India’s Protection of Interests in Aircraft Objects Rules, 2026 - A New Dawn for Aviation Finance

India’s commercial aviation is one of the fastest-growing aviation markets globally, and yet, until very recently, it remained one of the most legally uncertain destinations for aircraft lessors and financiers. The Protection of Interests in Aircraft Objects Rules, 2026 (“the Rules”), as notified by the Ministry of Civil Aviation, represent the culmination of a multi-decade effort to translate India’s international treaty commitments into a coherent, enforceable domestic framework.

The Rules are subordinate legislation made under the Protection of Interests in Aircraft Objects Act, 2025 (“PIAO Act”), which received assent on 16 April 2025 and came into force on May 1, 2025. The PIAO Act gives the force of law in India to the Convention on International Interests in Mobile Equipment, 2001 (“Cape Town Convention”) and its Protocol on Matters Specific to Aircraft Equipment, 2001 (“Aircraft Protocol”), which India acceded to in 2008.

The significance of this development cannot be overstated. According to the International Air Transport Association, approximately 58% of all commercial aircraft worldwide and approximately 80% of all commercial aircraft in India are operated under lease arrangements. The Rules now provide a transparent, technology-driven, and internationally aligned framework that governs the rights of creditors, the obligations of debtors, and the enforcement mechanisms available upon default or insolvency thereby completing a broader legislative architecture comprising the PIAO Act and the Bharatiya Vayuyan Adhiniyam, 2024.

The Rules operationalise the PIAO Act through a series of structured procedural mechanisms. Their key features may be summarised as follows:

2.1. The DGCA as Domestic Registry

The Directorate General of Civil Aviation (“DGCA”) is designated as the ‘registry authority’ under Section 4 of the PIAO Act, empowered to issue directions for the implementation of the Convention and Protocol. The Rules mandate that the DGCA establish and maintain an information system which is an electronic platform, structured on a per-aircraft basis.

2.2. Registration Obligations

Every aircraft subject to an international interest and registered or operated in India must be registered with the DGCA via Form-I. A debtor operating such an aircraft must inform the DGCA of the international interest within 30 days of its registration in India, providing details of the creditor, debtor, and mortgagee (if any). For aircraft already registered or operated in India on the commencement date of the Rules, debtors were permitted a transitional window until July 30, 2026 to comply. 

2.3. Quarterly Reporting of Dues (Appendix A)

Under Rule 7(3) and Section 5 of the PIAO Act, debtors are required to electronically maintain and submit records of outstanding dues, to the DGCA by the fifth day of the calendar month following the end of each quarter.

2.4. Creditor Remedies and Default Notification (Form III)

A creditor cannot exercise any remedy under the Convention or Protocol without first declaring default by notifying the DGCA via Form-III in the information system, as mandated by Section 5(2) of the PIAO Act. The DGCA must acknowledge the creditor’s application on the same working day and, before the end of the following working day, publish the fact of default on its website and notify stakeholders including airport operators, air navigation service providers, GST authorities, and fuel providers. These entities may submit outstanding dues within three working days.

2.5. Settlement of Dues by the IDERA Holder

In a provision of considerable practical significance, the Rules stipulate that any Appendix A dues arising after the creditor notifies the DGCA of a default must be settled by the holder of an Irrevocable De-registration and Export Request Authorisation (“IDERA Holder”) before the aircraft can be exported from India. This provision ensures that India’s public service providers are not prejudiced by a creditor’s enforcement action.

2.6. The Insolvency Waiting Period

In relation to debtors subject to corporate insolvency or bankruptcy proceedings under the Insolvency and Bankruptcy Code, 2016 (“IBC”), the Rules codify a ‘waiting period’ mechanism. The moratorium under Section 14 of the IBC commences on the insolvency commencement date and expires at the end of 2 (two) calendar months. Upon expiry of the waiting period, creditors become entitled to exercise their Convention remedies notwithstanding any continuing insolvency proceedings. During the waiting period, the resolution professional is required to preserve the aircraft and provide the creditor with access to the aircraft and all technical and maintenance records.

2.7. Non-Judicial Remedies

Pursuant to the India’s declaration under Article 54(2) of the Convention, all creditor remedies available without court action may be exercised extra-judicially. The Rules mandate the DGCA to issue directions specifying the manner in which creditors may take possession or control of aircraft objects without court involvement. 

2.8. Non-Consensual Interests and Registrability

India’s declarations under Articles 39(1)(a) and 40 of the Convention, as reproduced in the Second Schedule of the PIAO Act, specify the categories of non-consensual rights and interests that have priority over registered international interests and those that are registrable in the International Registry. These include employee wage liens, tax liens, and court attachment orders, arising both before and after a declared default, respectively.

