Aviation Finance & Leasing 2026 Comparisons

If the aircraft/engine is located within India at the time of execution of sale agreement, the transaction could be subject to taxes in India such as the goods and services tax (GST).

If the sale agreement is executed in India, stamp duty would be payable in India thereon. Further, if the original copy of a sale agreement executed out of India is brought into the country, it should be stamped within three months of receipt. Stamp duty is a state subject, and the duty payable can vary from state to state. Certain states in India levy stamp duty even on counterparts/duplicates of documents that are brought into the state.

Transfer of ownership of the entity owning the aircraft/engine would not, per se, be subject to the aforesaid consequences. However, if such entity is located within India, stamp duty would be payable on the transfer of shares.

If the sale agreement is to be filed with any judicial forum in India for the purpose of enforcement, the same should be translated into English, notarised and preferably apostilled/legalised as well.

Typically, once the sale agreement is executed by the parties and the conditions stipulated therein for consummating the sale are fulfilled, transfer of title to the aircraft has been effected. This principle extends to the parts installed in the aircraft as well.

Sale of ownership interest in the entity that owns the aircraft/engine would not constitute sale of individual assets owned by the entity such as the aircraft/engine.

Transfer of title to an aircraft or engine physically delivered in India is recognised by Indian courts, although the bill of sale is governed by English or New York Law. A bill of sale is generally recognised by the Indian courts if it is duly executed by the parties for a lawful consideration and does not contain anything contrary to Indian law or public policy.

If the bill of sale is to be filed with any judicial forum in India for the purpose of enforcement, it should be translated into English, notarised and preferably apostilled/legalised as well.

A bill of sale need not be registered or filed with any statutory authority in India and is not subject to consent from any government entity. However, the Director General of Civil Aviation (DGCA) may require a copy of the bill of sale (or a similar document) at the time of registration of the aircraft as evidence of ownership.

As regards aircraft/engine, if the bill of sale is executed/the title is transferred while in India, there could be tax implications in India (such as GST). This can be avoided if the transfer of title occurs while the aircraft/engine is in a foreign jurisdiction or over international waters.

Transfer of ownership of the entity owning the aircraft/engine would not, per se, be subject to the aforesaid consequences. However, if such entity is located within India, a stamp duty would be payable on transfer of shares.

Under Indian law, it is permissible to have operating, wet and finance leases. All such leases are recognised and enforced by Indian Courts, subject to prescribed conditions. It is also possible to have separate lease agreements for engines or parts. However, the DGCA does not maintain a separate register for recording ownership/leasehold interests specifically in engines or parts.

It is possible for aircraft lease agreements to be governed by foreign law, even if one of the parties is based outside of India and/or the aircraft is located in India. The courts in India generally recognise and enforce the lessor’s rights under such agreements, subject to the satisfaction of prescribed conditions.

Indian lessees can make rent payments to foreign lessors in US dollars. Similarly, payment of security deposit to foreign lessors is also permitted, subject to specified limits/conditions. For operating leases, such payments can be made through authorised dealers (banks). In the case of finance leases, prior approval of the Reserve Bank of India (RBI) could be required.

There are no exchange controls that could prevent rent payments under a lease or repatriation of realisation proceeds. However, for realisation of proceeds pursuant to enforcement proceedings, RBI’s approval could be required.

There could be stamp duty implications. Please refer to 1.1.1 Taxes/Duties Payable Upon Execution of the Sales Agreement.

The lessor does not have to be licensed or qualified to do business in India to enter into a lease agreement with an Indian lessee. It is sufficient for the lessor to validly exist and be eligible to do business in its home jurisdiction. Further, the constitutional documents of the lessor should authorise it to lease the aircraft, and all corporate approvals required as per the domestic laws of lessor’s home jurisdiction should have been obtained.

No mandatory terms have to be stipulated. The lease agreement should be validly executed by competent parties and should, inter alia, contain clear provisions with respect to offer, acceptance and payment of consideration. A lease agreement governed by English law or New York law can be enforced in India provided it does not contain anything contrary to Indian law or public policy.

Gross-up provisions (relating to taxes/withholding taxes) can be contractually agreed between the parties and are enforceable in India. However, for the purpose of deduction of income tax at source, the total grossed-up amount will have to be considered as income of the lessor.

