Legislative Brief On The Protection of Interests in Aircraft Objects Bill, 2025
The Protection of Interests in Aircraft Objects, 2025 (“the Bill”) seeks to ratify the Cape Town Convention and its Protocol on Matters Specific to Aircraft Equipment, establishing a clear legal frame
Key Takeaways
The Protection and Enforcement of Interests in Aircraft Objects Bill, 2025 aims to accelerate India's civil aviation growth by lowering airline operating costs and airfares through reduced leasing expenses, which will reflect in cheaper air travel for end consumers.
The Bill enhances India's compliance with the Cape Town Convention (CTC), improving its Aviation Working Group (AWG) outlook score and enabling 8-10% lower leasing costs and potentially saving airlines ₹10,000 crore in high risk premiums.
The Act is expected to make India a more attractive market for aircraft financing, supporting the GIFT City initiative to become an aviation leasing hub, reducing dependence on Ireland and Dubai-based lessors. By ensuring a smoother repossession process for global lessors in case of airline defaults, the Bill restores lessors confidence in India's aviation sector, especially after legal uncertainties like the Go First crisis.
The Bill ensures that a creditor only exercises remedies under the CTC after officially notifying the DGCA of a default in the prescribed manner. Further the Bill enforces Article XI of the Protocol, which ensures creditors regain possession of aircraft within two months of an insolvency event from the date of default, provided the international interest is duly registered.
Brief About The Bill
The Protection of Interests in Aircraft Objects, 2025 (“the Bill”) seeks to ratify the Cape Town Convention and its Protocol on Matters Specific to Aircraft Equipment, establishing a clear legal framework for aircraft financing, leasing, and repossession. By designating the Directorate General of Civil Aviation (DGCA) as the Registry Authority, the Bill ensures effective implementation of international standards, enhancing creditor confidence in aircraft transactions. By providing statutory recognition to remedies under the Cape Town Convention, such as repossession of aircraft within 40 days In case of default, the bill mandates a transparent and efficient system for asset recovery, which is set to reduce leasing costs, attract foreign investment, and solidify India’s status as a global aviation hub. By lowering leasing expenses, airlines can pass on savings to consumers, making air travel more affordable.
Although India acceded to the Cape Town Convention in 2008, the lack of dedicated legislation led to delays in repossession and deregistration due to conflicting domestic laws. The Bill addresses these gaps by giving overriding effect to its provisions over other laws, including the Insolvency and Bankruptcy Code (IBC), ensuring swift enforcement of creditor rights. This is particularly crucial in light of recent airline insolvency cases like Go First and Jet Airways, where delays impacted lessor confidence. By creating a predictable and transparent legal framework, the Bill strengthens India’s aviation sector, enhances market reliability, and facilitates greater access to financing, solidifying the country’s position as a global aviation hub. By reducing risks for lessors and financiers, the Bill is expected to lower airline costs, ultimately benefiting consumers through more competitive ticket pricing.
Background And Context
India’s civil aviation sector has experienced unparalleled growth, positioning itself as one of world’s fastest-expanding markets. Recognizing that robust regulatory frameworks are crucial for maintaining this momentum, the Bill represents a significant milestone in this effort.
The flagship UDAN (Ude Desh ka Aam Nagrik) scheme has democratized air travel, enabling middle and lower-class citizens to access affordable flights. The government has also invested ₹6,000 crore in the aviation sector and implemented a ₹120 crore Production Linked Incentive (PLI) scheme for drones, promoting indigenous manufacturing.
To address concerns about market concentration and potential monopolies in airport operations, the Government has adopted a strategy of bundling profitable airports with loss-making ones for privatization. This approach aims to balance revenue streams while improving infrastructure at struggling airports, with plans to privatize 11 airports by the end of FY 2025-26.
The NDA Government has tackled regulatory challenges by introducing new Flight Duty Time Limitations (FDTL) to mitigate pilot fatigue and enhance air safety. While implementation has been deferred to address industry concerns, these regulations demonstrate the Government’s commitment to balancing safety with operational efficiency.
