LI Network
Published on: November 03, 2023 at 02:37 IST
The recent amendment to the insolvency law, which excludes aircraft objects from the scope of a moratorium, will be retroactively effective, as clarified by the Directorate General of Civil Aviation (DGCA).
This amendment under the Insolvency and Bankruptcy Code (IBC) was introduced in response to legal disputes initiated by various aircraft lessors seeking to repossess planes that had been leased to the grounded airline Go First, which ceased operations since early May and is currently undergoing an insolvency resolution process under the IBC.
In an affidavit submitted to the Delhi High Court, the DGCA affirmed that the notification should be applicable to pending cases.
The DGCA stated that the executive’s notification is procedural and an essential adjunct to a section of the legislation, specifically section 14(1) of the IBC. Therefore, it should take effect from the date when the section becomes enforceable.
The DGCA’s submission came in the context of a case related to Go First. However, the DGCA emphasized that they would await the appropriate direction of the court regarding the matter, given that Go First’s case is currently before the court.
The amendment, made through a notification issued by the corporate affairs ministry on October 3, exempted aircraft objects registered in the international registry from the applicability of the moratorium under the IBC. This notification clarified that the provisions of section 14(1) of the IBC do not apply to transactions, arrangements, or agreements related to aircraft, aircraft engines, airframes, and helicopters under the Convention and the Protocol.
Section 14 of the IBC pertains to the authority of the National Company Law Tribunal (NCLT) to impose a moratorium when a company is admitted into the insolvency resolution process. The retrospective application of the amendment ensures that it covers cases that were already in progress when the change was introduced.