Delhi High Court: Petitioners filed the present petitions aggrieved by the decision of Respondent-Directorate General of Civil Aviation (‘DGCA’) to reject the deregistration applications filed by petitioners, in view of the Insolvency Commencement Order passed by the National Company Law Tribunal (‘NCLT’). Tara Vitasta Ganju, J.*, opined that no doubt, the return of the aircraft would cause hardship to GoAir, but it could not be used as a defense to not deregister the aircrafts. Further, the Court opined that in view of the delay in deregistration of the aircraft, India’s compliance rating of the Cape Town Convention and Cape Town Protocol had fallen from 3.5 to 2 out of 5, which was a significant drop. These compliance ratings had a long-term impact on the aircraft industry and the airlines operating in India. The Court opined that a chain reaction had been set off which would have a ramification on leasing, for all commercial airlines in the country. The inconvenience of a specific party could not outweigh the statutory provisions and the international treaty obligations applicable to these aircrafts.
Thus, the Court set aside the impugned rejection letters/communications dated 11-05-2023, 12-05-2023 and 19-05-2023 issued by the DGCA declining to process the deregistration applications of petitions, and accordingly directed the DGCA to process the deregistration applications filed for the fifty-four aircraft as per Rule 30(7) of the Aircraft Rules, 1937 (‘Aircraft Rules’) in no later than the next five working days.
Background
In the present case, all the petitions involved common question of law and facts and hence, were taken up together for adjudication.
Petitioners were lessors and owners of the aircraft leased to Respondent-GoAir. GoAir was being represented before this Court by the Resolution Profession (‘RP’) appointed by an order of the NCLT, Special Bench, New Delhi. Separate lease agreements were entered between GoAir and petitioners to lease one or more aircraft to respondent on the terms and conditions set forth under the lease agreements. In all, GoAir had leased fifty-four aircraft from the present fourteen petitioners for ten years each. Pursuant to the execution of the lease agreements, GoAir also executed and submitted before the respondent, an Irrevocable De-registration and Export Request Authorisation (‘IDERA’) for each Aircraft.
Petitioner contended that owing to defaults in payments of lease rental amounts, the petitioners sent individual notices of default to Go Air, requesting payment of arrears in lease rental due to them. Since the complete payment was not received by petitioners, the lease agreements regarding all fifty-four aircrafts were terminated by the petitioners on various dates, between 02-05-2023 and 04-05-2023. Thereafter, notice of default and termination was sent by the petitioners to GoAir which stated that GoAir was to immediately cease operation of the aircraft. The termination notices further directed GoAir to provide the necessary assistance and cooperation for deregistration and export of the aircraft. Subsequently, petitioners filed the applications for deregistration of the aircraft with DGCA under Rule 30(7) of the Aircraft Rules.
Meanwhile, GoAir initiated proceedings before the NCLT, under Section 10 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) for initiation of voluntary Corporate Insolvency Resolution Process (‘CIRP’). NCLT, by order dated 10-05-2023, admitted the petition filed by GoAir and because of which, a mortarium was imposed under Section 14(1) of the IBC. Further, this order was challenged by petitioners before National Company Law Appellate Tribunal (‘NCLAT’), wherein the NCLT’s order was upheld. Meanwhile, by letters/orders dated 11-05-2023, and 12-05-2023, petitioners were informed by DGCA, that the deregistration applications had been rejected, and could not be processed in view of the Insolvency Commencement Order passed by the NCLT. Thus, aggrieved by this, petitioners filed the present petition.
Respondent contended that once the insolvency commencement order came into effect on 10-05-2023, all disputes related to an entity where the insolvency process had commenced could only be adjudicated before the NCLT and this Court had no jurisdiction to entertain any petition related to the assets of the entity where CIRP had commenced. It was also contended that there was a clear nexus between deregistration and insolvency of Go Air and as per Section 60(5) of the IBC, only the NCLT had exclusive jurisdiction to decide the issues arising out of and in relation to the insolvency of the GoAir.