The parties can contractually agree that parts installed/replaced on an aircraft/engine at a later point in time will also be covered in the lease. An enabling clause to this effect can be included in the lease agreement, and the parties can execute side-letters thereafter as and when required.

There is no risk of title annexation. Indian law recognises the rights of the lawful owner of the aircraft, engine or other equipment.

The concept of a trust and the role of an owner trustee are recognised under Indian law.

The interests of the legal owner and lessor are recorded in the aircraft register. This serves as notice to third parties and is generally accepted as prima facie evidence of such interest by a court of law. However, for establishing definitive title to the aircraft, documents such as sale agreement or bill of sale have to be relied upon.

An aircraft can be registered with the DGCA even if the owner and operator are different entities. The certificate of registration will record the details of both the owner (lessor) and operator (lessee), though the application for registration is to be filed by or on behalf of the owner.

There is no specific register for aircraft or engine leases. The details of the aircraft lease are recorded in the certificate of registration of the aircraft. Further, there is no provision for separately recording engine leases. The parties may, at their discretion, submit a copy of the engine lease agreement while filing the application for registration of the aircraft.

The lease agreement should be filed with the DGCA, and details thereof should be duly recorded/registered. In the absence of such registration, the lessor may not be able to enforce the lease in India.

The application for registration of aircraft should be e-filed with the DGCA in the prescribed form by or on behalf of the owner (along with stipulated annexures). The application should contain details of the lease as well.

There is no separate process for the registration of a lease agreement with the DGCA. The prescribed registration fee (based on the take-off weight of the aircraft) should be deposited. In the normal course of events, it takes 3–4 weeks from the date of submission of all required documents/information to complete the registration process. The DGCA does not maintain a separate register for engines.

No government applications or consents are required for the execution and delivery of the aircraft/engine lease agreement.

The lease agreement does not need to be in any specific form, but English translation will be required. The DGCA usually insists on notarised copies. Legalisation/apostilling is not mandatory, though it is recommended.

A registration fee based on the take-off weight of the aircraft will have to be paid at the time of application for the registration of aircraft. No separate taxes/duties need to be paid to DGCA for registering a lease.

Aircraft habitually based in India have to be registered in India. A foreign-registered aircraft may be permitted to be operated in India under limited circumstances (such as a wet lease arrangement).

Original documents need not be filed, except the irrevocable deregistration and export request authorisation (IDERA) and/or deregistration power of attorney (DPOA). English translation is necessary, and the documents should be notarised. Legalisation/apostilling is not mandatory, though it is recommended.

The liability of a foreign lessor to pay income tax in India largely depends on whether it has its place of business (or permanent establishment) in India, and on the nature of the lease and the relevant double taxation avoidance agreement (DTAA).

Subject to the relevant DTAA, a foreign lessor would not be deemed to be resident, domiciled or carrying on business in India solely by virtue of the lease.

In the case of dry leases, the lessee will usually maintain/operate the equipment. Therefore, no liability for maintenance/operations will normally be imposed on a foreign lessor. However, in the case of wet leases, the lessor could be held liable since they will typically be involved in maintenance/operations.

In practice, the foreign owner/lessor would also be sued along with the lessee. Generally, the lessor would become liable only if:

• the lessor exercises control over the aircraft or lessee’s operations;
• the aircraft is being used for illegal/inherently dangerous activities, and the lessor is a party thereto; or
• the damage/loss is directly attributable to any act or negligence of the lessor.

Please also refer to 2.4.3 Engine Maintenance and Operations.

Creditors of a domestic lessee may be able to obtain ad interim orders from a court of law with respect to the aircraft. However, the courts will ultimately recognise and enforce the owner’s rights.

A lien can be exercised over the aircraft for:

• airport dues (landing/parking charges);
• statutory dues and taxes;
• workmen’s dues, and
• mechanic’s lien on account of repairs.

If an aircraft/engine is so detained, the owner can approach the court for enforcement of its ownership rights, and the courts generally adopt a charitable view.

Under exceptional circumstances (such as in the interest of public safety or public health, to avoid endangering persons/property or to ensure compliance with the law), the central government can issue orders for temporary detention/seizure of aircraft.

