Is an IDERA and De-Registration Power of Attorney effective in India?

The most common question asked by Clients relates to enforcement documentation, we commonly tell them the following:

Irrevocable De-Registration and Export Request Authorizations (“IDERA”) and De-Registration Power of Attorneys (“DPoA”) are fully effective to authorise the attorneys named therein to act in accordance with the terms set out therein, and a duly appointed appointee of the attorney name therein may (to the extent permitted by its appointment) serve as agent for the attorney and perform any and all acts authorised therein as if originally authorised therein. The Deregistration Power of Attorney and IDERA if executed in the correct form, cannot be revoked by a Lessee and would not terminate or lapse in the event of steps being taken for the cessation of activities, protection from creditors, winding up or dissolution of a Lessee. It has been our experience that till date, the Directorate General of Civil Aviation (“DGCA”) has not deregistered any aircraft solely on the basis of the Deregistration Power of Attorney. Till April, 2016 the Authority required the Operator to consent to the deregistration of the aircraft as well as return the original Certificate of Registration granted in favour of the aircraft. In relation to the enforceability of anIDERA, in the previous few years there has been immense activity both Regulatory as well as by the Courts of India. In the year 2010, when a private business jet was sought to be deregistered (the said lease was governed by the Cape Town Convention and an IDERA was in place), on a communication issued by the Directorate of Revenue Intelligence (for alleged non payment of proper import duties), the DGCA refused to deregister the aircraft.

On a writ petition filed by a Mortgagee against the DGCA (seeking inter-alia the deregistration of the private business jet) the Single Judge of the Hon’ble High Court of New Delhi ruled that:

having regard to the aforesaid, the only conclusion that one can come to is that there is no power under the Customs Act by which it can prevail upon DGCA to desist from deregistering the aircraft. Accordingly, as prayed, a writ of mandamus is issued directing the DGCA to deregister the aircraft in issue, being Bombardier Challenger Aircraft 300, bearing manufacturer’s serial no. 20174, and registration no. VT-RAK[1]”.

On an appeal filed before the Division Bench of the same Court by the Revenue Authorities, the learned Division Bench noticed Rule 30(6) of the Aircraft Rules, 1937 holding that:

Rule 30(6) of the Aircraft Rules empowers DGCA to allow de-registration of an Aircraft in accordance with the relevant provisions. The said rule for public reasons confers an enabling power. The enabling power of this kind conferred would be coupled with a duty on DGCA to exercise its powers, when circumstances so demand. It is a duty which cannot be shirked or shelved. The communications of DGCA dated 27.12.2010 and 08.10.2011 clearly indicate that DGCA has simply refused to exercise its powers without giving any cogent or justifiable reasons. It has simply acted at the behest of the appellant completely ignoring all other facts. DGCA has a duty to exercise its powers in the circumstances of the case. The act of DGCA in not exercising the said powers is arbitrary and illegal.

Now, we come to the relief. In our view the impugned order erroneously issues a Writ of Mandamus directing DGCA to de-register the Aircraft. Normally a Court would not direct a statutory authority to exercise its discretion in a particular manner not expressly required by law. Reference in this context may be had to the judgment of the Hon’ble Supreme Court in the case of U.P. State Road Transport Corporation and another -vs- Mohd. Ismail and others, (1991) 3 SCC 239 where in paragraph 12 the Hon’ble Court held as follows:

The court cannot direct the statutory authority to exercise the discretion in a particular manner not expressly required by law. The court could only command the statutory authority by writ of mandamus to perform its duty by exercising the discretion according to law. Whether alternative job is to be offered or not is a matter left to the discretion of the competent authority of the Corporation and the Corporation has to exercise the discretion in individual cases. The court cannot command the Corporation to exercise discretion in a particular manner and in favour of a particular person. That would be beyond the jurisdiction of the court.

Further, in this context reference may also be had to the case of Union of India and another -vs- Bilash Chand Jain and another, (2009) 16 SCC 601, where the Hon’ble Supreme Court held that the High Court would itself not perform the functions of the statutory authority and that the Court can command the statutory authority to perform its duty by exercising its duty in accordance with law.

In view of the above, we modify the impugned Order of the learned Single Judge, as set out below. We issue a Writ of Mandamus directing respondent no. 3 DGCA to exercise its enabling power and take a decision on the request of respondent No. 1 for de-registration of the Aircraft, in accordance with law. Keeping in view the observations made above, the DGCA would take its decision and pass a reasoned order. Respondents no. 1 and 2 are permitted to make written submissions to DGCA within four weeks from today in support of their application for de- registration. Based on the said submissions and other material on record, DGCA-respondent No. 3 shall take a reasoned decision within four weeks thereafter on the request for de-registration filed by the respondents No. 1 and 2. We may also clarify that irrespective of whatever decision is taken by DGCA, the appellant-DRI is free to take appropriate steps if so advised, on the allegations of evasion of custom duty as elaborated before this Court, in accordance with law[2].”

Ultimately, the Hon’ble Supreme Court of India dismissed a final challenge by the Mortgagee to the judgment of the Division Bench[3].

More recently, in relation to M/s Spicejet, B & B Air Acquisition 34953 who had terminated certain lease agreements and thereafter requested the DGCA to deregister their aircraft; and on being asked to return the original certificate of registration and proof of deactivation of the Mode “S” code, filed a writ petition against the Authority seeking a direction for deregistration of the aircraft, the Hon’ble High Court of Delhi held:

“According to the petitioner, respondent No. 2 is obliged to cancel the registration of the Aircrafts pursuant to Regulation 30 (6) (iv) of the said Rules.

