From Default to Deregistration: Aircraft Financing, Insolvency and Enforcement under India’s Cape Town Regime

India acceded to the Cape Town Convention and Aircraft Protocol in 2008 with the objective of reducing aircraft financing costs and improving access to global leasing markets. However, for more than a decade thereafter, the Convention largely remained an international commitment without a fully effective domestic enforcement mechanism. In the absence of a dedicated statute, enforcement of aircraft financiers’ and lessors’ rights continued to be routed through a patchwork of general laws, including the Aircraft Rules, DGCA circulars, the Companies Act, and eventually the Insolvency and Bankruptcy Code, 2016 (IBC).

This fragmented legal architecture led to significant uncertainty in insolvency scenarios, as seen starkly in high-profile airline failures such as Jet Airways and Go First. Despite the existence of registered international interests and IDERAs, lessors faced prolonged delays in repossession and deregistration due to the blanket application of the moratorium under section 14 of the IBC, lack of statutory recognition of the Convention’s “Alternative A” insolvency regime, absence of clear timelines binding the aviation regulator, and conflicting interpretations by insolvency professionals, courts, and regulators regarding priority, control, and preservation obligations.

In practice, aircraft objects were often treated as ordinary corporate assets, rather than specialised, mobile equipment governed by an internationally harmonised framework. This resulted in erosion of asset value, mounting maintenance liabilities for lessors, and reputational damage to India’s aviation and financing ecosystem. The uncertainty also had a demonstrable impact on leasing costs, insurance premiums, and willingness of global lessors to deploy aircraft into the Indian market.

The Protection of Interests in Aircraft Objects Act, 2025 (Aircraft Objects Act) marked a shift from this position. The Act gave a statutory force to the Cape Town Convention and Aircraft Protocol in India, overriding inconsistent domestic laws and embedding Convention principles directly into Indian law. Pursuant to this, now the Rules have been notified^[1] on January 30, 2026, to further enforce the mechanism under the Act. The Rules prescribe, who must disclose interests and defaults, which authority (DGCA as registry authority) is responsible at each stage, the exact forms to be used, and timelines for acknowledgement, publication, stakeholder responses, and enforcement actions.

Together, the Act and the Rules address the core deficiencies exposed during earlier airline insolvencies and what was earlier dependent on regulatory discretion and ad hoc court orders is now governed by predictable procedures and enforceable obligations, restoring confidence that aircraft objects will no longer be trapped indefinitely in insolvency proceedings.

[1] https://www.civilaviation.gov.in/sites/default/files/2026-02/gazette-notification-of-the-protection-of-interests-in-aircraft-objects-rules-2026.pdf

Requirements of registration of interest in an aircraft object is the focal point of creditor protection under the Aircraft Objects Act, 2025 and the Cape Town Convention framework. Without proper registration, even the most carefully drafted lease or security agreement risks being rendered ineffective in insolvency, enforcement, and priority disputes.

Under the Cape Town Convention, an “international interest” in an aircraft object is not merely contractual, it is a property-like right that derives its strength from public registration. Registration performs three critical functions (1)

Notice to the world that the aircraft object is subject to an international interest; (2) Priority determination between competing creditors and lessors; and (3) Trigger for insolvency protections, including enforcement rights during and after the waiting period.

The Aircraft Objects Act gives statutory recognition to this framework, ensuring that Indian insolvency law and aviation regulation cannot dilute these effects through general principles of company or insolvency law.

Rule 6 of the 2026 Rules imposes a mandatory obligation on the debtor (operator) to inform the registry authority of any international interest on an aircraft object. Key requirements include:

• The debtor must inform the registry authority within 30 days of registration of the aircraft under the Bharatiya Vayuyan Adhiniyam, 2024.
• For aircraft already registered or operated in India as on the commencement of the Rules, disclosure must be made within six months.
• The information must be submitted in Form-I, enabling the registry authority to link the international interest with the Indian nationality and registration mark issued by the DGCA.

For financiers and lessors, registration is not a procedural formality, it is the legal gateway to enforceability. The relevance of registration under the Aircraft Objects Act becomes most pronounced once insolvency proceedings commence under the IBC.

While section 14 of the IBC imposes a moratorium on enforcement actions, the Aircraft Objects Act and Rules carve out a special insolvency regime aligned with Alternative A of the Aircraft Protocol.  Registration of interest is a pre-condition for invoking these protections. Only a registered international interest can trigger the two-month “waiting period” and enable enforcement of remedies immediately upon expiry of that period, notwithstanding the general moratorium.

An unregistered interest risks being subordinated to the insolvency framework, exposing the financier to prolonged delays and value erosion.