Aircraft registered in India are usually insured with domestic insurance companies. Insurance cannot obtained from a foreign insurance company, except with prior approval of the Insurance Regulatory and Development Authority of India (IRDAI).

Insurance coverage is mandatory for aircraft registered in India. The insurance policy should cover crew, passengers, baggage, third-party risks and hull loss. A copy of the insurance policy should be carried on board.

An Indian insurance company can, in turn, place reinsurance outside India. IRDAI has mandated that 4% of the sum insured on every policy should be ceded to the specified Indian reinsurer, namely the General Insurance Corporation of India (GIC Re).

Cut-through clauses that enable the insured party to directly claim against the re-insurer (without going through the primary insurer) under certain circumstances are enforceable in India.

Assignments of insurance/reinsurance are generally permitted in India and should be notified to the concerned insurance/reinsurance company.

There are no statutory restrictions on the lessor’s ability to terminate an aircraft lease as per the terms thereof. After termination of the lease, the aircraft will have to be deregistered in India. The lessor can then export the aircraft out of India after obtaining the requisite statutory clearances and paying the outstanding dues.

The lessor is entitled to take physical possession of the aircraft if the lease agreement enables it to do so. If the lessee does not co-operate, the lessor may have to approach a court of law.

For effective enforcement of repossession rights, the lessor should obtain IDERA as per the Convention on International Interests in Mobile Equipment and the related Protocol on Matters specific to Aircraft Equipment (collectively, the “Cape Town Convention”). A separate DPOA executed in India (and governed by Indian laws) may also be obtained from the lessee.

There are no designated courts in India for aviation disputes, and the jurisdiction depends on the facts of the case. The Protection of Interests in Aircraft Objects Act, 2025 (the “PIAO Act”) confers jurisdiction on the concerned High Court to decide matters relating to enforcement of the Cape Town Convention. The courts generally recognise owners’/lessors’ rights, though there have been delays in the conclusion of legal proceedings.

The lessor can obtain summary judgment where the dispute solely involves non-payment of lease rentals/other payments clearly due under the lease agreement and the same have not been disputed/denied by the lessee.

Further, the lessor can obtain interim relief during regular civil proceedings if the lessor can prove that:

• there is prima facie case in its favour
• it will suffer irreparable injury if such interim relief is not granted; and
• the balance of convenience is in its favour.

In repossession proceedings, the court may pass interim orders (either on an ex parte basis or after giving notice to the lessee) depending on the facts and circumstances. In the firm’s experience, the lessor can obtain such an interim order within the first one or two hearings itself, if sufficient grounds exist. The court may, at its discretion, stipulate conditions for passing such interim order.

It the parties have chosen foreign law as the governing law and have submitted themselves to the jurisdiction of foreign courts, the courts in India typically recognise and enforce the same. Waiver of immunity clauses in lease agreements are also generally upheld. That said, the Indian courts do not enforce any right contrary to Indian law or public policy.

Foreign Judgments

Judgments/decrees (for payment of money) passed by superior courts of reciprocating countries can be directly executed in India (without re-examination of the matter) as if such decrees have been passed by a court in India. “Reciprocating countries” and “superior courts” are those that have been so notified by the central government. A foreign judgment/decree cannot be executed in the aforementioned manner if any of the following exceptions apply:

• it has not been pronounced by a court of a competent jurisdiction;
• it has not been given on the merits of the case;
• where it is based on an incorrect view of international law or a refusal to recognise Indian law;
• the proceedings were conducted in violation of the principles of natural justice;
• it has been obtained by fraud; or
• it sustains a claim founded on a breach of Indian law.

For recognising and enforcing a judgment/decree passed by a court in a non-reciprocating territory, a separate suit has to be filed in India.

Foreign Awards

India is a signatory to the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 (the “Geneva Convention”) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the “New York Convention”). Therefore, a foreign arbitral award can be directly enforced in India if:

• it is issued from a country that is a signatory to the aforesaid Conventions; and
• the award is made in a territory that has been notified as a Convention country by India.

The courts in India can decline to enforce a foreign award on certain specific grounds, such as:

• a party’s incapacity and invalidity of the agreement;
• violation of natural justice;
• being outside the scope and/or lack of jurisdiction;
• irregular composition of tribunal or lack of proper procedure;
• non-arbitrability under Indian law; or
• violation of public policy.