3.1. The Pre-IBC Phase

India acceded to the Cape Town Convention and the Aircraft Protocol on March 31, 2008. Prior to the enactment of the IBC, the enforcement regime was governed by the Aircraft Rules, 1937, which, in conjunction with the Convention, mandated that upon an IDERA Holder’s submission of a valid request to the DGCA, a leased aircraft must be de-registered and exported back to the lessor within five days. This mechanism provided substantial comfort to foreign lessors and was seen as a meaningful implementation of the Convention’s enforcement provisions. The Aircraft Rules, 1937 defined both ‘Cape Town Convention’ and ‘Cape Town Protocol’ with reference to India’s accession on 31 March 2008 and provided for the recording of IDERAs accordingly.

3.2. The Post-IBC Phase: The Jet Airways Crisis

The introduction of the Insolvency and Bankruptcy Code, 2016 created a structural conflict with the Convention’s enforcement framework. When Jet Airways (India) Limited ceased operations and the NCLT admitted the insolvency petition filed by the State Bank of India on June 22, 2019, a moratorium under Section 14 of the IBC was immediately declared. Section 14(1)(d) of the IBC explicitly prohibits the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

The same provision was invoked with equal force when Go Airlines (India) Limited  operating under the brand GoFirst filed a voluntary application under Section 10 of the IBC on May 2, 2023, and the NCLT, New Delhi (Special Bench) admitted the petition and declared a moratorium on May 10, 2023. The moratorium immediately restrained multiple international aircraft lessors including BOC Aviation (Ireland) Limited, Jackson Square Aviation Ireland Limited, SMBC Aero Engine Lease B.V., and Engine Lease Finance B.V. from recovering their aircraft and engines, notwithstanding that several of them had already issued notices of termination of lease and invoked the IDERA mechanism under the Cape Town Convention. The DGCA itself informed lessors that IDERA-based de-registration applications cannot be processed on account of the Admission Order, rendering the Convention's five-working-day de-registration mechanism wholly inoperative in the face of the moratorium. 

The NCLAT, in its landmark judgment on the Jet Airways proceedings, extensively examined the scope and rationale of the Section 14 moratorium, noting the Insolvency Law Committee’s position that the moratorium is intended to keep the corporate debtor’s assets together during the insolvency resolution process and facilitate orderly completion of the processes envisaged during the insolvency resolution process. The Supreme Court had itself affirmed in P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258, that the moratorium under Section 14 is designed to prevent depletion of the corporate debtor’s assets so that it may be kept as a going concern, and to provide it with a ‘breathing space’ for rehabilitation. The NCLT in the Go First proceedings applied these principles to reject the lessors' applications for interim relief, holding that aircraft in the physical possession of the corporate debtor fell squarely within Section 14(1)(d) and that permitting recovery would amount to corporate death of the Corporate Debtor, leaving no scope for resolution.

The consequence for foreign aircraft lessors was severe. The moratorium prevailed over the Convention’s five-day IDERA enforcement right, effectively grounded aircraft for extended periods. The Jet Airways resolution process took over two years to conclude, and the Go First CIRP in which lessors defaulted upon to the tune of approximately INR 2,660 crores similarly demonstrated that aircraft, once caught within the moratorium net, could not be retrieved through Convention mechanisms alone.  Taken together, the two  episodes represented a stark demonstration that the absence of a tailored insolvency carve-out under the Convention was the single most significant impediment to India’s credibility as an aircraft leasing destination.

3.3. The 2023 MCA Notification and the PIAO Act, 2025

In an initial legislative response, the Ministry of Corporate Affairs issued a notification dated October 3, 2023 exempting aircraft and aircraft objects registered under the Cape Town Convention from the moratorium under Section 14 of the IBC. However, this measure had the unintended consequence of making airline insolvency resolution under the IBC practically impossible, as the airline’s most valuable assets being its aircraft fleet, could be repossessed by lessors within five days of a default declaration, thereby stripping the resolution estate of its value.

The Government responded with a more calibrated solution: the formal enactment of the PIAO Act, 2025, which gave statutory force to the Convention and Protocol and adopted Alternative A of Article XI of the Aircraft Protocol, thereby providing for a structured two-calendar-month waiting period in insolvency proceedings. The 2026 Rules then operationalized this statutory framework in granular procedural detail.