• Treatment by Resolution Professional: A resolution professional is statutorily required to preserve the aircraft object, maintain its value, and provide access to technical and maintenance records. But these obligations arise meaningfully only where the international interest is duly registered and disclosed. Registration therefore anchors the RP’s duties and limits discretion in dealing with aircraft assets.

In cases involving multiple interests, lessor, mortgagee, security trustee, or sub-lessor, priority is determined strictly by order of registration, not by the date of contract execution. This principle overrides inconsistent domestic doctrines relating to equitable interests or unregistered charges. This is a marked departure from traditional Indian security law, where priority disputes often turn on charge registration under the Companies Act or equitable considerations.

Registration of interest sets in motion a structured sequence under the Rules such as disclosure of dues, intimation of default, stakeholder notification, waiting period management, and eventual enforcement, deregistration, and export.

Under the Aircraft Objects Act, 2025, registration of interest in aircraft objects transforms creditor protection from a reactive, litigation-driven process into a predictable, registry-based system. Bottom of Form

While registration of an international interest is the foundational step, the protection framework under the Aircraft Objects Act, 2025 does not end there. The 2026 Rules deliberately introduce a regime of continuous disclosure and reporting of dues, recognising that aircraft financing is dynamic and that enforcement decisions, particularly in insolvency, depend on real-time financial clarity.

Rules 7 and related provisions impose ongoing compliance obligations on the debtor, which directly affect the rights of financiers and lessors during default, insolvency, and enforcement. The maintenance and submission referred to under

sub-rule (2), of Rule 7 is required to be maintained and submitted not later than the fifth day of the calendar month following the end of each quarter and shall continue to be maintained and submitted as long as that aircraft object remains registered in India under the provisions of Bharatiya Vayuyan Adhiniyam, 2024 or any rules made thereunder.

Rule 7 mandates that any debtor operating an aircraft object subject to an international interest must:

• Electronically maintain records of dues arising from, related to, or owed in regard to the ownership or use of the aircraft object; and
• Periodically submit these records to the registry authority in the prescribed form.

These dues are not limited to financing instalments. They include charges typically encountered in aircraft operations, such as: (a) Airport operator charges including landing charges, housing charges and parking charges (b) Route Navigation and Facilitation Charges (c) Terminal Navigation Landing Charges (d) Fuel charges as a public service (e) Goods and service tax payable in respect of the leasing or financing, and any other dues specified in Appendix ‘A’ to the Rules.

The reporting must be done quarterly, not later than the fifth day of the calendar month following the end of each quarter, and must continue for as long as the aircraft object remains registered in India.

• Acknowledgement by Registry Authority and Regulatory Oversight

Upon receipt of the information in Form III, the registry authority is required to acknowledge the filing on the same working day. The Rules further empower the registry authority to issue directions governing the procedure and manner of exercising remedies, provided such directions are consistent with the Act, the Convention, and the Protocol.

• Statutory Notice to Stakeholders and Debtor

Following acknowledgement of the default intimation, Rule 10 introduces a transparency mechanism. The registry authority is required to inform all stakeholders, including the debtor, of the occurrence of default in respect of the aircraft object. This communication is effected through publication on the official website of the registry authority, and must be completed before the end of the next working day.

This public notice serves as constructive notice to all concerned parties,lessors, lenders, operators, regulators, and third-party claimants, thereby preventing disputes arising from lack of knowledge or surprise enforcement actions. It also aligns with the broader objective of the Cape Town framework: to provide certainty, predictability, and confidence to aircraft financiers by ensuring that enforcement is visible, orderly, and legally insulated.

• Form and Manner of Reporting

The information is required to be submitted in Form-II through the Information System designated by the registry authority. The Rules further clarify that the registry authority may seek information as and when required, and The debtor is under a continuing duty to furnish accurate and updated data.

From a creditor’s perspective, maintenance and reporting of dues serve multiple strategic purposes such as:

• Early Warning Mechanism: Regular disclosure of dues allows financiers to identify stress at an early stage, before defaults escalate into insolvency.
• Evidence of Default and Quantum: In enforcement or insolvency proceedings, registry-filed dues become a contemporaneous, neutral record of outstanding liabilities, reducing scope for disputes.
• Pre-condition for Enforcement Actions: Subsequent steps under the Rules, such as intimation of default, exercise of remedies, and deregistration, are closely linked to the accuracy of dues reporting.

The significance of Rule 7 becomes sharper once the corporate debtor enters insolvency under the IBC. During CIRP, the resolution professional is required to preserve the aircraft object, maintain its value, and ensure compliance with contractual obligations during the waiting period. The registry-maintained records of dues act as a benchmark against which defaults are identified, curing of defaults is assessed, and future obligations are evaluated. This limits subjective interpretation and constrains discretionary decisions by insolvency professionals.

