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INDIA (DOMESTIC FIRMS): An Introduction to India


RNClegal was the first legal firm to be established in New Delhi, soon after Indian Independence in 1947 and the promulgation of the Constitution of India. The firm’s practice includes advising and assisting clients on the acquisition and leasing of aircraft and other equipment, tax structuring, regulatory advice, approvals on Cape Town and other Conventions, mergers and acquisitions, and general corporate laws.

Practice areas, inter alia, include:

Aircraft finance and leasing: advice to lessors, owners, manufacturers and banks on leases of aircraft including advice on securitisation, registration, de-registration, provision of mortgage security, finance and taxation, repossession, enforcements and recovery of the aircraft and other related equipment.

Advice on aircraft acquisition, leasing and financing deals on a year-to-year basis.

Advice on regulatory and litigation issues, enforcements in courts and otherwise, and enforcements in India of foreign decrees/opinions.

Foreign trade and commerce, and cross-border transactions in asset finance, discounting, factoring, external commercial borrowings, letters of credit, issues arising out of international financing transactions.

Drafting, review and settlement of loan, guarantee, intercreditor agreements, assignments, mortgages, et al.

Registration, compliance with the Reserve Bank of India Guidelines and Securities and Exchange Board of India regulations.


Civil aviation, which includes airports, scheduled and non-scheduled domestic and international passenger airlines, helicopter and seaplane services, ground handling, MROs, flight and technical training institutions et al, is one of the fastest-growing industries in India. The International Air Transport Association (IATA) says that India will be the world’s third-largest domestic aviation market by 2024-2025, after the US and China.

With more than 100 airports that receive commercial flights, passenger traffic in India was 295 million and freight traffic 3 million tonnes (both domestic and international) during the financial year 2020. According to the IATA Annual Review 2019, India’s domestic market showed the fastest growth in passenger numbers, which increased by 18.5% in 2018. India has shown double-digit year-on-year growth consistently in revenue passenger kilometres.

The rising demand pushed up the number of aeroplanes in operation and, as of March 2020, to 706 aircraft all of which are operated by scheduled and non-scheduled operators in India. This number is expected to rise to 1,100 by 2027.


The outbreak of COVID-19 flew the aviation sector world over into turbulence. A lockdown has been in force since March 25, 2020. As India has unlocked gradually, domestic flights and some international flights have been permitted. Most international passenger flights were again suspended, except for certain others.

As stated above, the IATA Annual Review 2019 says that India’s domestic market has shown the fastest growth in passenger numbers, which increased 18.5% in 2018. In a recent analysis, the ICAO estimated:

An overall reduction in seats offered by airlines ranging from 42% to 52%;

An overall reduction of 2,344 to 2,978 million passengers; and

Approx. USD308 billion to USD391 billion potential loss of gross operating revenues of airlines.

The pandemic has caused an 86% decrease in government revenue. This has resulted in job losses. Ground handling agencies are the most affected in terms of employment reduction, followed by cargo operators.

Airlines are thus facing a severe cash crunch, but they are not supported by any relief package or tax concession from the Government. Whilst the relatively stable airlines will be able to ride through it, it will create irreversible decline curves for some others who were already struggling. In the mid-term, airlines could be looking at a cut down in fleet sizes and ultra-low cost models to remain afloat. In the longer term, it would be necessary for the Government to step in with support, in terms of tax relaxation or a reduction in the levy on Aviation Turbine Fuel (ATF), which at the moment hovers between 40% and 44%. Carriers with weak balance sheets and inadequate collateral have survived by withholding payment to suppliers for two months and counting and/or restructurings. In CAPA’s assessment, Indian carriers may need USD2.5 billion to keep flying.

The sector, however, has not lost momentum inasmuch as the period has not seen repossessions, as most lessors and lessees have agreed on rent deferrals and restructuring. Financing transactions have also seen restructuring, with some lenders stepping out and fresh lenders being roped in. What adds to it is the Ordinance dated June 5, 2020 which suspended Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 (IBC), as detailed elsewhere in this article.


Despite the sector having been impacted adversely, there have been a few key developments supported by government initiatives to give an impetus to the aviation industry. Some of these are:

1. Air India privatisation 

In an effort to revive Air India, and addressing the uncertainties caused by COVID-19, the Government has extended the deadline for submission of bids from October 30 to December 14, 2020.

2. Revival of Jet Airways 

On October 17, 2020, the Committee of Creditors of Jet approved a resolution plan submitted by a consortium of Kalrock Capital and Murari Lal Jalan. The Resolution Professional has now submitted this resolution plan before the Bankruptcy Court for approval. On approval from the Court, new owners will infuse money to revive the airline.

