22 June 2026
India has taken a significant step towards strengthening its aviation finance framework with the notification of the Protection of Interests in Aircraft Objects Rules, 2026 (“Rules”). Issued under the Protection of Interests in Aircraft Objects Act, 2025, the Rules operationalize India’s obligations under the Cape Town Convention and Aircraft Protocol and seek to address longstanding concerns of aircraft lessors, financiers, and creditors regarding enforcement and insolvency-related risks in India.
The development is particularly important given India’s emergence as one of the world’s largest aviation markets and its increasing reliance on leased aircraft. Historically, foreign lessors and financiers have expressed concerns regarding the enforceability of their rights in India, particularly during airline insolvencies. The insolvency proceedings involving Go First highlighted these concerns, where aircraft repossession became subject to prolonged litigation and regulatory uncertainty.
A key feature of the Rules is the creation of a structured framework for recognition and enforcement of international interests registered under the Cape Town Convention. The Rules establish a formal mechanism through which creditors can notify defaults, seek deregistration, and exercise remedies through prescribed forms and time-bound procedures administered by the Directorate General of Civil Aviation (DGCA). This replaces the earlier ad hoc approach that often led to delays and uncertainty.
Perhaps the most significant legal development is the treatment of aircraft assets during insolvency proceedings. The Rules provide that the insolvency moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) ceases to apply to aircraft creditors after a prescribed waiting period of two calendar months. Thereafter, creditors may exercise remedies such as repossession, deregistration, and export of aircraft notwithstanding the continuation of corporate insolvency proceedings. The Rules expressly provide an overriding effect over inconsistent provisions of other laws, including the IBC.
This marks a substantial departure from the position that existed prior to the enactment of the Act and Rules, where lessors frequently faced uncertainty regarding the interplay between the Cape Town Convention and India’s insolvency regime. By introducing a predictable enforcement timeline, the Rules seek to align India more closely with international aviation finance standards and the “Alternative A” insolvency framework contemplated under the Cape Town Convention.
The Rules also establish an electronic information system to facilitate the recording and monitoring of interests relating to aircraft registered in India. While priority of interests continues to be determined through the International Registry established under the Cape Town Convention framework, the domestic information system is intended to improve transparency and coordination between stakeholders and regulators.
From a transactional perspective, the Rules are expected to enhance confidence among aircraft lessors, lenders, export credit agencies, and other aviation financiers. Greater certainty regarding enforcement and insolvency outcomes may reduce risk premiums associated with financing Indian airlines and could potentially improve access to aircraft leasing and financing on more favourable terms.
The notification of the Protection of Interests in Aircraft Objects Rules, 2026 represents one of the most consequential aviation law reforms in recent years. By providing a clear statutory framework for enforcement of creditor rights and addressing insolvency-related concerns, India has taken a significant step towards establishing itself as a more creditor-friendly jurisdiction in the global aviation finance ecosystem.
