The Ministry of Corporate Affairs (MCA) is likely to clarify to the Delhi High Court that the recent amendment to Insolvency and Bankruptcy Code (IBC) regulations, which exempts aircraft, engines, and related assets from the moratorium clause, is intended to be prospective and apply to future insolvencies, according to official sources.
The high court had sought the government’s response to a plea by a Go First lessor.
On October 3, the MCA provided a major relief to aircraft lessors by exempting all transactions and agreements relating to aircraft, aircraft engines, airframes, and helicopters from the moratorium under Section 14 of the IBC. This move may deter airlines that end up in insolvency but bolsters lessors’ business. The MCA’s notification aligns with the Cape Town Convention Bill introduced by the Civil Aviation Ministry in 2018.
The Bill assures lessors that their assets, such as aircraft, will not be seized if a company becomes insolvent. This has been a concern in the case of Go First, which is currently undergoing insolvency proceedings.
A senior government official told Business Standard that the law’s intent is to exempt leased engines and aircraft in future insolvencies and not where the insolvency process has already begun. In Go First’s case, lessors had applied for deregistration of 45 aircraft prior to its admission of insolvency. These applications were put on hold following the commencement of the moratorium.