Notification exempting aviation leases from moratorium may apply to Go First, DGCA to Delhi HC

Go First, Delhi HC

In what could be considered a blow to grounded airline Go First's revival plan, the Director General of Civil Aviation (DGCA) has filed an affidavit in Delhi High Court clarifying that the notification exempting aviation leases from moratorium under the Insolvency and Bankruptcy Code 2016, should apply to pending cases as well.

However, DGCA said that since Go First's case  pending in the Delhi High Court, it will await court's directions. Simply put, DGCA's response states that the notification exempting aviation leases from moratorium should ideally apply to Go First, however the authority will wait for directions from the HC as it is currently subjudice.

DGCA's response states "The notification was issued u/s 14(3) of the IBC 2016, and would have to be considered to have a retrospective effect being clarificatory in nature. However, since the matter is subjudice, DGCA shall await for the appropriate directions from this Hon'ble Court
before proceeding in the matter further."

This clarification would make it easier for the lessors of Go First to seek for  deregister their aircraft.

On October 19, the Delhi HC asked DGCA to file a response on whether or not notification exempting aviation leases from moratorium under the Insolvency and Bankruptcy Code, 2016, applies to Go First case.

The HC was hearing a case by aircraft and engine lessors of grounded airline Go First against DGCA for de-registration of their aircraft. The case is expected to be taken up for hearing on November 3.

MCA's notification

The Ministry of Corporate Affairs issued a notification on October 4 stating that the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), would not be applicable to transactions, arrangements or agreements, under the Convention and the Protocol, relating to aircraft, aircraft engines, airframes and helicopters.

Section 14 of the IBC deals with the power of adjudicating authority (NCLT) to issue a moratorium when admitting a company to the insolvency resolution process. Once a moratorium is imposed, activities such as institution of suits, continuation of pending suits, execution of judgments, transferring/disposing off assets and recovery or enforcement of security interest are prohibited.

As a result of this notification, a moratorium will not include agreements relating to aircraft, aircraft engines, airframes and helicopters. This would mean that aircraft, engine and helicopter leased and other agreements will not be bound by a moratorium.

The National Company Law Tribunal (NCLT) had admitted Go First to insolvency on May 10 after the airline filed for it voluntarily.