Consent of a Defaulting Aircraft Operator No Longer Required in India While Seeking De-registration with an IDERA

CONSENT OF OPERATOR OF AIRCRAFT NO LONGER REQUIRED WHILE SEEKING DE-REGISTRATION OF AN AIRCRAFT IN INDIA WITH AN IDERA

By

Nitin Sarin

29th October 2018

Since time immemorial the fate of a successful aircraft de-registration in India has ridden on the back of a standard A-4 size paper, with a bit of black ink, a rubber stamp ink impression and a signature of a Government official.

Whether the aircraft involved is a Boeing 747 or a Cessna 172; whether the debt owed by a defaulting aircraft operator is 100 $ or 10,00,000$ – the fate of the recovery of an aircraft has always rested upon this infamous piece of paper – the “Original Certificate of Registration”.

For some reason, the Directorate General of Civil Aviation (herein after referred to as the “DGCA”) has always felt the need to base its decision (on whether an aircraft is to be de-registered or not) around the availability of this insignificant piece of paper.

Some say that this is a protectionist move. What better way to protect your country’s own airline (albeit being bankrupt) from a “ruthless” and “hounding” aircraft lessor or bank than to require such “moral less” person, seeking de-registration, to produce a document which under law, must be on the aircraft at all times – thereby meaning it is always in the hands of the defaulting operator.

A brief search of the case law involving de-registration of aircraft in India shows that the vault of precedent mostly involve cases where the DGCA has refused to de-register an aircraft because the owner or lessor has been unable to produce the “Original Certificate of Registration”. It goes without saying that the DGCA merely needs a gentle rap on its knuckles by a Court to buckle and quickly de-register an aircraft.

The question however is, should the DGCA demand this insignificant piece of paper from a person who (i) does not have it due to the operation of law; (ii) cannot procure it from the operator due to an ongoing dispute; and on the lighter note, (iii) can be very easily recreated by an expert in Photoshop!

This requirement is archaic and utterly ancient.

Thankfully, due to the tireless efforts of the Aviation Working Group and others, the movement of having the Cape Town Convention and Aircraft Protocol properly implemented in letter and in spirit has become “trendy”. The Government seems to have finally woken up (albeit only partially) to the benefits of instilling confidence in the big boys (who own or finance all the aircraft) by making India a “secure” jurisdiction.

A small step forward has been made by the Government by amending Rule 30 (7) of the Aircraft Rules, 1937. For those not familiar with Rule 30 – the Rule itself is the magna carta of “registration and de-registration of aircraft” while sub-rule (7) is the infamous “anti-national” sub-rule which deals with de-registration on the basis of an IDERA.

Rule 30(7) saw its birth in a very “sketchy” avatar, full of spelling mistakes and confusion. Over time, with several amendments, it had reached a stage of adolescence. Now, with the latest amendment on the 27th of August 2018 one can say that it had entered its “teens”.

The 27th of August 2018 amendment of Rule 30(7) witnesses an inclusion of a short yet powerful phrase:

“…, without seeking consent or any document from the operator of the aircraft of any other person,…”

These 16 words, though not very complex, act as a gold nugget of knowledge from the powers that be. Perhaps one could term the amendment as an early Christmas present to all the (understandably so) stressed-out in-house aircraft lessor Irish lawyers.

The amended Rule 30 (7) reads as thus:

“(7) The registration of an aircraft registered in India, to which the provisions of the Cape Town Convention and Cape Town Protocol apply, shall be cancelled by the Central Government, within five working days, without seeking consent or any document from the operator of the aircraft or any other person, if an application is received from the IDERA Holder along with: —

(i) the original or notarised copy of the IDERA recorded with the Director-General; and

(ii) a priority search report from the International Registry regarding all Registered Interests in the aircraft ranking in priority along with a certificate from the IDERA Holder that all registered interests ranking in priority to that of the IDERA Holder in the priority search report have been discharged or that the holders of such interests have consented to the deregistration and export of the aircraft:

Provided that such cancellation of registration of the aircraft shall not affect the right of the Central Government or of any entity thereof, or any inter-governmental organisation in which India is a member, or other private provider of public services in India, to arrest or detain or attach or sell an aircraft object under its laws for payment of amounts owed to the Government of India, any such entity, organisation or provider directly relating to the services provided by such aircraft in respect of that object.

Explanation.─ For the purpose of this sub-rule, “International Registry” “means the Registry established under Article 16 of the Cape Town Convention”.”

A bare perusal of the “holy” phrase along with its fellow sentences, shows that the Government has now done away with the requirement of returning the “Original Certificate of Registration” while seeking de-registration under the IDERA route.

One can argue that “any document” may or may not include the infamous A-4 size paper, however only time and experience will tell. What is overly positive is that the “consent” of the operator is no longer required.

Moving on to the words, “any other person”, we are yet to witness whether this “person” includes Government run businesses – fuel providers, ground handlers, etc. In the recent past, it has been my experience that no objection certificates have always been sought from the Government owned businesses including the Airports Authority of India and others.

All in all, one can only conclude that this is a positive move, definitely moving towards the direction of the light at the end of the tunnel.

One must note a very important fact – should de-registration be sought under any other Rule, say Rule 30 (6), then the DGCA will still demand return of the “Original Certificate of Registration”. Note: If the Government is reading this, please note that this requirement should also be done away with.

The bonanza doesn’t end with Rule 30 (7). The other “CTC Rule” which was introduced a few years ago was Rule 32A. Rule 32A talks about “export of aircraft”. While this rule has witnessed less (amendment) activity in its short life, the Government has also taken the bold step of strengthening the Rules “muscles”.

Rule 32A now reads are thus:

“32A. Export of aircraft. —The Central Government shall, consequent upon cancellation of registration of an aircraft under sub-rule (7) of rule 30, if an application is made by the IDERA Holder for export of the same aircraft, take action to facilitate the export and physical transfer of the aircraft, along with spare engine, if any, subject to: —

(i) the payment of outstanding dues in respect of the aircraft; and

(ii) the compliance of the rules and regulations relating to safety of the aircraft operation.”

There are no specifics on how the Government will facilitate the export and physical transfer of the Aircraft. Several questions also come to mind: can the DGCA direct the customs authorities to allow an aircraft to leave India? Can the DGCA direct an operator to hand over possession of an aircraft to a lessor? What happens if there is more than one spare engine (32A talks about a spare engine in singular tense)? Does the lessor have to pay all the outstanding dues against that aircraft? Dues from even before default by the operator? Are such dues also payable to non-governmental organisations or only government owned and controlled agencies? What are the “rules and regulations” relating to safety of the aircraft operation? How does one find out about these dues apart from running from pillar to post from agency to agency?

As is evident from the above, while the intention behind introducing this amended Rule 32A is commendable, there are still multiple questions that remain unanswered, one can just hope that the Government keeps it in mind that most aircraft disputes cannot afford to go to Court to have these unanswered questions answered!

To conclude, it would be useful for the Government to continue its march towards making India a “secure” jurisdiction for aircraft lessors and banks and also do away with yester year requirements such as the return of a simple piece of paper of complete insignificance (in this digital day and age) – the “Original Certificate of Registration”.

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