IBC Amendment Exempting Aircraft Objects from Moratorium Applicable Retrospectively

The Directorate General of Civil Aviation (DGCA) has announced that the recent amendment in the insolvency law that exempts aircraft objects from the ambit of moratorium will be applicable retrospectively. This means that the exemption will apply to cases that were pending before the amendment was made.

Background of the Amendment

The exemption under the Insolvency and Bankruptcy Code (IBC) came against the backdrop of various aircraft lessors launching legal battles to repossess planes leased to the grounded Go First, which stopped flying since early May and is undergoing an insolvency resolution process under the IBC.

On October 3, the corporate affairs ministry, through a notification, exempted aircraft objects registered in the international registry from the applicability of the moratorium under the IBC.

DGCA's Affidavit

In a short affidavit filed before the Delhi High Court, the DGCA has said that the notification should apply to pending cases as well. The regulator argues that since the notification is procedural and a necessary adjunct to a section in legislation, it needs to be given effect from the date on which the section comes into force.

Retrospective Effect

The DGCA further states that the notification was issued under section 143 of the IBC 2016 and should be considered to have a retrospective effect. This means that the exemption will apply to cases that were pending before the amendment was made.

Go First Case

The regulator made the submission to the court with respect to a case related to Go First. However, DGCA said that since Go First's case is pending before the court, it shall await the appropriate direction of the court before proceeding in the matter.

Implications of the Amendment

The amendment to the IBC exempts transactions, arrangements, or agreements relating to aircraft, aircraft engines, airframes, and helicopters from the moratorium imposed under the IBC. This will allow aircraft lessors to repossess their planes even if the airline is undergoing an insolvency resolution process.

The retrospective application of the amendment will provide relief to aircraft lessors who have been facing difficulties in repossessing their planes from grounded airlines. It remains to be seen how this amendment will impact the insolvency resolution process of Go First and other airlines that are facing financial difficulties.