A bare perusal of the said rule indicates that it provides power to DGCA to cancel the registration of an aircraft in the circumstances, as spelt out in Rule 30(6) of the said rules.

Learned counsel appearing for DGCA points out that an application for their relief was made by the petitioner on 15.12.2014 and the same is under consideration.

The learned counsel appearing for the lessee of the Aircrafts (respondent no. 2) submits that several disputed questions are involved including the amount due to the lessor. He further contends that DGCA is required to provide him a hearing.

Be that as it may, it is apparent that the DGCA would have to take a view on the application made by the petitioner. Accordingly, the present petition is disposed of by directing that the DGCA take a view on the application filed by the petitioners as expeditiously as possible in accordance with law.[4]

 

Thereafter, B and B Air Acquisition 34953 Leasing Limited filed LPA 32 of 2015 before the learned Division Bench of the Delhi High Court against the judgment passed by the learned Single Judge.

In the mean while, on 29.01.2015 other Lessors filed similar writ petitions (i.e. WP (c) 871 and 747 of 2015) before the Hon’ble High Court seeking a similar relief as BBAM, i.e. seeking deregistration of their aircraft by the DGCA. Extensive arguments were heard and even the Aviation Working Group intervened as an intervener in the matter to illustrate the various CTC provisions under law. During the pendency of WP (c) 871 and 747 of 2015 before the High Court, the Government of India, on 9th February, 2015 incorporated Rule 30(7) of the Aircraft Rules, 1937 giving official recognition to the IDERA and introduction of the words “shall cancel registration” in relation to the action to be taken by the DGCA on the presentation of an IDERA. The text of Rule 30 (7) has already been reproduced above and for the sake of brevity is not being reproduced again.

While deciding WP (c) 871 and 747 of 2015, the Hon’ble Delhi High Court inter-alia held:

The Division Bench Judgment of this court in DRI Vs. Corporate Aircraft Funding Company LLC, has however, construed the power of the DGCA under Rule 30 of the Aircraft Rules, as an enabling power. Being a judgment of the Division Bench, concerning the issue at hand, it would have to be followed both as a matter of propriety and in law, having regard to the principle of judicial hierarchy

A bare reading of the aforesaid would show that with the insertion of sub-rule (7) in Rule 30, the doubt, if any, as to whether the DGCA had any discretion in the matter has got removed. Upon the creditor fulfilling the conditions prescribed in clause (i) and (ii), of sub-rule (7), of Rule 30, the DGCA is mandatorily required to cancel the registration.

This aspect of the matter, however, need not detain me any further as, Rule 30 stands amended with the insertion of sub-rule (7) in Rule 30 of the Aircraft Rules. The relevant amendments brought about in Rule 30, vide notification no. GSR 78(E) dated 09.02.2015, issued by Ministry of Civil Aviation read as follows :-

                                                                        *****

A bare reading of the aforesaid would show that with the insertion of sub-rule (7) in Rule 30, the doubt, if any, as to whether the DGCA had any discretion in the matter has got removed. Upon the creditor fulfilling the conditions prescribed in clause (i) and (ii), of sub-rule (7), of Rule 30, the DGCA is mandatorily required to cancel the registration.

Therefore, keeping in mind the aforesaid, in my view, a mandamus shall issue to the DGCA to act in a particular manner, as the conditions prescribed for acting in that manner, as required by law, stand fulfilled.

Any other direction would only frustrate the object and purpose with which the amendment has been brought about in Rule 30. I am, thus, persuaded to direct the DGCA to de-register the aircraft objects, which are subject matter of the captioned writ petition[5].”

Thereafter, the matter has been settled by the Petitioners with M/s Spicejet wherein the Petitioners have agreed to withdrawn their requests for deregistration as well as withdraw their winding up petitions filed against the Airline. As such, in our opinion, the judgment of the learned Single Judge passed in WP (c) 871 and 747 of 2015 dated 19.03.2015 has attained finality with no person challenging the same before the Division Bench of the Hon’ble Delhi High Court[6]. Therefore, in light of Rule 30 (7) of the Aircraft Rules, 1937 as interpreted by the Hon’ble High Court of Delhi we can opine that there is a mandatory duty cast on the DGCA to cancel the registration of an aircraft if an IDERA (original or notarised) is received along with a certificate that all registered interests ranking in priority have been discharged or that the holders of such interest have consented to such deregistration and export

[1] Judgment dated 14.03.2013 passed by Rajiv Shakdher,J. in W.P. (c) 792 of 2012 Corporate Aircraft Funding Company LLC Vs. Union of India & Others.

[2] Judgment dated 10.05.2013 passed by D. Murugesan, C.J. and Jayant Nath J. in LPA 226 of 2013 Directorate Revenue Intelligence Vs. Corporate Aircraft Funding Company LLC and Others.

[3] Judgment dated 02.09.2013 passed by Kurian Joseph JJ. In SLP (Civil) 26346 of 2013 Corporate Aircraft Funding LLC Vs. Directorate of Revenue Intelligence and Others.

[4] Judgment dated 22.12.2014 passed by Vibhu Bakhru J. in W.P. (c) 9172 of 2014 B and B Air Acquisition 34953 Leasing Limited Vs. Directorate General of Civil Aviation and Another.

[5] Judgment dated 19.03.2015 passed by R. Shakdher J. in WP (c) 871 and 747 of 2015 AWAS 39423 Ireland Ltd & Ors Vs. DGCA and Wilmington Trust SP Services (Dublin) Vs. DGCA.

[6] We are unlikely to see a challenged to the judgment dated 19.03.2015 as Spice Jet and the Lessors have settled their dispute by entering in to a Settlement Agreement.

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