In commercial matters, Indian courts generally treat the principle of comity with high fidelity to ensure that India remains a pro-enforcement and internationally aligned jurisdiction.

In exceptional cases and upon sufficient cause being shown, the court may agree to issue the judgment in foreign currency.

There are no express statutory limitations on a lessor’s liability to recover default interest or charge additional rent (if the lessee fails to return the aircraft) following termination of the lease for default. However, the courts may sometimes apply the test of reasonableness to determine if the interest/penalty charged is unreasonable or disproportionate under the circumstances. Moreover, in the firm’s experience, Indian courts normally reject prayers for compound interest.

The lessor has no statutory obligation to pay any taxes/fees in connection with enforcement (though a court fee may have to be paid based on the monetary value of the claim). Further, the lessor may have to clear any unpaid taxes or statutory dues in relation to the aircraft before it is flown out of India.

Under Indian law, there is no mandatory notice period for aircraft lease termination. The notice period as per the lease agreement will be applicable unless waived by the parties.

An aircraft operator (lessee) in India is not entitled to claim sovereign or other immunity from legal proceedings. The benefit of sovereign immunity is available only to the government during the discharge of sovereign functions. Said benefit is not even available to state-owned airlines, since they are commercial entities.

India has adopted the New York Convention. Please refer to 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards.

Enforcement is largely governed by the terms of the lease agreement. If the lessee does not co-operate, the lessor may have to take recourse to a court of law. Though legal proceedings in India are generally time consuming in nature, the lessor should be able to obtain interim orders (mainly for grounding/protection of the aircraft) within a short period of time, provided sufficient grounds can be established.

Further, the lessor could face some procedural delays during the deregistration process, though the process has been largely streamlined following India’s ratification of the Cape Town Convention and the subsequent legislative enactments.

Indian law recognises the concept of assignment/novation of contracts.

In case the lessor assigns/novates its rights to a third party pursuant to an agreement governed by New York law or English law, the courts in India would generally recognise the same, provided the agreement does not contain anything contrary to Indian law/public policy. Such an assignment/novation is not contractually binding on the lessee unless the lessee’s consent is obtained.

Indian law does not stipulate any mandatory terms. Typically, the agreement will mention that:

• the assignee fully takes over the lessor’s obligations under the lease;
• the terms and conditions of the lease will remain the same; and
• the lessee’s rights will be fully protected.

An English translation of the assignment/novation agreement is required. Further, such agreements should be notarised and, preferably, apostilled/legalised as well.

An aircraft lease assignment/novation agreement should be recorded with the DGCA. An application should be filed for this purpose, along with a copy of the agreement. Upon review of the documents, and after obtaining the requisite clarifications, the DGCA will proceed to take the assignment/novation on record. An indicative timeline for completing the process is 3–4 weeks, though the actual time taken may vary based on the facts and circumstances.

No other governmental consent/permission is required in this regard. Novation/assignment agreements relating to engine leases are not required to be filed with DGCA though the parties may do so at their discretion.

There may be stamp duty implications. Please see 1.1.1 Taxes/Duties Payable Upon Execution of the Sales Agreement. There may also be GST implications if the aircraft is in India at the time of assignment/novation.

If there is no change in the legal owner/lessor of the aircraft, no regulatory filings are required in India. The fact that the ownership interest of the entity that owns the aircraft has changed would not make a difference.

An application for deregistration will have to be filed with the DGCA. The application can be filed by the owner/lessor on the ground that the lease has expired or has been terminated as per the terms thereof. The application should be accompanied by the certificate of registration and a copy of the lease agreement, and should clearly set out the grounds on which deregistration is sought. The DGCA would typically issue notices to all concerned parties before taking a final decision.

If the IDERA has been recorded with the DGCA, the deregistration application can be filed based on the same. The following documents should also be enclosed with such applications:

• original and notarised copies of the IDERA; and
• a priority search report from the international registry (along with certificate/proof that all the registered interests having priority have been settled or that the holders of such interests have consented to the deregistration/export).

Suo moto cancellation of registration can also be done by the DGCA under certain circumstances, such as:

• if the registration was obtained by providing false information; or
• it is not in the public interest that the aircraft remain registered.

