Will aviation disputes be easier to resolve? | Explained

Protection of Interests in Aircraft Objects Bill, 2025 aligns India's aviation laws with global standards, boosting investor confidence.

The story so far:

Parliament last week passed the Protection of Interests in Aircraft Objects Bill, 2025. The proposed legislation establishes a legal framework to resolve disputes between airlines and lessors over high-value aviation assets, such as aircraft, helicopters, and engines. The legislation aims to align India’s aviation laws with international standards, in order to boost investor confidence amid rapid fleet expansion by IndiGo and Air India. Once enacted, the law will streamline processes, allowing lessors to repossess aircraft for unpaid dues, avoiding lengthy court proceedings like those seen with GoFirst’s 2023 shutdown. However, the industry remains worried over the lack of ease of doing business as well as complicated tax laws in the country.

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The Bill implements the Cape Town Convention and Protocol, which is an international treaty adopted by the United Nations aviation watchdog, the International Civil Aviation Organization (ICAO), in 2001 and signed by India in 2008 following a Cabinet approval. The Cape Town Convention and Protocol standardises transactions involving aviation assets such as aircraft and engines, and provides remedies for creditors in cases of financial default by airlines towards the lessors they rent aircraft from.

Speaking in the Rajya Sabha, the Minister for Civil Aviation Ram Mohan Naidu said that the Bill will “provide a significant boost to the leasing industry, which is the need of the hour.” This he said would be made possible by providing much needed legal clarity, while referring to past disputes such as those involving SpiceJet and the now defunct GoFirst, where the absence of a uniform legislation often led to challenges in interpreting the Cape Town Convention and Protocol by courts. It also led to difficulties for lessors in re-possessing their assets rented to airlines. The Minister also said that airlines have informed him that such a legislation could bring down leasing costs by 8-10%, which he claimed would offer a trickle-down advantage for passengers through lower airfares. The Minister said that the Bill has the potential to promote domestic leasing in the Gujarat International Finance Tec-City (GIFT) City in Ahmedabad.

The Bill designates the Directorate General of Civil Aviation (DGCA) as the Registry Authority for the purposes of the Convention. Such an authority is responsible for the registration and de-registration of aircraft. The Bill also empowers the DGCA to issue directions to implement the Convention. It lays down the obligations of debtors, such as airlines, which include submitting a record of dues to the DGCA. It also defines remedies available in case of a default in payment that includes the right to take back possession of the asset within a period of two calendar months or a mutually agreed upon period, whichever is earlier. The Bill will also have an overriding effect, which means that if there is any inconsistency between the Bill and any other law, the provisions of the Bill will prevail.

The Bill was introduced to address long-standing challenges in India’s aviation sector, particularly the legal uncertainties faced by international lessors and creditors.