Govt changes insolvency rules to exclude leased aircraft from moratorium

India has amended its insolvency rules to exclude leased aircraft from a moratorium that kicks in when an airline goes into bankruptcy, according to a government notification released on Tuesday, a move that could resolve discrepancies between global leasing rules and its bankruptcy laws.

Some provisions of the Indian Bankruptcy Code will not apply to transactions relating to aircraft, aircraft engines, airframes and helicopters, the notice showed.

Section 14 of India's Insolvency and Bankruptcy Code, which imposes a moratorium on assets of a company undergoing insolvency, will not apply to aircraft covered by the global aircraft leasing rules under the Cape Town Convention - a treaty designed to protect repossession rights.

India has ratified the treaty but there was no local legislation enforcing it, rendering it ineffective.

The notification comes at a time when lessors of budget airline Go Air are entangled in a legal dispute to recover their aircraft after the airline went bankrupt.

"With this, India can hope to somewhat repair the reputation it has acquired as a risky country to lease aircraft and engine to," Ramesh Vaidyanathan, managing partner, BTG Advaya, a law firm in India, told Reuters.

The announcement also comes after the country's aviation secretary told Reuters in June that India is working to resolve discrepancies between global aircraft leasing rules and its national bankruptcy laws.

 

(Reporting by Indranil Sarkar in Bengaluru, Arpan Chatterjee in New Delhi and Jayshree Pyasi in Mumbai, writing by Shilpa Jamkhandikar; Editing by Bernadette Baum)