In case the IDERA has been recorded with the DGCA, deregistration can be done without the lessee’s consent. However, in practice, the DGCA may notify the lessee and consider any objections raised by it.

Please see 2.8.1 Deregistering Aircraft in This Jurisdiction.

As per Rule 30(7) of the Aircraft Rules, 1937, deregistration has to be done by the DGCA within five working days of receipt of application from the IDERA holder along with all required documents. However, in practice, the deregistration process could take longer. An indicative time estimate would be 3–4 weeks, although this could vary if the lessee initiates legal proceedings. The DGCA may also seek additional documents/clarification.

The Indian aviation authority (the DGCA) does not provide any assurance with respect to prompt deregistration of aircraft.

There are no significant costs/fees/taxes payable in relation to the deregistration process.

The DPOA, if executed in India, should be in English, duly stamped, signed by an authorised signatory, witnessed and notarised. It is recommended that a copy be filed with the DGCA well in advance. 

Normally, no additional documents would be required. However, it is advisable to obtain a notarised copy of the authorisation based on which the lessee’s signatory is executing the DPOA.

Typically, the DPOA would be executed by the lessee in India. Therefore, it is recommended that it be governed by Indian laws.

It may not be possible for the lessee (grantor) to revoke the DPOA, except as per the terms thereof. It is, however, possible that the lessee may raise arguments based on fraud, coercion or lack of authority with the objective of evading its obligations. In practice, it is unlikely that the lessee will succeed in such efforts.

Once the aircraft is deregistered, the lessee’s consent will not be required to export the aircraft out of India. The owner/lessor/mortgagor should, however, ensure that all statutory and other dues relating to the aircraft (including airport charges) are settled. Once it is confirmed that all such dues have been cleared, the DGCA will issue permission to fly the aircraft out of India.

Please see 2.8.11 Owner’s/Lessor’s Consent. It is not possible to obtain export permission in advance. Once the aircraft is deregistered and the requisite formalities are completed, permission will be issued expeditiously.

There are no significant costs/fees/taxes/ with respect to the export of aircraft out of India.

The deregistration process in India has been largely streamlined since India ratified the Cape Town Convention, and by virtue of the subsequent legislative enactments. However, there can be delays due to factors such as:

• the initiation of legal proceedings by the lessee; and
• the DGCA’s demand for further documents/information.

Further, the export of aircraft out of India could be delayed due to pending statutory/other claims relating to the aircraft.

The primary Indian legislation relating to insolvency is the Insolvency and Bankruptcy Code, 2016 (IBC). As per the IBC, insolvency proceedings can be initiated by the creditor against a corporate debtor before the relevant bench of the National Company Law Tribunal (NCLT) if the debt owed is INR10 million or more and has not been disputed/denied contemporaneously. The proceedings can lead to either the revival or liquidation of the corporate debtor.

Upon admission of the insolvency petition, an interim resolution professional (IRP) will be appointed to temporarily take over the debtor’s management. Also, a moratorium will come into effect. During the moratorium period:

• no legal proceedings can be initiated/pursued against the debtor;
• no action can be taken by an owner/lessor for recovery of any property in the possession of the debtor; and
• no proceedings can be taken for enforcement of security interest over the debtor’s assets.

The moratorium is initially valid for 180 days and can be further extended. The maximum moratorium period that has been stipulated (including extensions) is 330 days. There have been instances where the NCLT has extended the moratorium beyond even 330 days, considering the specific facts and circumstances.

The IRP will make a public announcement inviting claims, collate the claims and constitute the Committee of Creditors (CoC). The CoC consists only of financial creditors, and will either replace the IRP with a resolution professional (RP) or confirm the IRP as the RP.

The RP will invite bids from prospective investors for preparation of a resolution plan. Once the resolution plan is approved by the CoC, it will be placed before the NCLT for approval. If approved by the NCLT, the resolution plan will become binding on all stakeholders. Rejection of the resolution plan by the NCLT could lead to liquidation of the corporate debtor.

It should be noted that the CoC may, instead of approving the resolution plan, decide to proceed with liquidation of the corporate debtor, if it has sufficient reasons to do so. This will also require approval from the NCLT.

If the CoC fails to approve the resolution plan within the stipulated time, the NCLT will typically order liquidation of the debtor.