India’s civil aviation sector has experienced unparalleled growth, positioning itself as one of world’s fastest-expanding markets. Recognizing that robust regulatory frameworks are crucial for maintaining this momentum, the Bill represents a significant milestone in this effort.
The flagship UDAN (Ude Desh ka Aam Nagrik) scheme has democratized air travel, enabling middle and lower-class citizens to access affordable flights. The government has also invested ₹6,000 crore in the aviation sector and implemented a ₹120 crore Production Linked Incentive (PLI) scheme for drones, promoting indigenous manufacturing.
To address concerns about market concentration and potential monopolies in airport operations, the Government has adopted a strategy of bundling profitable airports with loss-making ones for privatization. This approach aims to balance revenue streams while improving infrastructure at struggling airports, with plans to privatize 11 airports by the end of FY 2025-26.
The NDA Government has tackled regulatory challenges by introducing new Flight Duty Time Limitations (FDTL) to mitigate pilot fatigue and enhance air safety. While implementation has been deferred to address industry concerns, these regulations demonstrate the Government’s commitment to balancing safety with operational efficiency.
The Bill aims to resolve long-standing issues in aircraft financing and leasing by aligning India’s domestic laws with the Cape Town Convention and its Protocol, which India acceded to in 2008 but had not formally enacted into law. The Bill addresses long-standing issues in aircraft leasing and financing, particularly highlighted by recent insolvency cases like Go First and Jet Airways, where lessors faced prolonged legal battles in repossessing aircraft. By reducing the moratorium period for asset recovery from 60 to 40 days and designating the Directorate General of Civil Aviation (DGCA) as the regulatory authority, the Government seeks to enhance investor confidence and align India’s legal framework with global aviation norms. This Bill is expected to enhance investor confidence, reduce leasing costs, and facilitate easier access to financing for Indian airlines. The Bill complements the BJP Government’s vision maintaining that privatization and market-driven pricing are essential for sector growth, while establishing mechanisms like the Tariff Monitoring Unit to oversee pricing practices.
By creating a more secure and predictable environment for aircraft leasing and financing, the Bill aims to attract foreign investment and reduce leasing costs for airlines. By addressing these challenges through comprehensive reforms and strategic investments, the Government is laying the foundation for India to emerge as a global aviation powerhouse, fostering sustainable growth and enhancing connectivity across the nation.
By creating a more secure and predictable environment for aircraft leasing and financing, the Bill aims to attract foreign investment and reduce leasing costs for airlines. By addressing these challenges through comprehensive reforms and strategic investments, the Government is laying the foundation for India to emerge as a global aviation powerhouse, fostering sustainable growth and enhancing connectivity across the nation.
Key Legal Provisions
Creation Of A Registry Authority: The Bill empowers the DGCA to issue necessary directions for implementation of the Cape Town Convention and its Protocol.
Ensuring Transparency, Strengthening Accountability In Aviation Records: Under the Bill, a “debtor” (chargor/lessee) is required to maintain and submit to the DGCA records of dues arising from, related to or owed in regard to the ownership or use by the owner or operator of the aircraft, in the form and manner prescribed.
Safeguarding Creditor Rights With Transparent Oversight: Under the Bill, a “creditor” (charge/lessor) will not be entitled to exercise any remedy under the Cape Town Convention or Protocol unless such creditor declares the occurrence of default by notifying the DGCA in the form and manner prescribed.
Strengthening Creditor Protections For Timely Aircraft Repossession: As per the Bill, the provisions of Article XI (Remedies on insolvency) of the Protocol will apply provided inter alia the international interest of the agreement has been registered in accordance with the Cape Town Convention and the Protocol. Thus, upon the occurrence of an insolvency-related event, the administrator/debtor is required to give possession of the aircraft to the creditor at the end of the waiting period (two calendar months) or the date on which the creditor would be entitled to possession of the aircraft if Article XI of the Protocol did not apply, whichever is earlier.