Under the Rules governing the waiting period, a debtor may retain possession of the aircraft only if all non-insolvency-related defaults are cured, and future obligations are agreed to be performed.

The requirement of periodic reporting also serves a broader regulatory purpose. Aircraft operations affect multiple stakeholders, airports, service providers, regulators, and the flying public. By mandating disclosure of dues to a central authority, the Rules ensure:

Alternative A under Article XI, of the Cape Town Convention and the Aircraft Protocol, provides a time-bound insolvency regime for aircraft objects. India has expressly adopted Alternative A. The Aircraft Objects Act, 2025 gives statutory recognition to this adoption, while Rule 11 of the 2026 Rules operationalises Alternative A by introducing the concept of a fixed “waiting period”, replacing the uncertainty that previously characterised airline insolvencies in India.

• What is Alternative A and Why It Matters

Under Alternative A of the Aircraft Protocol, insolvency law cannot indefinitely restrain a creditor’s remedies in respect of an aircraft object. A debtor or insolvency administrator is given a limited and defined period to either cure all defaults and agree to perform future obligations, or surrender the aircraft object to the creditor.

This framework is designed to preserve asset value, avoid prolonged grounding of aircraft, and ensure predictability for lessors and financiers.

The Aircraft Objects Act acknowledges that international interests must be enforceable notwithstanding domestic insolvency laws, and insolvency protection under the Convention is an integral part of creditor rights. The Act harmonises the IBC with the Convention by allowing temporary restraint but prohibiting indefinite moratorium-driven immobilisation of aircraft objects.

• Rule 11: Codifying the “Waiting Period”

Rule 11 of the 2026 Rules formally introduces the “waiting period”, which is the Indian statutory equivalent of Alternative A.

Commencement and Duration: The waiting period commences on the insolvency commencement date under the IBC. The moratorium under Section 14 of the IBC continues, but expires at the end of two calendar months, which is expressly designated as the “waiting period” for aircraft objects. This two-month cap is crucial, it prevents insolvency proceedings from becoming a tool to indefinitely retain aircraft without payment.

• During the Waiting Period

While enforcement remedies are temporarily stayed, the Rules impose positive obligations on the resolution professional for preservation and maintenance in accordance with the underlying lease or security agreement. Secondly, creditor get access to the aircraft object, technical records, maintenance records, and information relating to physical security. This ensures that the aircraft does not deteriorate or lose value during insolvency.

• Option to Retain Aircraft

The debtor or resolution professional may retain possession only if, before expiry of the waiting period: all defaults (other than those triggered solely by insolvency) are cured, and there is agreement to perform all future obligations. This mirrors Alternative A’s central principle: pay and perform or return the asset.

• Post-Waiting Period: Automatic Revival of Remedies

Rule 11(2) makes the position unambiguous. No remedy recognised under the Convention or Protocol shall be prevented or restricted after the expiry of the waiting period. Which means section 14 of the IBC cannot be invoked beyond the waiting period to block repossession or deregistration. The creditor may exercise remedies under Article IX of the Protocol.

Upon receiving the creditor’s application, the registry authority is required to act in accordance with aviation law, not insolvency discretion.

Rule 11(6) reinforces creditor protection by providing that agreements between debtor and creditor cannot be modified without creditor consent. While the resolution professional retains limited termination powers under the IBC, commercial terms cannot be unilaterally rewritten, addressing a long-standing concern of aircraft lessors in Indian insolvencies.

The Rules strike a balanced approach in this regard, as use of the aircraft is permitted only if it preserves value, commercial exploitation without compliance is not allowed.

An important feature of the Cape Town Convention framework is the recognition of non-judicial, self-help remedies in favour of creditors, subject to safeguards. Under Article 8(1)(a) and Article 10(a) of the Convention, a creditor is entitled, upon default, to:

• take possession or control of the aircraft object, and
• exercise such remedies without judicial intervention, where permitted by the Contracting State.

India, in its declaration under Article 54(2), expressly allowed remedies to be exercised without leave of court, but subject to the manner prescribed under domestic law. The Aircraft Objects Act gives statutory effect to India’s Article 54(2) declaration by recognising that remedies under the Convention and Protocol are enforceable in India, and such enforcement need not pass through traditional civil courts. However, instead of leaving enforcement entirely to private action, the Act designates the registry authority as the institutional gatekeeper to ensure that remedies are exercised consistently with aviation law, safety and regulatory compliance are not compromised, and enforcement does not conflict with insolvency or public interest considerations.