The IBC covers both voluntary and involuntary liquidation. Regarding creditor-driven liquidation, please refer to 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations.

The NCLT has the power to issue a liquidation order in proceedings relating to oppression/mismanagement, if circumstances so warrant. Such power is exercised only in exceptional cases.

The central government has the power to initiate liquidation proceedings before the NCLT on certain grounds, such as fraud, safeguarding of national interest and non-filing of annual returns/financial statements. Voluntary liquidation can be initiated by the shareholders of the company, subject to the satisfaction of prescribed conditions. A declaration of solvency will have to be filed for this purpose.

During civil/commercial proceedings, a receiver may be appointed by a court of law as an interim measure for the protection/upkeep of the assets involved in the dispute.

There are no specific Indian regulations that mandate co-operation between Indian and foreign courts/authorities (or which provide for mutual recognition of legal proceedings/orders) in the event of cross-border insolvency. India has been actively contemplating the adoption of UNCITRAL Model Law into the domestic insolvency laws. Committees have been constituted by the government to examine this aspect, and the recommendations/findings are under consideration.

The IBC contains the following enabling provisions:

• Section 234 enables the central government to enter into reciprocal bilateral agreements with foreign countries to enforce the provisions of the IBC, and to prescribe rules for dealing with a corporate debtor’s assets located in a foreign jurisdiction;
• Section 235 enables the NCLT to issue a letter of request to a foreign court/authority to seek assistance with respect to a corporate debtor’s assets located in said jurisdiction; and
• as per Section 240C, the central government can frame rules for administering and conducting cross-border insolvency proceedings (including the process for recognition and granting of relief, judicial co-operation and providing assistance in relation thereto).

The IDERA (or DPOA) will not be impacted by the initiation of insolvency proceedings against the lessee. It is recommended that the lessor take immediate action for repossession of the aircraft as soon as it comes to know of such proceedings.

India has adopted Alternative A under the Cape Town Convention. As per Rule 11 of the Protection of Interests in Aircraft Objects Rules, 2025 (the “PIAO Rules”) promulgated under the PIAO Act, no remedy recognised under the Cape Town Convention shall be prevented or restricted after the expiry of the “waiting period”, which shall be two months from the insolvency commencement date.

Further, the central government issued a notification, dated 3 October 2023, which provides that moratorium under the IBC shall not apply to transactions under the Cape Town Convention. The processes in this regard are still evolving. However, it appears that the lessor will be able to effectively exercise its powers under the IDERA/DPOA after the two-month waiting period.

If a liquidation order is ultimately passed against the lessee pursuant to the insolvency proceedings, all agreements/instruments issued by or on behalf of the lessee (including the IDERA/DPOA) will cease to have effect. However, the title of the aircraft will always remain with the lessor/owner, who should be able to take the aircraft back after the completion of all statutory and court-related formalities.

Initiation of insolvency proceedings against the lessee will not, per se, result in the lease being set aside. In the case of transactions covered under the Cape Town Convention, the lessor will be entitled to repossess the aircraft upon expiry of the waiting period of two calendar months. The aircraft will not be deemed part of the lessee’s property, and the title will always remain with the lawful owner of the aircraft.

The lessor’s dues under an operating lease agreement qualify as operational debt. As per the IBC, the proceeds from the sale of liquidation assets shall be distributed in the stipulated order of priority. The dues of the lessor in such cases will be cleared only after satisfying certain other claims, such as employees’ dues, amounts payable to government and dues of secured creditors.

The main risk for a lender is that it will be able to recover the dues only in the prescribed order of priority. A secured lender can proceed to enforce the security interest, subject to prescribed conditions.

Please see 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations, 2.9.4 Effect of Lessee’s Insolvency on a Deregistration Power of Attorney and 2.9.5 Other Effects of a Lessee’s Insolvency.

Please refer to 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations and 2.9.2 Overview of Relevant Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership.

Ipso facto defaults will be recognised during insolvency proceedings, and the lessor will be able to exercise its repossession rights subject to the terms of the lease agreement.

Once a liquidation order is passed against an Indian operator (lessee), the aircraft will be returned to the lawful owner subject to establishment of title and completion of statutory formalities. The lessor will be able to recover its dues, subject to the stipulated order of priority.