3. Development of new airport at Jewar 

Zurich Airport International signed a concession agreement for 40 years to design, build and operate the Jewar international airport near New Delhi. The airport is being developed through a public-private partnership model with Noida International Airport responsible for the overall management of the project. Once complete, the airport will feature six runways, making it the largest airport in the country.

HDFC Bank has also signed an agreement to provide a INR5 billion (USD67 million approx.) loan for the project.


India acceded to the Cape Town Convention and Protocol (CTC/Cape Town Convention) in 2008. However, some provisions of CTC are in conflict with certain Indian laws. The continued delays in de-registering and exporting Kingfisher-operated aircraft since it suspended operations in 2012 created a wrong impression that India was not committed to CTC. However, not many know that Kingfisher aircraft were not covered by CTC. From that time, enforcement has vastly improved, as was brought out clearly in the recent Jet Airways saga.

To further bring Indian provisions in line with CTC, the (Indian) Aircraft Rules, 1937 were amended in 2015 by the insertion of Rule 30(7), which mandates that the Directorate General of Civil Aviation (DGCA) shall cancel registration of an aircraft registered in India within five working days on the receipt of an application from the registered Irrevocable Deregistration and Export Request Authorisation (IDERA) holder along with the original or notarised IDERA and a certificate that all Registered Interests ranking in priority have been discharged or such holders have given their consent to deregistration and export.

Adding further substance to Rule 30(7) of the Aircraft Rules, 1937, the Delhi High Court in a 2015 judgment, while interpreting Rule 30(7), has held that “with the insertion of sub-rule (7) in Rule 30, the doubt, if any, as to whether the DGCA had any discretion in the matter has got removed. Upon the creditor fulfilling the conditions prescribed in clause (i) and (ii), of sub-rule (7), of Rule 30, the DGCA is mandatorily required to cancel the registration.”

On November 16, 2018, the DGCA issued an Aeronautical Information Circular (AIC) No. 12 of 2018, which deals with the "Standard Operating Procedure for Implementation of Rule 32A, relating to Export of Aircraft Covered under Cape Town Convention." The AIC details the procedure to be followed by DGCA on receipt of an application from an IDERA holder and also provides the format in which an IDERA holder is to make an application to the DGCA for deregistration on the basis of an IDERA (BOCA & Ors vs. DGCA and Wilmington Trust SP Services (Dublin) vs. DGCA, WP (C) 871 and 747 of 2015).

The result of these developments could be seen during the repossession of aircraft from Jet Airways India Ltd, in the years 2018-2019. Of its fleet of 123 aircraft at the time of admission of the insolvency application against it, only 11 aircraft were left in its possession, of which six were on finance lease.


a. Insolvency and Bankruptcy Code, 2016: The threshold for initiation of Corporate Insolvency Resolution Process was increased from INR100,000 to INR10,000,000, by a Notification No. S.O.1205 (E), dated March 24, 2020.

With the objective of shielding financially distressed companies impacted by the outbreak of COVID-19, the Indian Government has by IBC (Amendment) Ordinance, 2020 suspended initiation of fresh insolvency proceedings under Sections 7, 9 and 10, which relates to filing of insolvency proceedings by and against a company in default, for six months (extendable up to one year) with effect from March 25, 2020.

The ordinance also perpetually prohibits initiation of insolvency proceedings on account of default committed by the company during these six months or the extended period. Further, by a notification No. S.O. 3265(E), dated September 24, 2020, the Government extended the suspension of these sections by three months from September 25, 2020.

b. CAR on Registration & Deregistration: The DGCA on June 15, 2020 amended the Civil Aviation (CAR) requirement on ‘Registration and Deregistration of Aircraft.' Prior to the amendment there was no formal process of filing and acknowledgement of IDERA by the DGCA. Per the amended CAR, the DGCA has now inserted a new paragraph (see below) per which the IDERA holder/Certified Designee shall submit an application in the proper format along with the originals and notarised copies of the IDERA.

7A. “Recording of Irrevocable De-registration and Export Request Authorization:

For recording IDERA with DGCA the IDERA holder or his authorized signatory or certified designee of the authorized signatory shall submit application as per Appendix B, along with Original IDERA and notarized copy or two notarized copy thereof.”

Time and again the Indian Government has stated publicly that it is committed to creating a more conducive environment in India for the international lessors' and lenders' community and to boost the civil aviation sector, which is projected to be a major mode of public transport in India.