termination of the lease for default. In case a court does come to the conclusion that the default interest or penalty on the lessee is not sustainable, it may levy a rate of interest on its own accord which would ordinarily be the prevailing market rate of interest.

The following third-party rights would take priority over a lessor’s rights under an aircraft or engine lease:

• the Airports Authority of India can exercise a lien on the aircraft for any unpaid dues such as landing and parking charges – this also includes the private airport operators exercising under the powers vested to the Airports Authority of India;
• an unpaid bailee can exercise a mechanics lien;
• similarly, statutory dues such as taxes, workmen wages, etc, form the first charge on the asset;
• the government or its agencies can confiscate, detain or requisition aircraft (whether foreign owned or otherwise) under certain circumstances, such as if an emergency is declared by the central government or if the aircraft is involved in criminal activity.

Creditors of a domestic lessee may exercise a lien over the aircraft – for example, an unpaid bailee may exercise a mechanics lien; the Airports Authority of India may attach an aircraft for unpaid statutory dues. However, such creditors would not have the right to sell the leased aircraft.

An aircraft in India may be deregistered on the application of the lessee/operator, the owner, the lessor or the IDERA holder.

The lessee/operator or foreign lessor/owner may apply to the DGCA for deregistration of an aircraft in case the lease in respect of the aircraft has expired or has been terminated in accordance with the terms of the lease.

The applicant being the owner, mortgagee or lessor must apply to the DGCA with a written application requesting deregistration and the reason for such a request. The application should annex the original “no objection” letters from each of the entities named on the certificate of registration of the aircraft. The DGCA always has the power to request any additional documentation that it may deem fit during scrutiny of an application for deregistration.

The consent of all the parties named on the certificate of registration needs to be enclosed. In usual circumstances, the DGCA will give notice to the concerned party seeking their comments or no objection. In India, there are several methods by which the registration of an aircraft may be cancelled by the DGCA. For all other methods, apart from the method prescribed under AIC 12 of 2018 (the Cape Town Convention and Aircraft Protocol regulations), the consent of the operator is required.

For other methods therefore, the operator may block the proposed deregistration and export by an owner of mortgagee.

A deregistration and export power of attorney (DPoA) should satisfy the general principles of powers of attorney, (i.e., it should not confer any power that the issuer itself does not possess). While theoretically, a DPoA should enable an owner or mortgagee to freely deregister and export the aircraft from India, in practice however, there may be variations to how the DPOA is perceived by the DGCA. The introduction of AIC 12 of 2018 has virtually resulted in the DPoA losing its significance in relation the deregistration and export, thereby resulting in an IDERA being considered a superior tool to enable deregistration and export.

Further, it is advisable that a DPoA be executed on Indian stamp paper and attested by a notary public. It is also recommended that it be executed in English. Advance recordation of the DPoA with the DGCA is not required, however it is recommended. If the DPOA has been executed properly then the same cannot be revoked. A DPOA can be issued in favour of more than one person.

Furthermore, the person exercising powers under the deregistration power of attorney would need to demonstrate that he or she is duly authorised by the attorney (in case of a corporate entity) to sign and act on behalf of such attorney. A board resolution or officers certificate issued by the attorney would usually suffice.

Usually, if a deregistration power of attorney is stated to be irrevocable, the grantor would not be able to revoke the same. However, in practice, the grantor could always dispute the power of attorney on the grounds of fraud, coercion or misrepresentation.

India acceded to the Cape Town Convention on 31 March 2008 with the Convention entering force on 1 July 2008. The Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment was also acceded to and came into force on the same date. An IDERA holder may also apply to the DGCA for deregistration of the aircraft in light of the Cape Town Convention and Aircraft Protocol.

The IDERA holder would have to approach the DGCA with an application as prescribed under AIC 12 of 2018 and annex the original or notarised copy of the IDERA. The IDERA holder must also provide evidence that all international interests ranking in priority to that of the IDERA holder in relation to the aircraft have been discharged or, alternatively, provide the consent of the entity named as the priority interest holder in the aircraft as per the International Registry.

Under India’s newly introduced Cape Town Convention regulations, an IDERA holder is able to deregister and export an aircraft from India without the consent of the lessee. If the mortgagee of an aircraft is the IDERA holder or the certified designee, then it may also export the aircraft without the owner or lessor’s consent. The asset need not be located in India at the time of deregistration.

Following the IDERA route is a much more certain method of securing deregistration and export rather that invoking powers under a DPoA.

