Author: Epooru Anusha, Damodaram Sanjivayyya National Law University, Vishakapatnam

India's aviation sector, regardless of its swift expansion since its time immemorial, has been characterised by financial fragility. Approximately 70-80% of aircrafts are leased by Indian carriers instead of operating them as their own aircrafts. Which reflects the shift towards dependency on international lessors which consists of predominant entities like Ireland, Singapore, and the United Arab Emirates. The governance of such arrangements left insufficiently to fill the gaps in developing that particular sector due to the lacunas arising in legal frameworks especially at the interference of international treaty obligations and insolvency laws.

One of the most pressing legal issues in the aviation sector was- the insolvency petition was filed by Go first Airlines(india)limited on 2nd may 2023 under section 10 of the IBC,2016. After admission of such voluntary petition, which had impacted international creditors leading them to invoke its fastened effect of freezing the repossession of leased aircrafts by invoking a moratorium under section 14(1)(d) of the IB.This made the lessors who held a valid contractual right by filing an irrevocable deregistration and export authorisation under the Cape town. Convention on international interest in mobile equipment. 2001.which is in a form of unsustainability.

This article evaluates legal Battle that evolved from go first airlines insolvency proceedings By Examining three interconnected issues. The obstacle expansion of Production of moratorium. Two leased assets. And a section 14 clause 1 clause t Second, one. The institution Scuffle between the NCLT and the DGCA. Bridging the gap between domestic insolvency law and its international commitments. And the advocacy of India’s legislative response. The Central Contention Is that An outcome that undermines the India's credibility as a destination for global aviation finance, due to its absence of Specific sector insolvency frameworks Gathered with its India Unleft domestication of the Cape Town Convention. Which rendered international lessors structurally vulnerable.

In order to expedite corporate bankruptcy resolution in a timely and creditor-friendly way, insolvency laws were introduced. While Section 14 provides extensive protection by establishing a moratorium that forbids any security interest in the debtor's assets in the form of recovery or enforcement, Corporate affords sweeping protection by allowing the debtor to voluntarily initiate corporate insolvency resolution. Additionally, clause 14(1)(d) specifically prohibits any owner or lessor from reclaiming the property that the corporate debtor occupies or possesses. In addition to the moratorium, the primary goal of the statutory objective is to safeguard the debtor's estate by enabling a prompt resolution.the expanded protection for aircraft held under lease agreements governed by foreign legislation but not owned by Go First.

This becomes problematic, at least legally, for two reasons. However, the NCLT's interpretation of the aforementioned aviation leasing context was expanded in SMBC Aviation Capital Ltd. v. Go Airlines India Ltd.First, moratorium under section 14 serves as the foundation for the protection of debtor assets that are a part of the corporate debtor's patrimony. In any meaningful proprietary sense, the lessor's contract and the international obligation of leased aircraft, which will be the lessor's property, do not comprise the debtor' s estate. The Delhi High Court of the Union of India v. UCO Bank accepted this distinction. where it was decided that the corporate debtor's property was the sole property covered by the moratorium. In a similar vein, the NCLAT cautioned against extending moratorium protection to third-party property forever in Vanguard Credit & Holdings Pvt. Ltd. v. Kshitiz Chhawchharia.

The NCLT's expansive interpretation of section 14(1)(d) expanded India's obligations under the Cape Town Convention. Article XI of the Convention and its Aircraft Protocol grants lessors an unrestricted right to reclaim assets in the event of default or insolvency, subject only to formalities. Despite India's 2008 adoption of the Convention, no enabling legislation was passed to operationalise it under Section 3 of the IBC, so its provisions remained legally dormant in domestic proceedings. The NCLT failed to consider the reality that this gap rendered India's international commitments unenforceable against its own bankruptcy machinery.

Differing mandates between the NCLT, an adjudicatory body under IBC, and the DGCA, a statutory regulator of civil aviation under the Aircraft Act of 1934, caused the paralysis of the first crisis. The DGCA rejected international lessors' IDERAs requesting deregistration of the leased aircraft as a prerequisite to physical repossession on the grounds that it was constrained by the NCLT's moratorium ruling. This rejection caused a central institutional dilemma to crystallise: the primary legal question here is whether an internationally ratified treaty that will be operationalised through the DGCAs' regulatory functions under India's obligation takes precedence over the insolvency court's moratorium.

The DGCAs' posture in dangerously performing administrative functions was legally problematic in light of Indian Treaty obligations. The Cape Town Convention aims to shorten the time it takes to implement IDERA, which requires contracting governments to recognise it. The DGCA purposefully positioned India's breach of international commitments by prioritising domestic insolvency over treaty obligations. This is not a mere technical legal failing, but rather a message to global aviation financiers that India's treaty ratifications may be unenforceable against local legal actions, ultimately culminating in the loss of investor trust. The court ruled that the IBC moratorium cannot supersede the responsibilities of international treaties and directed the DGCA to conduct deregistration allowance within the scope of leased aircraft, particularly when third party rights were at risk. Unless it is appropriately and legislatively handled. Individual verdicts cannot permanently fix the fundamental issue of a lack of a clear legal hierarchy between industry regulators and bankruptcy adjudicating authorities.Entities cannot be resolved permanently.In situations involving cross-border issues, the courts ratio reaffirmed the asset recovery of international commitments. Additionally, this is a significant remedy for NCLT's too broad application of Section 14. However, the structural uncertainty was not resolved by the judicial resolution. Due to its partial Ness reactive and litigation-dependent nature, the gap between the DGCA's regulatory mission and the NCLTS jurisdiction will recur.