The judicial landscape preceding the 2026 Rules was shaped primarily by the tension between two competing principles: the sanctity of international treaty obligations and the protective purpose of the IBC moratorium.

The Supreme Court in P. Mohanraj & Ors. articulated the moratorium’s function as a shield to protect the corporate debtor from pecuniary attacks during the CIRP, observing that any crack in this shield is bound to have adverse consequences.

In the Jet Airways proceedings before the NCLAT, the tribunal addressed the scope of Section 14(1)(c), which prohibits any action to foreclose, recover, or enforce any security interest, observing that ‘law does not permit Secured Creditors to enforce their security, since, if permitted, the Secured Creditors will be more than inclined to enforce their securities and realize their debt during the currency of the CIRP, which shall defeat the entire object of the insolvency resolution’. This reasoning, while sound in the domestic corporate lending context, was directly in conflict with the Convention’s regime, under which a creditor’s international interest is registered in a supra-national registry (the International Registry in Ireland) and enjoys priority protections that transcend domestic insolvency law.

India’s declarations under the Convention and Protocol now resolve this tension legislatively. The declaration under Form No. 23 (Article XXX(3)) adopts Alternative A of Article XI in its entirety for all types of insolvency proceedings, with a waiting period of two calendar months. The declaration under Form No. 13 (Article 54(2)) confirms that all creditor remedies may be exercised without court action. The statutory overriding effect of the PIAO Act under Section 9, combined with Section 6, ensures that in any conflict between the Act and the IBC or any other law, the Act and the Convention shall prevail to the extent of such inconsistency. 

The overriding provision under Section 9(3) of the PIAO Act does, however, preserve the government’s pre-existing right to arrest or detain an aircraft for dues directly related to public services rendered in respect of that aircraft, a position now reinforced by the Appendix A dues settlement obligation under the Rules.

The Convention on International Interests in Mobile Equipment, 2001, and its Aircraft Protocol represent the most successful international private law instrument in the aviation financing space. The Convention establishes a uniform international legal framework for securing and enforcing rights in high-value mobile equipment, specifically airframes, aircraft engines, and helicopters by facilitating asset-based financing, reducing creditor risk, and ensuring legal predictability in cases of default or insolvency. 

Ireland has through legislation explicitly dispensed with any requirement for court authorization before a creditor exercises extra judicial remedy. Similarly, United States laws confirm that all extra-judicial remedies available under the Convention may be exercised without leave of court. Singapore has followed the same route and Singapore's insolvency framework, amended significantly by the Insolvency, Restructuring and Dissolution Act 2018 (in force from 2020), integrates the Convention's enforcement framework within a modern restructuring regime modelled significantly on Chapter 11 of the US Bankruptcy Code. Singapore's Judicial Management regime provides for an automatic moratorium but, consistent with the Convention's approach, aircraft lessors and creditors holding registered international interests retain enforceable rights that can be activated upon expiry of applicable waiting periods. Singapore's position as a growing aviation finance hub particularly for engine leasing and MRO-related financing is directly supported by the clarity of its Convention implementation. Australia's experience is instructive because, unlike Ireland, the United States, and Singapore, it has not adopted Alternative A of Article XI, which has been noted as a relative weakness in its Convention implementation from the perspective of international aircraft lessors. India’s adoption of a two-month waiting period aligns it with the de-facto standard in common law jurisdictions such as the United States, representing a balanced position. India’s interim remedies framework, under which the resolution professional must preserve the aircraft and provide the creditor with access and technical records, closely mirrors the US Chapter 11 ‘adequate protection’ concept. India’s declaration under Article 54(2) permitting extra-judicial enforcement aligns it with the most creditor-friendly jurisdictions globally.

6.1. Certainty of Enforcement

For lenders, lessors, and aircraft financiers, the single most important development is the resolution of the long-standing ambiguity surrounding the interaction between the IBC moratorium and Convention enforcement rights. The Rules now provide unambiguous procedural clarity: upon a declared default, the creditor files Form-III in the information system, the DGCA acknowledges on the same day, notifies stakeholders by the next working day, and after the expiry of the two-month waiting period, de-registration and export must proceed within five working days of the creditor’s request to the administrative authorities, in accordance with Article XI(8)(a) of the Protocol. 

6.2. The IDERA as a Creditor’s Primary Enforcement Tool

The recognition and statutory entrenchment of the IDERA mechanism under Section 7 of the PIAO Act and Article XIII of the Protocol is the cornerstone of the new enforcement framework. The IDERA, once recorded with the DGCA as the registry authority, cannot be revoked by the debtor without the creditors’ written consent. This provides lessors and lenders with a self-executing enforcement instrument that, combined with the overriding effect of the PIAO Act, is no longer susceptible to being neutralised by an IBC moratorium beyond the two-month waiting period.