The IDERA needs to be lodged the DGCA as per the extant guidelines. Upon successful lodgment of the IDERA, the DGCA will, inter alia, provide an SRN number confirming the same. It is mandatory to lodge the IDERA with the civil aviation authority in order to obtain de-registration via IDERA route at a later stage.

Deregistration under the IDERA route should take five working days from the date of receipt of application from IDERA Holder. Deregistration under any other method may take anywhere from one to four weeks, assuming the DGCA does not request any additional documents which may be sought on a case-to-case basis.

There is no concept of the DGCA providing advance assurances to an aircraft owner, mortgagee or lessor regarding the prompt deregistration of an aircraft. The regulations, however, mandate that any request by the IDERA holder for deregistration shall be processed within five working days from the date of receipt of such application.

The DGCA may also suo moto cancel the registration of an aircraft:

• if it no longer satisfies the ownership test;
• if the registration has been obtained by furnishing false information;
• if the aircraft could more suitably be registered in some other country;
• if the certificate of airworthiness in respect of the aircraft has expired for a period of five years or more;
• if the aircraft has been destroyed or permanently withdrawn from use; or
• if it is inexpedient in terms of the public interest that the aircraft should remain registered in India.

Permissions that are required for the export of an aircraft from India include:

• permission from the DGCA under AIC 12 of 2018 (after the IDERA holder pays government dues accrued against the aircraft for three months prior to the date of application for deregistration); and
• permission from the customs and tax authorities.

These permissions cannot be issued in advance and time required for grant of each license may range from two to twelve weeks.

The owner or mortgagee or both, as the case may be, shall be required to give their consent in case of any registration in India. In usual circumstances, the DGCA will give notice to the concerned party seeking their comments or no objection. In India, there are several methods by which the registration of an aircraft may be cancelled by the DGCA. For all other methods, apart from the method prescribed under AIC 12 of 2018 (the Cape Town Convention and Aircraft Protocol regulations), the consent of the operator is required. For other methods therefore, the operator may block the proposed deregistration and export by an owner of mortgagee.

If the debt owed by a debtor is above INR10 million, then the Insolvency and Bankruptcy Code 2016 (“IBC 2016”) proposes two independent processes (i) an insolvency resolution process and (ii) liquidation.

While India has opted for Alternative A, the Government of India has gone a step ahead by way of notification dated 3rd October, 2023, and completely excluded transactions, arrangements or agreements, under the Cape Town Convention and the Aircraft Protocol, relating to aircraft, aircraft engines, airframes and helicopters from the purview of any moratorium issued under the IBC 2016.

A creditor must apply to the National Company Law Tribunal (NCLT) to accept the debtor company into the Corporate Insolvency Resolution Process (CIRP) which might end up in liquidation or revival of the debtor company. Once a corporate debtor is admitted into the CIRP, its board of directors is suspended, and its management is placed under an independent “interim resolution professional”. Simultaneously, a moratorium takes effect.

The Government of India has, by way of notification dated 3rd October, 2023, excluded transactions, arrangements or agreements, under the Cape Town Convention and the Aircraft Protocol, relating to aircraft, aircraft engines, airframes and helicopters from the purview of Section 14(1) of the Insolvency and Bankruptcy Code, 2016. A creditor or Lessor shall therefore, not be prevented from repossessing an aircraft or engine in case a moratorium is issued by the competent Tribunal , under Section 14(1) in proceedings initiated against the Lessee under the Insolvency and Bankruptcy Code, 2016. The interim resolution professional will then invite and verify claims made by the corporate debtor’s creditors, classify them and form a Committee of Creditors, comprised of all the financial creditors of the corporate debtor who shall in turn appoint an independent professional to function as the “resolution professional”. A resolution plan for the revival of the company needs to be approved by creditors holding 66% of the voting rights.

If no plan is approved by the Committee within the requisite time frame available, it may opt for liquidation. The NCLT is then required to order the liquidation of the corporate debtor. If an order of liquidation is passed, a liquidator will be appointed to sell the assets of the corporate debtor and distribute the assets among the creditors.

The moratorium as imposed by the IBC 2016 prohibits:

• the continuation or initiation of any legal proceedings against the corporate debtor;
• the transfer of its assets;
• the enforcement of any security interest;
• the recovery of any property from it by an owner or lessor; and
• the suspension or termination of the supply of essential goods and services to it.

The Government of India has, by way of notification dated 3rd October, 2023, excluded transactions, arrangements or agreements, under the Cape Town Convention and the Aircraft Protocol, relating to aircraft, aircraft engines, airframes and helicopters from the purview of Section 14(1) of the Insolvency and Bankruptcy Code, 2016. A creditor or Lessor shall therefore, not be prevented from repossessing an aircraft or engine in case a moratorium is issued by the competent Tribunal , under Section 14(1) in proceedings initiated against the Lessee under the Insolvency and Bankruptcy Code, 2016.

