What's Brewing

The Protection of interests in aircraft Objects Bill (‘Bill’) was tabled in the Rajya Sabha on 10th February 2025. 

The main objective is to give legal sanctity to two international agreements proposed in Cape Town in November 2001 and formally entered into by India in 2008. These two international agreements are:
(i) Convention on International Interests in Mobile Equipment [Convention]. 
(ii) Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment [Protocol].

The following are the salient features of the Bill:

1. Objectives of the Convention and Protocol are to establish a uniform international legal framework for securing and enforcing rights of creditors in high value mobile equipment like helicopters, aircraft, aircraft frames and engines, railway rolling stock and space assets.
2. The Convention and Protocol also aim to protect the interests of creditors against default by debtors in any and all of the following three types of transactions:
   (i) Lease  i.e. use for a specified period.
   (ii) Conditional Sale i.e. transfer of ownership upon completion of certain terms and conditions.
   (iii) Security Agreement i.e. asset given as collateral for borrowing.
3. The Convention and Protocol are to be treated as a single instrument. The Protocol shall take precedence over the Convention, in the event of any discrepancy between the two.
4. The provisions of this Bill shall be applicable to all sovereign nations as and when they become signatories to the Convention and Protocol.
5. There shall be a Supervisory Authority jointly designated by the signatory nations for the purpose of establishing an International Registry and for implementing the Convention and Protocol.
6. Every signatory nation shall designate an entity for the registration and de-registration of aircrafts within its territory who shall be appointed as Registrar by the Supervisory Authority for a specified period.
7. This Bill seeks to empower the Director General Civil Aviation (DGCA) to function as Registrar in India, for purposes of the Convention and the Protocol.
8. A Debtor is any person who has taken an aviation asset on lease, conditional sale or under a security agreement.
9. A Debtor is legally obligated to (a) assign his rights in writing, totally or partially, to the Creditor as per Convention and Protocol (b) furnish all records of the assignment to the Registrar, in this case the DGCA.
10. A Creditor too is legally obligated to inform the DGCA of the occurrence of the default by Debtor. Creditor is any person who has given an aviation asset on lease, conditional sale or under a security agreement and has been assigned specified rights by Debtor.
11. In the event of default by Debtor, the remedies available to Creditor shall include taking possession of the aviation asset within a specified period.
12. High Courts of India shall have jurisdiction over all claims or disputes under the Convention.
13. Provisions of this Bill shall override any other existing provisions in other laws, in the event of discrepancy between the two.
14. This Bill empowers the Central government of India to frame any rules for implementing the Convention and the Protocol.

Further, the Bill consists of three Schedules, each containing a broad set of details:

First Schedule – This Schedule pertains to the provisions of the Convention, including definitions, constitution of an international interest, default remedies, international registration system, relationship with other conventions, etc.

Second Schedule – This Schedule highlights the declarations lodged by the Republic of India under the Convention and the Protocol, declaring certain non-consensual rights or interests i.e. rights or interests of the member nations which take precedence over the international rights under the Convention.

Third Schedule – This Schedule deals with various provisions of the Protocol, including sphere of application, definitions, remedies of default and insolvency, supervisory and registry authority, etc. 

The purpose of this Bill is to protect the financial interests of creditors dealing in aircrafts/components and to put in place a set of protocols for recovery of the assets from defaulting debtors.

For full text of the Bill:

https://prsindia.org/files/bills_acts/bills_parliament/2025/Protection_of_Interests_in_Aircraft_Objects_Bill_2025.pdf