• Rule 12: Operationalising Non-Judicial Remedies

Rule 12 of the 2026 Rules is the operational pivot for self-help enforcement in India.

It provides that for remedies involving taking possession or control of an aircraft object, the registry authority shall issue directions determining the manner of availing such remedies, such directions must be consistent with the Aircraft Objects Act and the Bharatiya Vayuyan Adhiniyam, 2024.

Non-judicial remedies in the Indian context include, physical repossession of the aircraft, control over the aircraft object (including grounding and custody), deregistration and export pursuant to IDERA (covered separately under Rules 13 and 14).

Importantly, these remedies are post-waiting period rights in insolvency scenarios. During CIRP, Section 14 moratorium applies only during the prescribed waiting period, after expiry, remedies revive automatically and cannot be restrained by insolvency law.

For financiers and lessors, non-judicial remedies now offer, speed without sacrificing legality, predictability in enforcement timelines, educed dependency on judicial discretion. For resolution professionals and debtors, it signals that aircraft objects cannot be treated as ordinary business assets, and insolvency cannot be used to indefinitely retain high-value mobile assets.

Deregistration and export of an aircraft constitute the final and the decisive enforcement remedy available to an aircraft financier or lessor. Unlike repossession, which secures control over the aircraft object, deregistration and export remove the aircraft from the Indian aviation and insolvency ecosystem altogether, restoring full economic and operational control to the creditor.

Under Article XIII of the Aircraft Protocol, a creditor holding a valid IDERA (Irrevocable Deregistration and Export Request Authorisation) is entitled to procure deregistration of the aircraft, and export and physically remove the aircraft from the territory of the Contracting State, upon the occurrence of default.

• Rule 13 operationalises Article XIII by mandating that the registry authority (acting through DGCA under the Bharatiya Vayuyan Adhiniyam, 2024). It provides that the registry authority shall, in accordance with the provisions of the Bharatiya Vayuyan Adhiniyam, 2024 or rules made thereunder, take action on an application made by the creditor for a remedy under Article XIII of the Protocol.

Key features of Rule 13 is that there is no requirement of court or tribunal approval, no discretion to refuse deregistration once conditions are met, alignment with non-judicial enforcement under Rule 12.

• Rule 14: Settlement of Dues Prior to Export: Rule 14 introduces a balancing mechanism between creditor rights and statutory interests.

It requires that dues listed in Appendix ‘A’ (arising after intimation of default under Rule 9), must be paid and settled by the IDERA Holder, before the aircraft is permitted to be exported from India. These dues typically include airport charges, navigation and parking fees, statutory aviation charges accruing post-default.

• Role of IDERA Holder: The Rules clearly distinguish between the creditor, and the IDERA Holder (authorised party or its certified designee). The IDERA Holder acts as the execution arm of deregistration and export, assumes responsibility for settling post-default dues, coordinates with the registry authority for physical export.

The compliance chain involves multiple authorities operating in a coordinated manner. The International Registry remains the exclusive forum for registration and priority of international interests. Domestically, the DGCA acts as the registry authority for receiving disclosures, maintaining aircraft-specific records, and facilitating deregistration and export, including through IDERA mechanisms. In insolvency scenarios, the NCLT and Resolution Professional interact with this framework, but their powers are expressly constrained by India’s adoption of Alternative A, which mandates return of the aircraft or cure of default within the prescribed waiting period.

• Timelines and Consequences of Non-Compliance

The timelines under Rules 6 and 7 are strict and continuing in nature. Failure to disclose the international interest within the prescribed period, or failure to maintain and submit records of dues, may not invalidate the international interest per se, but it can materially weaken the creditor’s domestic enforceability, invite regulatory action, and complicate insolvency enforcement. From a financier’s perspective, contractual documentation must therefore impose clear covenants on the debtor to ensure timely disclosures and filings, with audit and indemnity protections for non-compliance.

The 2026 Rules convert India’s Cape Town commitments from principle into practice. They make enforcement outcomes depend not on judicial discretion or ad-hoc insolvency responses, but on procedural discipline, regulatory coordination, and time-bound action. For financiers and lessors, protection now turns on compliance as much as contract; for debtors and insolvency professionals, delay is no longer a viable strategy. If applied consistently, the new framework can prevent repetition of past enforcement failures and ensure that aircraft objects retain their economic value even through insolvency, aligning India’s aviation finance regime with global expectations of certainty, speed, and creditor confidence.

ELP’s related write up: “Implementation of the Cape Town Convention in India: A Legal Framework for Protection and Enforcement of Security Interests in Aircraft” can be found here.

We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

Mukesh Chand, Senior Counsel – Email – mukeshchand@elp-in.com