An order of liquidation (i.e. after a company has been through the corporate resolution insolvency process and been unsuccessful) would result in the DPoA and IDERA no longer being effective. Aircraft transactions covered under the Convention and Protocol are excluded from the purview of the moratorium. Given the nascency of the legislation, it is still advisable for a creditor or lessor to act swiftly on the filing of an application for insolvency.

In case a domestic lessee is wound up, an aircraft on an operating lease may be taken back by its owner and the lease agreement would no longer subsist. All rights flowing from the lease – namely, rent, security deposit and maintenance reserves – would also end.

Ipso facto defaults are regular inclusions in lease transactions relating to aircraft in India and would be recognised to repossess an aircraft during lessee insolvency proceedings. Defaults under the IBC 2016 arising during the period of the COVID-19 pandemic have been excluded.

If a liquidator is appointed or if a similar process is initiated, it is not necessary that the lease will be set aside, although it is always in the power of such authority to do so.

The owner of the aircraft will always be recognised as the title holder. The aircraft owner and its rights (under an operating lease) will be recognised and the aircraft will not be deemed to be part of the lessee’s property.

The main risk for a lender in case of insolvency of the borrower, guarantor or an entity providing security is the inability to recover its debt. Government dues, taxes, wages, etc, will always take precedence over the lessor’s rights, in as far as recovery of monies is concerned.

A sale agreement / lease agreement, if executed while the asset is in India, runs the risk of being levied with several taxes in India such as capital gains tax, goods and services tax and stamp duty. Aircraft transfers are thus, effected once the aircraft is situated in a third-party country or over international waters (as the case may be).

Under Indian law, in case an original document (executed outside of India) is not stamped with the requisite stamp duty, then the said document must be affixed with the requisite stamp duty within three months after it has been first received in India. It must also be noted that certain states also impose stamp duty on even copies of agreements (physical or electronic).

Simply put, by virtue of being a party to a lease or because of its enforcement of a lease, the foreign lessor would ordinarily not be deemed to be resident, domiciled in or carrying out any business in India. However, it is always prudent to have a tax expert study the relevant double tax avoidance treaty between the country of domicile of the foreign lessor and India.

Courts in India have the power to detain a document if a document is not properly stamped and refuse to admit it into evidence unless and until it is properly stamped.

A foreign lessor may be required to pay income or other taxes upon leasing an aircraft or engine to an Indian lessee depending upon the domicile of the foreign lessor as well as the provisions of the specific double taxation avoidance treaty with the country of domicile of the foreign lessor and India. The rule that exists is that should the lessor not have any permanent establishment in India, then it should ordinarily not be liable to any tax in India.

Ordinarily, where a lessee is required to withhold tax but does not do so, the onus would remain with the lessee and the responsibility would not shift to the foreign lessor.

Tax and “grossing up” clauses are permissible and may be enforced by the courts provided the same form part of the binding contract entered into between the parties to the lease.

In case the parties qualify under the relevant double taxation avoidance treaty, withholding tax may not be applicable for lease payments being made under an operating lease.

However, loan repayments or rental payments under a finance lease may be subject to tax in India. Specifics vary on the basis of the structure and factual matrix of each transaction. Similar, withholding tax may also be applicable to payments made under a finance lease or repayment of loan, or both.

A lessor under an aircraft lease seeking enforcement of such a lease would not be required to pay any taxes or fees in connection thereto.

There are no taxes or duties payable in respect of such assignment and assumption/novation agreement. As is usual practice with lease agreements, the original assignment and assumption/ novation agreement, if brought into India, must be “stamped” within three months of it first being received in the country. Certain states also require copies of agreements to be “stamped”.

There are no fees or taxes chargeable in respect of the deregistration of an aircraft. Costs are also minimal.

On termination of the lease (before expiry thereof), the Lessor or the Lessee, as the case may be, would be required to clear any Integrated Goods and Services Tax - IGST or other taxes which may have accrued against lease rentals in relation to the aircraft before customs authorities would give permission to export the aircraft from India.

Usually, a secured party under a security assignment would not be deemed to be a resident, domiciled, carrying on business or subject to any taxes in India.

India is an exchange-controlled country with the relevant enactment being the Foreign Exchange Management Act, 1999, which is administered by the RBI. Therefore, any remittance of foreign exchange (including US dollars) requires the approval of the RBI.