India has acceded to the Cape Town Convention. Further, the government of India enacted the PIAO Act, by way of which the Cape Town Convention has been given statutory force. The PIAO Rules, which lay down the procedural aspects relating to enforcement of Cape Town Convention, have also been notified.

The “authorised entry point” system has not yet been adopted by India. Registration of aircraft on the international registry can be done directly and then notified to the DGCA. The lessor should ensure that the IDERA is filed with the DGCA so that it does not face any issues with deregistration and export as and when the need arises.

The PIAO Rules prescribe the following filing requirements.

• The debtor (lessee) should notify the international interest over the aircraft to the DGCA.
• The lessee should maintain electronic records of dues and submit them to the DGCA on a quarterly basis. The records should be accessible to the creditor (lessor/lender) as well.
• If a creditor intends to exercise any right under the Cape Town Convention, it shall intimate the DGCA. The DGCA would then intimate all stakeholders, who should then file the required information.

The main declarations that India has made under the Cape Town Convention are as follows:

Declarations Under the Convention

These are as follows:

• Form No 1 – specific declaration under Article 39(1)(a);
• Form No 4 – general declaration under Article 39(1)(b);
• Form No 6 – declaration under Article 40;
• Form No 10 – general declaration under Article 52;
• Form No 11 – declaration under Article 53; and
• Form No 13 – mandatory declaration under Article 54(2).

Declarations Under the Protocol

These include:

• Form No 19 – declaration under Article XXX (1) in respect of Article VIII;
• Form No 21 – declaration under Article XXX (2) in respect of Article X providing for the application of the entirety of Article X;
• Form No 23 – general declaration under Article XXX (3) in respect of Article XI providing for the application of Alternative A in its entirety to all types of insolvency proceeding;
• Form No 26 – declaration under Article XXX (1) in respect of Article XII; and
• Form No 27 – declaration under Article XXX (1) in respect of Article XIII.

Article XIII of the Protocol is applicable in India. For recording the IDERA with the DGCA, the IDERA holder (or authorised signatory) should file an application in the prescribed format, along with the original IDERA and two notarised copies thereof.

There have been a few occasions where the courts dealt with the lessor’s rights under the Cape Town Convention. The courts, in such cases, have generally recognised the rights of lessors.

India is not a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft or the 1933 Rome Convention on the Unification of Certain Rules relating to the Precautionary Arrest of Aircraft.

Foreign lenders can extend loans to borrowers in India for aircraft purchases, subject to the prescribed limits and in compliance with applicable RBI guidelines.

Though there has been considerable liberalisation over the last several years, exchange control restrictions still exist in India. Foreign exchange transactions are governed by the Foreign Exchange Management Act, 1999 and the rules/regulations issued by the RBI. Repatriation of realisation proceeds under a loan, security or guarantee document can be done through the authorised dealer. RBI approval might also be required in some cases.

Borrowers can provide security to foreign lenders, subject to approval from the authorised dealer. RBI approval may also be required in some cases. Such security can be provided over movable assets (including shares/financial assets) or immovable assets, or can be in the form of a personal/corporate guarantee.

Downstream, upstream or cross-stream guarantees in favour of overseas lenders can be provided. RBI approval may be required, depending on the transaction structure and nature of the guarantee being provided.

If domestic special purpose vehicles are used for aircraft acquisition, the lender may consider taking security over its shares. Pledge of shares is recognised under Indian laws.

Negative pledges are recognised in India and enforced by Indian courts if they form part of a valid contract.

In general, there are no material restrictions/requirements on intercreditor arrangements. However, each transaction has to be analysed on a case-by-case basis.

Indian law recognises the concept of agency, and the role of a facility agent is recognised and enforced by Indian courts.

Debt subordination arrangements between lenders are permissible and recognised in India. Indian banks are subject to the relevant RBI guidelines.

Transfer/assignment of a loan, governed by English or New York law, is permissible and recognised in India. Consent from the authorised dealer or, in some cases, the RBI may be required depending on the facts of the case.

There are no regulations in India that specifically restrict the interest that can be charged by banks/financial institutions. However, the RBI has laid down broad parameters that mandate that the interest so charged should be fair, transparent and reasonable.