Streamlining De-registration And Export Processes For Aviation Efficiency: As per the Bill, subject to the provisions of the Bharatiya Vayuyan Adhiniyam, 2024 (or rules thereunder), the provisions of Article XIII (De-registration and export request authorisation) of the Protocol apply to the de-registration and export request.
Overriding Domestic laws: In the case of any inconsistency between a provision(s) of the Bill and any other Domestic law, the provisions of the Bill will prevail to the extent of the inconsistency.
Safeguarding Government Rights In Aviation Enforcement: The Bill explicitly establishes that the provisions of the Bill, the Cape Town Convention or the Protocol will not affect the rights of the Central Government (or other Government entity, provider of public services in India or inter-government organisation of which India is a member) to arrest or detain an aircraft for payment of any amount due to the Government of India (or affiliated entities).
Frequently Asked Questions (FAQs)
What is the rationale behind the Protection of Interests in Aircraft Objects Bill, 2025?
The Bill is a proposed legislation aimed at aligning India’s aviation financing and leasing laws with international best practices, particularly those set out in the Cape Town Convention and its Protocol. It establishes a clear legal framework to protect creditor rights, ensuring efficient repossession of aircraft and related assets during airline defaults, while providing certainty for lessors and financiers in transactions involving planes, engines, and helicopters.
Its importance stems from India’s ambition to lead global aviation amid rapid sector expansion. Current laws leave international investors wary due to unpredictable delays in asset recovery, hampering India’s ability to secure competitive financing for its airlines. The Bill provides a solution for this by aligning with international standards, reducing legal risks, and fostering a stable environment for aviation growth. This strengthens India’s appeal as an investment destination, supports the financial health of airlines, and aligns with the vision of making air travel more accessible, which is crucial as connectivity expands to smaller cities.
What is the existing legal framework governing the aircraft sector?
The Ministry of Civil Aviation (“MoCA”) is the nodal Ministry responsible for the formulation of policy and regulation of civil aviation in India. The MoCA oversees the planning and implementation of schemes for the growth and expansion of civil air transport, airport facilities, air traffic services and the carriage of passengers and goods by air. The following are the principal regulatory authorities functioning under the authority of the MoCA:
The Directorate General of Civil Aviation (“DGCA”) enforces civil aviation regulations and regulates air transport services, air safety and airworthiness standards.
The Airports Authority of India (“AAI”) creates, upgrades, maintains and manages civil aviation infrastructure both on the ground and in the airspace of India.
The Airport Economic Regulatory Authority (“AERA”) determines the tariff for aeronautical services and Passenger Service Fees to monitor performance standards relating to quality, continuity and reliability of service.
The Bureau of Civil Aviation Security ensures that the aviation security standards follow national and international obligations/treaties on air safety, to which India is a signatory.
Some of the principal regulations are as follows:
The Aircraft Act, 1934 (“Aircraft Act”) and the Aircraft Rules, 1937 (“Aircraft Rules”): (i) regulate the manufacture, possession, use, operation, sale, and the import and export of aircraft; and (ii) stipulate the parameters for determining airworthiness, maintenance of aircraft, general conditions for flying and safety, registration of aircraft and the conduct of investigations.
The Airports Authority of India Act, 1994 (“AAI Act”) establishes the AAI and makes the AAI responsible for the development, finance, operation and maintenance of all Government airports in India.
The Civil Aviation Requirements (“CAR”): the CARs are issued by the DGCA under Rule 133A of the Aircraft Rules and provide the standards expected to be met before a licence, certificate, approval or permission is granted/accorded. The DGCA also issues Aeronautical Information Circulars (“AIC”) which contains explanatory or advisory information concerning flight safety, air navigation, technical, administrative or legislative matters.
