Balancing Interests In Airline Insolvency: Reconciling The Insolvency And Bankruptcy Code With The Cape Town Convention In India
- IJLLR Journal
- Mar 15
- 2 min read
Reshma G, LLM (Corporate and Commercial Law), School of Law, Christ (Deemed to be) University, Bengaluru, India
ABSTRACT
The recent voluntary insolvency filing by Go First Airlines has brought to light the complexities of airline insolvency in India, particularly the conflict between the Insolvency and Bankruptcy Code (IBC) and the rights of aircraft lessors. The imposition of a moratorium under §14 of the IBC has prevented lessors from repossessing their leased aircraft, leading to significant financial losses and tarnishing India’s reputation in the global aviation market. In response, the Indian government issued a notification on October 3, 2023, exempting leased assets from the moratorium under §14(c) of the IBC. This move not only addresses the immediate concerns of lessors but also sets the stage for the ratification of the long-pending Cape Town Convention (CTC) Bill, 2018, which aims to harmonize international laws governing aircraft financing and leasing.
This article provides a comprehensive analysis of the challenges posed by airline insolvency in India, focusing on the legal and policy gaps in the current framework. It begins by contextualizing the evolution of the aviation industry and the reasons behind frequent airline insolvencies. The article then examines the legal framework governing aircraft repossession during insolvency, including the IBC and the CTC, and highlights the legislative gaps that have left lessors vulnerable. It evaluates the government’s recent notification and its implications, arguing that while it provides temporary relief, it is not a long-term solution. Finally, the article explores policy alternatives, including the adoption of a modified version of the CTC’s Alternative A, and suggests a balanced approach that protects the interests of both lessors and the national aviation industry. The article concludes by emphasizing the need for a robust legal framework to ensure the stability and growth of India’s aviation sector.