For types of security, please refer to 3.1.3 Granting of Security to Foreign Lenders. In the event of default, an overseas lender would be able to enforce the security. Proceeds thereof can be repatriated outside India through the authorised dealer, though this may require RBI approval in some cases.

There are no specific prohibitions with respect to any kind of security.

The concept of trust and the role of the security trustee are recognised in India. Security trustees are widely used in aviation finance transactions, especially when there are multiple lenders.

The borrower can assign its rights to a security trustee pursuant to a security assignment or mortgage. Indian law recognises such assignment. The security trustee should be duly authorised under the transaction documents to hold the security on behalf of the lenders.

Assignment of rights/benefits alone (without assigning the corresponding obligations) can be done if so authorised by the transaction documents.

A security assignment/guarantee governed by English or New York law is enforceable in India.

There is no prescribed format for the security assignment, but English translation will be required. The agreement should be notarised. Apostilling/legalisation is also recommended, though is not mandatory. The security assignment should be filed with the DGCA.

In case security is created/assigned with respect to immovable property, the agreement should mandatorily be registered with the Sub-Registrar of Assurances. As regards movable assets, such registration is optional.

If the security is being created by an Indian company, it should be filed with the Registrar of Companies (RoC) in the prescribed format.

It is not necessary to have a separate security assignment governed by Indian law. Filings in India can be made based on the assignment agreement, which is governed by foreign law.

A security assignment can be registered in India irrespective of whether it is governed by English law, New York law or the laws of India. Please also refer to 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments.

Transfer of security interests over aircraft/engines is recognised in India.

If the identity of secured party changes after execution of the security assignment, it should be recorded with the DGCA. Further, the registration requirements in 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments should be fulfilled.

Parallel debt structures are not generally used in India.

A secured party will not be deemed to be resident, domiciled or carrying on business in India solely on account of being a party to the security assignment. This will, however, be subject to the terms of the relevant DTAA.

For perfection of a domestic law mortgage in India, the steps mentioned in 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments have to be followed (to the extent relevant).

The documentation (and steps for perfection) are the same irrespective of whether the security is over aircraft or spare engines.

In India, security over a bank account (such as a lease receivables account) is typically in the form of hypothecation. The agreement should be filed with the relevant bank. Further, if the security is being created by an Indian company, it should be recorded with the RoC.

Please refer to 2.4.6 Priority of Third Parties’ Rights. Mechanic’s lien would cover only the concerned aircraft (depending on the value of the work done). Fleet lien is not generally recognised in India. The holder of a lien can approach a court of law to enforce the same.

Lien is discharged as soon as the dues are cleared. In the case of court proceedings, the timeframe can vary on case-by-case basis.

There is no separate register for aircraft mortgages. Security interests can be recorded in the aircraft register itself, which constitutes sufficient notice to third parties.

Statutory rights of detention and non-consensual preferential liens are generally applicable only to a particular aircraft and not on a fleet-wide basis.

A potential purchaser should check the aircraft register at the DGCA office as well as the register maintained under the Cape Town Convention.

There are no significant differences in procedural aspects relating to the enforcement of a security assignment as opposed to a loan/guarantee.

The security trustee will have to rely on the notice and acknowledgment executed by the lessor and lessee (or any similar document) for enforcing its rights under the security assignment.

Indian courts generally uphold the parties’ choice regarding the governing law and court jurisdiction.

Please refer to 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards.

The position of a secured party is like that of a lessor. Please refer to 2.6.2 Lessor Taking Possession of the Aircraft.

The civil courts in India are competent to adjudicate on enforcement actions under a security agreement/aircraft mortgage. To determine which court will have jurisdiction, various factors such as the place of business of the defendant, the value of the claim and the location where the dispute arose have to be considered.

A secured party can obtain summary judgment or interim relief. Please refer to 2.6.4 Summary Judgment or Other Relief for details.

Please refer to 2.6.7 Judgments in Foreign Currencies.

Please refer to 2.6.9 Lessor’s Requirement to Pay Taxes/Fees.

The enforcement aspects are largely governed by the terms of the transaction documents. Though legal proceedings in India are generally time-consuming, interim orders can be obtained within a short period of time if sufficient grounds can be established.

Further, there can be procedural delays during the deregistration process, though the process has been largely streamlined since India’s ratification of the Cape Town Convention and the subsequent legislative enactments.