The Carriage by Air Act, 1972: governs the rights and liabilities of air carriers and is applicable to both domestic and international carriage by air, irrespective of the nationality of the aircraft performing the carriage.
Airports Economic Regulatory Authority of India Act, 2008 (“AERA Act”) provides for the establishment of AERA along with regulating the tariff and other charges for services rendered at airports and also establishes an appellate tribunal for the adjudication of related disputes.
Aircraft (Security) Rules 2011 deals with the air safety and security regulations for aerodromes and aircraft.
India follows the ICAO guidelines on Safety and Standards and Recommended Practices (“SARPs”). The DGCA regulates the safety requirements to be observed by aircraft, including foreign aircraft operating in India. The Aircraft Rules in Part II (General Conditions of Flying), Part III (General Safety Conditions) and Part VI (Airworthiness) stipulate the conditions of safety that an aircraft is required to be compliant with in order to be operated in Indian airspace.
The Bharatiya Vayuyan Vidheyak, 2024 (“2024 Bill”) seeks to replace the Aircraft Act with a modernized and comprehensive regulatory framework for civil aviation in India. The 2024 Bill aims to address the evolving needs of the aviation industry by introducing provisions that regulate the manufacture, possession, use, operation, sale, and import/export of aircraft and other related matters. It also focuses on airworthiness standards, licensing of personnel, maintenance protocols, and safety measures to ensure compliance with international norms. Furthermore, the Bill strengthens oversight mechanisms by empowering regulatory authorities such as the Directorate General of Civil Aviation (DGCA), Bureau of Civil Aviation Security (BCAS), and Aircraft Accident Investigation Bureau (AAIB) to issue directions and adjudicate penalties. By streamlining regulations and incorporating global best practices, the Bharatiya Vayuyan Vidheyak, 2024 seeks to promote efficiency, accountability, and safety in India’s rapidly growing aviation sector.
What is the current state of India’s civil aviation sector?
Size Of The Domestic Civil Aviation Industry
As of 2025, India’s civil aviation sector ranks third globally in domestic passenger traffic, with carriers operating approximately 941 aircraft across scheduled and regional fleets. This marks a jump from 680 operational aircraft in 2023. This growth is driven by demand with domestic passengers reaching 161.3 million in 2024, marking a 6.12% year-on-year growth. February 2025 alone saw 140.44 lakh (14.04 million) domestic passengers.
Notably, during the UPA-II regime (2009-2014), air passenger traffic grew by 9.2% per year, while under the NDA Government, the sector posted an average growth rate of around 16% from 2014 to 2020. This accelerated growth is evident in the increase of domestic passengers from 60 million in 2013-14 to 143 million in 2019-20.
Additionally, new entrants like Akasa Air and fleet upgrades by IndiGo and Air India fuel this growth, with projections targeting over 1,200 aircraft by 2030, despite supply chain challenges grounding some aircrafts. The sector’s expansion essentially underscores India’s rise as a global aviation hub, enhancing economic activity and access to Tier-2 and Tier-3 cities. In order to monitor airfares, the Ministry of Civil Aviation has established a Tariff Monitoring Unit (TMU) that tracks fares on 60 routes at multiple intervals before flight departure.
Status Of Ongoing and Planned Airport Expansion Activities
Once constrained by infrastructural and financial challenges, the sector has reached new heights with the number of operational airports doubling from 74 in 2014 to 148 by April 2023. The following graph denotes the increase in the number of airports in the past ten years:
Image 1: Comparison of Airport Expansion during the UPA (2014) and the NDA (2023) eras
Notably, the Airports Authority of India (AAI) is advancing privatization, which shall lead to increased operating efficiency by allowing private operators to manage airports effectively by offering different incentives. Privatization also brings improved infrastructure and facilities, as seen in major airports like Delhi and Mumbai, which have benefited from private sector involvement. Recently, under the National Monetisation Pipeline (NMP), 25 airports, including Bhubaneswar and Trichy were targeted for leasing from 2022-2025, with seven operational under private management by early 2025. This will in turn boost efficiency. Ongoing projects include capacity upgrades at non-metro airports and the Noida International Airport, set to open in April 2025, enhancing regional access. A $11 billion infrastructure pipeline through 2030 supports new terminals and runways, driving connectivity and economic growth. Privatization revenues, partly from user fees like the UDF, fund these expansions, aligning with India’s goal to modernize its aviation network.