Analysis, Law, and Decision
The Court opined that a combined reading of Rule 5 and Rule 30(6) of the Aircraft Rules showed that unless and aircraft had an existing registration, it could not be flown and once the lease of an aircraft had expired/terminated, its registration might be cancelled at any time. Further the validity period of registration certificate of an aircraft was restricted to the subsistence of the valid lease agreement. In the present case, petitioners had terminated the lease agreements hence, the fifty-four aircrafts did not have a valid registration certificate.
The Court opined that NCLT and the NCLAT were the statutory bodies constituted under the provisions of Sections 408 and 410 of the Companies Act, 2013 respectively and had the powers to adjudicate upon matters related to the IBC. The NCLT was created under the IBC and therefore, its jurisdiction was limited to the extent as provided under the IBC. NCLT could not assume control over other government authorities in the realm of public law, and the scope of Section 63 and Section 231 of the IBC was restricted to matters in which the NCLT/NCLAT had jurisdiction. The Court relied on Canara Bank v. Deccan Chronicle Holdings Ltd., 2017 SCC OnLine NCLAT 255 and opined that the NCLT did not have the authority to assume the jurisdiction exclusively conferred on the High Courts and the Supreme Court and it could not be curtailed by any statute.
The Court opined that the primary and most proximate cause for the termination was continuous non-payment of lease rentals for the aircraft, and it could not be equated with the conditions ‘arising out of’ or ‘in relation’ to the insolvency resolution as provided in Section 60(5) of the IBC. The default notices/emails were sent to Go Air from 2020 onwards and, prior to that, Go Air had received several such default notices. The Court opined that although, the termination notices did refer to the insolvency being one of the many events of default, it was not the insolvency which led to the termination. Thus, the Court applied the principles laid down in Tata Consultancy Services Ltd. v. SK Wheelers (P) Ltd., (2022) 2 SCC 583, and opined that since the termination did not arise out of the insolvency and was certainly not a consequence of the insolvency, therefore the provisions of Section 60(5) of the IBC could not be deemed to be applicable in the present case.
The Court noted the notification issued by the Ministry of Corporate Affairs on 03-10-2023, under Section 14(3) of the IBC (‘MCA notification’) wherein aircraft, aircraft engines and airframes were kept outside the purview of the IBC and opined that applying the principles set forth in Zile Singh v. State of Haryana, (2004) 8 SCC 1, it was apparent that the MCA Notification had been issued to cure a lacuna in the existing law which would benefit the community. The Court opined that keeping in mind the scope and purview of the Aircraft Act, 1934, and Rule 30(7) of the Aircraft Rules and the fact that India was a signatory to the Convention of International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (‘Cape town convention’), Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (‘Cape town protocol’) since 31-03-2008, the present Court was of a considered view that the words “aircraft, aircraft engines, airframes” ought to have been included in Section 14(3) of the IBC from the date it came into force, so as to ensure implementation of procedure for remedies on insolvency related to aircraft, which form the subject matter of these petitions.
The Court stated that Rule 30(7) of the Aircraft Rules was mandatory in nature and upon fulfillment of the conditions specified in the Rule, the DGCA should mandatorily deregister the aircraft. The Court opined that petitioners were the IDERA holders in respect of all aircraft and indisputably, the Cape Town Convention and Cape Town Protocol applied to these aircraft. The DGCA had not placed on record any communication setting forth the deficiencies in the documents filed by petitioners for deregistration. Therefore, DGCA was bound to deregister the aircraft. Thus, the Court opined that subject to the removal of any deficiencies in the deregistration application by petitioners, the deregistration of the fifty-four aircrafts was to be proceeded by the DGCA.
Further, regarding the contention that RP of GoAir was for possession and occupation of the aircrafts and as per Section 14(1)(d) of the IBC, the possession could not be disturbed during a moratorium, the Court opined aircrafts ceased to be the property in possession of GoAir upon termination of the lease agreements. The termination notices were received by the GoAir prior to the imposition of moratorium by the Insolvency Commencement Order. Thus, the Court opined that since the aircrafts ceased to be in the possession of Go Air, prior to the imposition of the moratorium therefore, these could not be covered under Section 14(1)(d) of the IBC.