Go first procedures addressed the grave issues regarding procedural fairness and creditor categorisation beyond the bounds of the moratorium. While it may be acceptable under the IBC's expedited admission framework, the NCLT's admission of the insolvency petition without giving international lessors a chance prior to admission raised a significant issue, particularly when third parties' rights are immediately and negatively impacted by the moratorium.The NCLAT strongly refused to change the admission ruling in favour of repossession. International aircraft lessors are not more strictly categorised as financial or operational creditors by NCLT or NCLAT, nor are Sections 5(7) and 5(20) of the IBC specified.These international aircraft leases, whether governed by English or New York law, are similar to secured financial transactions, and the IBC's failure to accommodate such arrangements by offering asset-owning lessors a feasible creditor classification shows a structural flaw that diminishes the code's stated goal of balancing creditors' rights during insolvency resolution.This type of exclusion has a significant influence on the denial of membership to lessors in the committee of creditors, prohibiting them from participating in the resolution process and forcing them to file a CIRP against the legitimate business interests of the aircraft owners.The most difficult component is failing to categorise on doctrinal or policy grounds, since aeroplane leases are structured as complex finance arrangements because they typically include significant financial responsibilities.

A careful legislative reaction has been taken to the legal void revealed by the go first proceedings. In June 2023, the Ministry of Corporate Affairs issued a notification exempting some leasing transactions from the IBC application's moratorium conditions. Although it was strongly supported, the restricted application of that exemption which ignored the interpretative uncertainty surrounding section 14(1)(d) applicability to leased assets generally made the outcome pointless. Legal experts have suggested that putting the Cape Town Convention under section 238 of the IBC, which gave the codes overriding force, would be a more permanent solution. However, without matching changes, legislative reform is insufficient to address the shortcoming in institutional capacity and coordination. There should be a significant shift in the tribunals that decide aviation insolvency cases because they need to have specialised knowledge of international aviation finance. The main benefit of the proceedings should be changed in favour of the lessors, who should be identified, categorised, and given the chance to be heard by upholding the administrative and constitutional principle of natural justice, where the court finds it easier to adopt such methods in the case of legal gaps that help them resolve judicial matters prior to the imposition of a moratorium.The 2025 Bill for the Protection of Interest in Aircraft Objects has significant structural relevance. The purpose of this legislation is to improve the Cape Town Convention and its aircraft protocol within domestic law by introducing automated deregistration mechanisms at the request of the lessor, providing statutory recognition of IDERA rights, and establishing a legal framework for asset recovery during insolvency proceedings.The introduction of specific insolvency regimes for high-capital industry such as aviation was also proposed in the Insolvency Law Committee's 2023 Report; the Go First case has made it difficult to ignore this recommendation.According to Rao and Krishna, this would provide compliance asset recovery statutorily privileged status above general moratorium laws, creating a solid legal base independent of judicial interpretation. By creating a legislative hierarchy of power and proposing changes to the Aircraft Act, 1934 to ensure conformity with Convention obligations, the Bill also aims to eliminate the jurisdictional dispute between the NCLT and the DGCA.

The Go First Airlines insolvency procedures in the Indian legal environment were one of the three intersecting failures. The judiciary's interpretation of the IBC moratorium went too far, and India's incomplete implementation of the Cape Town Convention resulted from a lack of institutional coordination between the NCLT and the DGCA. All of these obstacles and failures put aircraft lessors in a precarious legal position, delayed asset repossession, and damaged India's reputation as a reliable counterparty in international aviation finance.India's reputation as a trustworthy partner in global aviation financing.

Although the Delhi High Court's intervention in ordering IDERA-based deregistration was an essential remedy, its impact was temporary and litigation-specific. India needs a long-term legislative solution that fully operationalises the Cape Town Convention through the Protection of Interests in Aircraft Objects Bill, 2025, enacts sector-specific insolvency provisions for aviation, and creates a statutory framework that precisely defines the jurisdiction of sectoral and insolvency regulators. In order to guarantee aircraft lessors' meaningful involvement in resolution procedures, the IBC must also be modified to provide them a suitable creditor classification.

Ad hoc court remedies are insufficient to maintain international investor trust in India's aviation industry. It needs a cohesive legislative framework that indicates India's true commitment to meeting its international responsibilities. The Go First case is more than just another chapter in airline insolvency; it is a test of India's institutional maturity in navigating the convergence of local law and global economic responsibilities. Legislative and regulatory reforms already underway must fulfil that standard.

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