How has the budgetary allocation for the Ministry of Civil Aviation and DGCA changed between the UPA and NDA governments, and what does this increased allocation signify?
The budgetary allocation for the Ministry of Civil Aviation and the Directorate General of Civil Aviation (DGCA) reflects a significant shift in priority between the UPA Government and the NDA Government, underscoring differing approaches to the development of India’s aviation sector. During the UPA Government, the budgetary expenditure for the DGCA in FY 2013-14 stood at ₹80.71 crore. In contrast, under the NDA Government, this figure rose sharply to ₹330 crore in FY 2025-26, marking an absolute increase of ₹249.29 crore, an over fourfold jump (i.e., an increase of 311.61%) (Refer to the table attached below for the budgetary allocation break-up). This increased allocation signifies the NDA Government’s focus on enhancing the aviation sector’s safety, efficiency, and global competitiveness.
What are the long term benefits of the Bill?
Currently, airline defaults face delays under India’s existing laws, with no fixed timeline for redressal, leading to prolonged disputes, financial losses, and frustration for international investors as evident in cases like Jet Airways, where lessors waited years to recover assets. The Bill resolves this by aligning India with the Cape Town Convention, establishing a clear framework for aircraft financing and repossession. Its long-term benefits for India’s aviation sector, passengers, and economy include:
Enhanced Investor Confidence and Reduced Financing Costs: By guaranteeing creditors swift repossession within 40 days, the Bill enhances trust among global lessors and financiers. This is expected to cut leasing costs for Indian airlines by $1.2-1.3 billion annually, reducing airfares and making travel more affordable for millions of citizens.
Aviation Sector Growth and Stability: Clear asset recovery rules strengthen the financial health of the aviation industry, minimizing risks during defaults and supporting sustained expansion, which is critical as India’s airport count has risen from 74 in 2014 to 157 by 2025.
Increased Foreign Direct Investment: The Bill attracts Foreign Direct Investment by establishing a clear and predictable legal framework aligned with the Cape Town Convention, reducing risks for lessors and financiers. This streamlines asset repossession, lowers transaction costs, and signals India’s commitment to international standards, fostering confidence in the Indian legal system and making the aviation sector more appealing to global investors.
Which authority has been given regulatory power under the bill?
The Directorate General of Civil Aviation (DGCA) has been designated as the primary regulatory authority under Clause 2(1)(m) of the Bill. Furthermore, Clause 4 empowers the DGCA to issue necessary directions for implementation of the provisions of the Cape Town Convention and Protocol, in such manner as may be prescribed.
Specific Regulatory Powers of the DGCA: The Bill grants the DGCA specific regulatory powers to implement the Cape Town Convention and Protocol and is authorized to issue directives for implementing the Cape Town Convention’s provisions, serve as the central registry for recording interests in aircraft objects (including mortgages and leases), receive creditor notifications before remedies are exercised in default cases, oversee deregistration and export of aircraft assets upon valid requests, maintain records of aircraft-related financial interests and transactions, and ensure compliance with international aviation financing standards. These powers are designed to align India’s aviation sector with global norms and enhance the country’s aircraft financing and leasing framework.
Limitations on the DGCA’s Powers: The enforcement powers of the DGCA are dependent on judicial processes, as High Courts retain jurisdiction over claims under the Cape Town Convention. The Central Government maintains overriding authority to detain aircraft for unpaid public service dues, even if creditors seek repossession. Compliance monitoring by the Aviation Working Group (“AWG”) ensures adherence to international standards, introducing external accountability. The DGCA’s role is primarily confined to procedural oversight, lacking direct authority to resolve financial disputes or override insolvency proceedings.