Any financing or repatriation of realisation of proceeds under a loan, guarantee or security document would require the approval of the RBI. In general, payment of lease rentals under an operating lease (and supplemental rent) require only the prior permission of the remitters’ authorised dealer bank. The authorised dealer bank shall, on a scrutiny of the documents (which may include a form 10F, no PE certificate, tax residency certificate, as the case may be), permit or reject the request for remittance of funds to the foreign party.

In cases of finance leases, the prior approval of the RBI is mandatorily required before remittance of any proceeds overseas. Payments of insurance claim pay outs, if being remitted overseas in foreign currency, would also require approval from the RBI.

The operator must have insurance coverage for liability towards hull, crew, passengers and third parties. Insurance is also mandatory for baggage, etc, as may be required under the Carriage by Air Act.

Indian registered aircraft may be insured by an Indian insurer, who in turn would seek re-insurance on the international insurance market – provided, however, that there is a 4% reinsurance retention mandatorily required with the General Insurance Company of India.

Unless the direct involvement and consequent negligence of the foreign owner, lessor or financier is proved in respect operation of the aircraft or the activities of the operator, no liabilities would be imposed on the foreign party. However, it is not uncommon for an opportunistic litigant to implead the foreign parties to any proceeding brought in India, however bleak the prospects of imposition of liability may be.

The owners, lessors, financiers and others cannot be held responsible for the action or inaction of the lessee in respect of the operation of the aircraft.

Under Indian law, the lessee under a dry lease remains primarily liable for loss or damage caused by the aircraft to third parties, although in the event of a claim, it is likely that both the lessor and the lessee would be arrayed as parties in the claim. Needless to add, both the lessor and the lessee will be liable for negligence in relation to the aircraft arising as a result of their own acts and omissions.

Normally a lessee under a dry lease remains liable for injuries to the person or property of third parties, passengers and is responsible for any breach of environmental laws.

The Indian law on vicarious liability confines the liability of the master only to the torts committed by his or her servants and agents where the same were within the scope of the servant’s or agent’s authority. As the relationship between the lessor and lessee is on a principal-to-principal basis there will be no vicarious liability either.

However, there are four exceptions to the above rule and the lessor may be held liable:

• where it (the lessor) retains control over the lessee, and interferes with or makes himself or herself a party to the tortuous act, or both;
• where the act contracted to be done is wrongful or illegal;
• where a legal or statutory duty is imposed on the owner, lessor or financier; and
• where the act contracted to be done is, by its nature, likely to cause danger to others. In such a case the lessor must take all reasonable precautions against such risk.

There is no principal domestic legislation that exclusively deals with aircraft finance and leasing. In India, aircraft finance and leasing transactions are governed by various Acts of parliament, Rules and regulations, the prominent ones being the Aircraft Act, 1934, the Aircraft Rules 1937, the Foreign Exchange Management Act (FEMA) 1999 (and the rules framed thereunder) and the Reserve Bank of India (RBI) regulations etc.

Indian law recognises the principal of autonomy of parties and hence the parties are allowed to choose any law to govern their contract.

Bills of sale in relation to aircraft or engines in India may be governed by either English or New York law. There is no prohibition on bills of sale being governed by any foreign law in India.

A bill of sale should ideally note that a valid contract has been entered into – ie, that there has been an offer by the seller, the offer has been accepted by the purchaser and consideration has been received by the seller.

It is recommended that deregistration powers of attorney be governed by Indian law.

It is fairly common for a foreign law governed lease to be recognised in India. A court will enforce its terms and sustain claims arising under such law as long as the rights of the parties deriving from such lease are not opposed to public policy and are not in breach of Indian law.

Submission to a foreign jurisdiction would also be recognised. Further, immunity is recognised only in limited terms in India, as such execution and performance of obligations under a lease would constitute private and commercial acts of a private party, and therefore not allow any party to plead immunity.

A security assignment or a guarantee may be governed by English or New York law and does not need to be governed by Indian law to be fully enforceable.

Only in certain cases can a foreign decree be executed in India directly as if it had been passed by a court in India. Section 44A  the (Indian) Civil Procedure Code 1908 (“CPC”) provides, inter alia, that where a foreign judgment has been rendered by a superior court in any country or territory outside India, which the government has by a notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court of India.

Courts in India may refuse execution if it is shown to the satisfaction of the court that the decree falls within any of the following exceptions specified in Section 13 of CPC, which inter alia provides that a foreign judgment shall be conclusive of any matter directly adjudicated upon, except where:

• it has not been pronounced by a court of competent jurisdiction;
• it has not been given on the merits of the case;
• it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases where such law is applicable; • the proceedings in which the judgment was obtained were opposed to natural justice;
• it has been obtained by fraud; and
• it sustains a claim founded on a breach of any law in force in India.