6.3. GIFT City and India’s Aviation Finance Ambitions

The enactment of the Rules carries direct economic significance for India’s ambition to challenge Europe’s dominance as the global hub for aircraft financing. India is seeking to attract aircraft financing entities to GIFT City through significant incentives, including twenty-year tax holidays. The Rules now provide the legal infrastructure necessary to make GIFT City a credible international aviation financing hub, by aligning India’s enforcement framework with that of leading jurisdictions.

6.4. Information Transparency and Priority Management

The information system maintained by the DGCA enhances transparency for all stakeholders. Creditors, airport operators, air navigation service providers, GST authorities, and fuel providers now have structured electronic access to information about aircraft subject to international interests and their associated dues. Critically, the information system does not affect the priority of interests as recorded in the International Registry which means that lenders’ existing priority arrangements under the Convention are preserved and the domestic system is complementary, not competitive. 

6.5. Risk Mitigation in Transactions

From a transaction structuring perspective, the Rules enable more sophisticated risk allocation. The express recognition of choice of law under Article VIII of the Protocol (adopted by India per Form No. 19) allows parties to select the governing law for their contractual rights and obligations. The legal certainty provided by the overriding effect of the PIAO Act, combined with the High Court’s jurisdiction under Section 8 as the ‘relevant court’ for Article 53 purposes (and all High Courts in their respective territorial jurisdictions per Form No. 11), means that secured parties can identify the forum for any dispute resolution with greater predictability.

7.1. The Two-Month Waiting Period: A Calibrated Compromise or a Residual Risk?

The two-month waiting period, while internationally aligned with the US model, must be measured against the practical realities of Indian insolvency administration. The Jet Airways proceedings demonstrated that the corporate insolvency resolution process, even under statutory timelines, can extend to several hundred days. The sufficiency of two months depends entirely on the resolution professional’s ability to cure all defaults and agree to perform future obligations within that period. In an airline insolvency involving significant fleet and complex creditor structures, this may prove optimistic. The provision permitting retention of possession upon cure of all defaults and agreement to perform future obligations is a welcome balance, but the absence of a second waiting period upon subsequent default could create practical difficulties.

7.2. Appendix A Dues: A Potential Bottleneck

The requirement that IDERA Holders settle all Appendix A Dues arising post-default before aircraft can be exported could, in practice, create delays or disputes, particularly where dues are contested or where airport authorities are slow to furnish the relevant information within the stipulated three-working-day window. Whilst the policy rationale of protecting public service providers is sound, the potential for disputes over quantum to delay enforcement is a residual risk that lenders will need to factor into their legal due diligence.

7.3. Absence of Judicial Guidance

There has been no airline insolvency in India since the enactment of the PIAO Act and the promulgation of the Rules. As a result, the exact operation of the two-month waiting period, particularly its interaction with NCLT orders, resolution professional obligations, and the Article XI requirement that the insolvency administrator ‘preserve the aircraft object and maintain it and its value’ awaits judicial interpretation. The absence of established Indian jurisprudence on Convention enforcement under the new regime is a gap that may deter some conservative lenders in the near term.

The Rules represent the most significant legislative development in Indian aviation finance in a generation. In completing the domestic implementation architecture for the Cape Town Convention and Aircraft Protocol, the Rules deliver on a commitment that has been in gestation since India’s accession to the Convention in 2008. The Rules resolve the critical tension between the IBC moratorium and Convention enforcement rights, introduce a transparent electronic framework for recording and managing interests in aircraft objects, and align India’s insolvency remedies regime with the world’s most creditor-friendly jurisdictions. 

The combination of the PIAO Act and the Rules together with the PIAO Act’s overriding force under Section 9 now equips India with a framework that is, on paper, equal to the Convention implementation standards of any leading common law jurisdiction. Whether it matches those standards in operational practice will depend on the institutional performance of the DGCA, the disciplined adherence by all stakeholders to the prescribed timelines, and the evolution of judicial interpretation as the first cases under the new regime emerge.

India’s commercial aviation market with its approximately 80% leased fleet, its ambitious GIFT City aviation financing ambitions, and its position as one of the world’s fastest-growing aviation markets now has the legal infrastructure to match its commercial aspirations. For the international aviation finance community, the runway is clear. The 2026 Rules represent a credible, progressive, and overdue invitation to engage with India on terms that are finally commensurate with global standards.