[Answered] Critically examine if the Protection of Interests in Aircraft Objects Bill, 2025, effectively streamlines the repossession of aircraft by lessors in India, considering the Bill’s key provisions and the inherent challenges within the Indian aviation ecosystem. (400 words)

Introduction

The Protection of Interests in Aircraft Objects Bill, 2025 seeks to operationalize India’s obligations under the Cape Town Convention (CTC) and its Aircraft Protocol, with the aim of enhancing investor confidence and reducing leasing costs in the aviation sector. It proposes a framework to simplify aircraft repossession by lessors in events of airline default or insolvency. However, its effectiveness must be evaluated against existing institutional and legal constraints.

Key Provisions of the Bill

1. Direct enforceability of CTC rights such as repossession, deregistration, and export of aircraft objects without court intervention.
2. Override clause providing primacy over conflicting national laws (except IBC, which is not explicitly excluded).
3. Establishment of a Designated Authority to process deregistration requests within prescribed timelines.
4. Facilitation of electronic international registry access in line with CTC norms.
5. Penal provisions for non-compliance by airline operators.

Positive Implications

1. Reduces leasing costs: Alignment with CTC obligations improves India’s standing on the AWG Compliance Index, lowering risk premiums.
2. Investor confidence: Provides certainty to foreign lessors post Jet Airways and Go First controversies, where repossession was stalled due to IBC proceedings.
3. Faster deregistration: Reduces bureaucratic hurdles via a single-window deregistration mechanism through DGCA.

Inherent Challenges

1. IBC Override Missing: The Bill does not explicitly override the Insolvency and Bankruptcy Code, which has previously blocked lessor claims (e.g., Go First case).
2. Judicial delays: Enforcement still dependent on Indian courts for final repossession in disputed cases.
3. Taxation & SPV Ambiguities: India lacks clarity on Special Purpose Vehicles (SPVs) and permanent establishment (PE) status, deterring lessor investment.
4. Regulatory overlap: Lack of synergy between DGCA, RBI, CBDT, and Ministry of Civil Aviation affects seamless implementation.
5. Domestic leasing bottlenecks: GIFT City’s leasing ecosystem remains underutilized due to unclear incentives and compliance burdens.

Way Forward

1. Introduce a non-obstante clause overriding the IBC in aircraft repossession cases.
2. Create a sectoral arbitration mechanism under DGCA to handle aviation-specific disputes.
3. Simplify taxation norms and issue CBDT circulars aligning with global leasing practices.
4. Institutionalize Cape Town Compliance Cell for regular monitoring and AWG index improvement.

Conclusion

While the Protection of Interests in Aircraft Objects Bill, 2025 marks a critical step towards modernizing India’s aviation finance ecosystem, its potential is constrained by gaps in legislative harmonization, regulatory fragmentation, and implementation inertia. A holistic, cross-sectoral approach is essential for India to emerge as a global hub for aircraft leasing and financing by 2047.