Section 44A, however, only refers to decrees or judgments under which a sum of money is payable. Essentially, therefore, it must be a money decree to fall within the purview of Section 44A.

In the absence of any reciprocal arrangement or treaty, a suit will have to be filed for enforcement of any such judgment or any such order obtained. The United Kingdom and Northern Ireland have been declared as reciprocating territories for the purpose of Section 44A. Curiously, there is no such arrangement with the USA; accordingly, the judgment of a US court may only be enforced by a suit upon the judgment and not by proceedings in execution (under Section 44A).

In a suit on a foreign judgment, the court cannot go into the merits of the original claim or question its correctness or propriety. Through precedent, the courts have held that the word “judgment” in the expression “foreign judgment” has been assigned the same meaning given to it in English law and refers to the decree or order of a foreign court. A foreign judgment must be final and conclusive in the court in which it is passed for it to be considered a valid cause of action. In order to establish that a final and conclusive judgment has been pronounced, it must be shown that, in the court in which it has been pronounced, it conclusively, finally and forever established the existence of the right of which it is sought to be made conclusive evidence in this country (ie, in India) so as to make it res judicata (ie, a thing conclusively decided between parties).

India has ratified the Geneva Convention and New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Any foreign award under the New York Convention or the Geneva Convention can be enforced in India in accordance with the provisions of Part II of the (Indian) Arbitration and Conciliation Act 1996. Where the concerned court in India is satisfied that such a foreign award is enforceable under the Act, the award is deemed to be a decree of that court and enforceable as such. The courts will not revisit the issues involved in the arbitration or sit as a court of appeal.

India has ratified the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Any foreign award under the New York Convention can be enforced in India in accordance with the provisions of Part II of the (Indian) Arbitration and Conciliation Act 1996. Where the concerned court in India is satisfied that such a foreign award is enforceable under the Act, the award is deemed to be a decree of that court and enforceable as such. The courts will not revisit the issues involved in the arbitration or sit as a court of appeal.

India has ratified the Rome Convention (1933), the Chicago Convention (1944), the Montreal Convention (1999), the Cape Town Convention (2001) and the Beijing Convention (2010). India is not a party to the Geneva Convention (1948).

Operating Leases

The IFSCA notified the Framework for Aircraft Leasing in the IFSC on 19^th February 2021. Leasing of aircraft under the same includes an operating lease (including sale and lease back transactions), purchase, novation, transfer, assignment, or any other related activity with the approval of the IFSCA. An entity engaged in the business of aircraft leasing and desirous of operating in the IFSC needs to register with the IFSCA to act as a lessor and fulfil the extant requirements for the same.

Finance Leases

A non-banking financial institution is allowed to undertake financial lease and/or operating lease transactions by setting up a finance company / unit in the IFSC under the Finance Company Regulations as amended vide notification dated 4^th July 2022. A banking company (Indian or foreign), having set up its unit in accordance with the extant regulations, is also permitted to engage in aircraft leasing transactions vide its IFSC unit, subject to the fulfilment of requirements stipulated by IFSCA.

• The Ministry of Commerce and Industry (MoCI) has amended the policy requirements for import of aircraft in India and has exempted IFSC-registered entities to obtain DGCA’s prior approval for import of aircraft/ helicopters or acquisition of an Indian registered aircraft for purpose of leasing.
• MoCI has detailed the procedure for import or export; or procurement from or supply to the Domestic Tariff Area of aircraft by a lessor who is setup in the IFSC. These provide much needed clarity on customs related formalities.
• If a leasing company approved by IFSCA repossesses an aircraft due to expiry or termination of lease, the aircraft may be registered in the name of the GIFT City based lessor as the ‘Operator’.

• Lessors are allowed a 100% profit linked tax deduction for any 10 consecutive years out of 15 years of operation, at the option of the taxpayer.
• Capital gains arising from transfer of aircraft or aircraft engine are eligible for 100% deduction.
• No withholding tax on interest payments on royalty to non-residents.
• No withholding tax on aircraft lease rental payments in the nature of royalty paid to non-residents by units in the IFSC that commence operations on or before 31^st March 2025.
• No basic custom duty.
• Entities engaged in aircraft leasing have been granted waiver from payment of stamp duty on all activities related to setting up of units in IFSC and acquisition of movable property (including aircraft) or immovable property for a period of 10 years.
• Lessors are granted an exemption from capital gains tax on the sale of shares by an aircraft leasing company setup in an IFSC to non-residents.