Does the Bill override India’s insolvency laws?
Yes, the Bill overrides specific provisions of the Insolvency and Bankruptcy Code (IBC), 2016, particularly in cases involving defaults on aircraft objects. Under the Cape Town Convention, which the Bill implements, creditors (lessors and lenders) are granted the right to repossess aircraft within a 40-day timeframe in the event of default, bypassing the IBC’s moratorium provisions (e.g., Section 14) that typically halt asset recovery during insolvency proceedings. This reform addresses challenges highlighted by cases like Jet Airways and Go First, where lessors faced significant losses due to prolonged moratoriums and judicial delays under the IBC, delaying capital recovery in a capital-intensive industry. By prioritizing swift repossession over the IBC’s lengthier resolution process, the Bill resolves these inefficiencies while preserving the IBC’s broader framework for non-aviation assets. This change is expected to enhance global lessor confidence, leading to more favorable leasing terms for Indian airlines and supporting the growth of the aviation sector.
Will the Bill affect domestic investors, airlines, or employees?
No, the Bill applies equally to all stakeholders in the aviation sector and is not designed to favor any particular group. Instead, it establishes a transparent, and investor-friendly regulatory framework that benefits both domestic and international players. The Bill seeks to implement the protections outlined under the Cape Town Convention CTC, ensuring that its provisions apply uniformly to domestic airlines, financial institutions, and leasing companies operating in India and not just foreign investors or lessors.
By streamlining aircraft leasing processes and providing legal clarity on repossession rights, the Bill reduces financial uncertainty for all industry participants. Notably, one of its key advantages is the potential to lower leasing costs for Indian airlines, which can translate into improved operational efficiency and lower fares for passengers. Additionally, the enhanced investment climate resulting from the Bill will encourage fleet expansion and infrastructure development, ultimately driving the long-term growth of the aviation industry. Beyond aircraft financing and related matters, the Bill’s impact extends to job creation across multiple sectors, including airport operations, maintenance, logistics, and supply chain management. As the aviation sector strengthens, it fosters increased demand for skilled professionals, contributing to economic growth and employment generation.
What initiatives has the Modi Government implemented to make air travel cheaper and more accessible for Indians across Tier-II and Tier-III cities?
Over the past nine years, India’s aviation industry has witnessed an extraordinary transformation, propelled by the policy reforms of the Modi Government. Once constrained by infrastructural and financial challenges, the sector has reached new heights, now standing as the third-largest domestic aviation market in the world.
One of the major expenses of an airline is fuel expenses and to address the same, National Civil Aviation Policy (NCAP) 2016, introduced by the Ministry of Civil Aviation (MoCA). Under this policy, excise duty on Aviation Turbine Fuel (ATF) for Regional Connectivity Scheme (RCS) flights is capped at 2% for three years, while VAT on ATF at RCS airports is reduced to 1% or less for ten years. The following image represents the State-Wise VAT rates before and after the implementation of the NCAP, 2016:
Image 2: Comparison to VAT imposed on ATF, before and after NCAP16
After the cost, connectivity was another issue as air travel was limited to Tier-1 cities in the country. To tackle this, the Regional Connectivity Scheme (UDAN) has played a crucial role in improving air travel accessibility, particularly in Tier-2 and Tier-3 cities. By 2024, over 600 routes and 71 airports had been operationalized under the scheme, making air travel more affordable and accessible to millions.This has already fueled growth, with Indian airlines placing substantial aircraft orders totaling 1,359 new aircrafts in 2023 and 2024. IndiGo alone ordered 500 aircraft in 2023 and an additional 40 in 2024, while Air India placed landmark orders for 470 aircraft in February 2023 and added another 100 Airbus aircraft later that year. These developments have positioned India as the world’s third-largest aviation market, with domestic airline capacity doubling since 2014.