The Court further opined that RP of Go Air’s contention that deregistration of the aircraft would lead to the only asset of GoAir being taken away from it, leading to its corporate death, failed to recognize that the aircraft were not the assets which were owned by or belonged to GoAir. The Court opined that no doubt, the return of the aircraft would cause hardship to GoAir, but it could not be used as a defense to not deregister the aircrafts. Further, the Court opined that in view of the delay in deregistration of the aircraft, India’s compliance rating of the Cape Town Convention and Cape Town Protocol had fallen from 3.5 to 2 out of 5, which was a significant drop. These compliance ratings had a long-term impact on the aircraft industry and the airlines operating in India. The Court opined that a chain reaction had been set off which would have a ramification on leasing, for all commercial airlines in the country. The inconvenience of a specific party could not outweigh the statutory provisions and the International Treaty obligations applicable to these aircrafts.
Thus, the Court set aside the impugned rejection letters/communications dated 11-05-2023, 12-05-2023 and 19-05-2023 issued by the DGCA declining to process the deregistration applications of petitions, and accordingly directed the DGCA to process the deregistration applications filed for the fifty-four aircraft as per Rule 30(7) of the Aircraft Rules, in no later than the next five working days. All maintenance tasks related to these aircrafts should be undertaken by petitioners and/or their authorised representatives, until the time these aircrafts were deregistered and exported. The DGCA and the Respondent-Airport Authority of India should aid and assist petitioners and grant their employees, agents, officers and/or authorised representatives’ access to the airports, where these aircrafts were parked. Further, RP of GoAir should within the next fourteen days provide to petitioners up to date information and documentation related to the aircraft, airframe, aircraft engines and other parts and components of all the fifty-four aircrafts.
The Court restrained RP of GoAir, GoAir and its directors, employees, agents, officers and/or representatives from entering, accessing or in any manner, operating or flying any of the aircraft. Further, they were also restrained from removing, replacing taking out any accessories, spare-parts, documents, records, materials, etc. of these aircraft.
[Accipiter Investments Aircraft 2 Ltd. v. Union of India, 2024 SCC OnLine Del 3125, decided on 26-04-2024]
*Judgment authored by- Justice Tara Vitasta Ganju
Advocates who appeared in this case :
For the Petitioners: Mukul Rohtagi, Rajiv Nayyar, Dayan Krishnan, Arun Kathpalia, Kevic Setalvad, Satvik Varma, Amit Sibal, Senior Advocates with Ravi Nath, Ankur Mahindro, Nitin Sarin, Rohan Taneja, Pranaya Goyal, Aditya Kapur and Mehul Jain, Ameya Gokhale, Meghna Rajadhyaksha, Vaijayant Paliwal, Medha Sachdev, Rishabh Jaisani, Riay Basu, Harit Lakhani, Mehak Nayak, Ajay Kumar, Hetram Bishnoi, Anchal Nanda and Ambarish Deenadhayalraj, Advocates; Marylou Bilawala, Dhruv Khanna, Sharleen Lobo, Chiranjivi Sharma, Priya Desai, Apoorva Kaushik, Vasu Gupta, Saakshi Malpekar, Nehal Gupta and Uday Mathur, Nimish Vakil, Amit Pai, Bhavana Duhoon, Anshul Syal and Abhiyudaya Vats, Mukul Katyal, Priyam Jinger, Soumil Gonsalves, Hetram Bishnoi and Aanchal Nanda, Advocates;
For the Respondents: Vikarmjeet Banerjee and Chetan Sharma, Additional Solicitor General of India with Anjana Gosain and Nippun Sharma, Rajesh Gogna, Avshreya Pratap Singh Rudy, Amit Acharya, Apurv Karup, Advocates with Naveen Kapoor, Law Officer (DGCA); Neeraj Kishan Kaul, Senior Advocate with Diwakar Maheshwreari, Pratiksha Mishra, Vishnu Sriram, Shreyas Edupugnati, Pratibha Agarwal and K. Lakshmi, Advocates; Digvijay Rai, Standing Counsel with Archit Mishra and Vivek Gupta, Advocates; Gopal Jain, Senior Advocate with Dheeraj Nair, Angad Baxi, Vishrutyi Sahni and Stanzin Dolker, Advocates.
