Introduction
The Protection of Interest in Aircraft Objects Bill, 2025, introduced by Civil Aviation Minister Shri Ram Mohan Naidu, has been passed by both Houses of Parliament. The bill aligns India’s aviation leasing and financing framework with international standards under the Cape Town Convention of 2001, which India had ratified in 2008 but struggled to fully implement.
By addressing gaps in legal enforcement, the legislation aims to reduce aircraft leasing costs, which have historically been 8–10% higher than global averages, and strengthen investor confidence in India’s booming aviation market.
India and Cape Town Convention
The Cape Town Convention on International Interests in Mobile Equipment, 2001, along with its Aircraft Protocol, was created to provide a uniform, internationally recognized legal framework for securing and enforcing rights in high-value mobile assets like aircraft, engines, and helicopters.
The primary goal was to protect creditors and lessors by simplifying repossession and asset recovery procedures, particularly in cases of debtor default or insolvency.
India ratified the Convention and its Protocol in 2008, signaling its commitment to providing international financiers and lessors a predictable, stable legal environment for aircraft leasing and financing. However, for the next 15+ years, India failed to fully integrate its obligations under the Convention into domestic law.
Importance of the Act
In India, the rights of international creditors to repossess aircraft or enforce leasing agreements in insolvency cases remained uncertain. Indian courts, dealing with insolvency matters under the Insolvency and Bankruptcy Code (IBC) or other procedural statutes, did not consistently enforce Cape Town Convention provisions due to the absence of enabling domestic legislation.
During the parliamentary discussion, Shri Naidu emphasized the bill’s role in modernizing India’s aviation infrastructure. He highlighted India’s rapid aviation growth, with:
- Annual passenger traffic rising from 10.38 crore in 2014 to 22.81 crore in 2024
- Airports increasing from 74 to 159
- Total aircraft fleet expanding from 340 to over 840 in the same period
The bill is expected to simplify aircraft leasing procedures, improve India’s Cape Town Convention compliance, and attract more aviation investments.
The discussion also addressed broader sector challenges, notably the high cost of Aviation Turbine Fuel (ATF), which forms nearly 45% of an airline’s operational expenses, and the need for tax rationalization across states.
Additionally, the ministry outlined ambitious goals for sustainability, aiming to:
- Transition over 100 airports to 100% renewable energy
- Scale up Flight Training Organizations (FTOs) to meet the growing demand for 30,000–34,000 commercial pilots over the next 10–15 years
In his closing remarks, Shri Naidu reiterated the government’s vision to position India as a global aviation hub, focusing not only on infrastructure but also on economic connectivity, employment generation, and sustainable development.
Key Features of the Bill
The Protection of Interests in Aircraft Objects Bill, 2025, directly addresses this enforcement vacuum by:
- Formally adopting the Cape Town Convention’s operational framework into Indian law
- Providing clear procedural rules for insolvency remedies, deregistration, and export of aircraft
- Granting overriding effect over conflicting Indian laws (with narrow exceptions for public dues)
It finally makes India a credible, investor-friendly jurisdiction for aircraft leasing and financing, which it had promised to become in 2008 but never legally followed through on until now.
The Act fills a critical void in India’s aviation finance laws, standardizing repossession and deregistration processes, offering legal predictability to international financiers, and facilitating faster dispute resolution.
It will likely improve India’s standing in the global aircraft leasing market, attract foreign investment, and reduce the cost of aircraft financing for Indian carriers. At the same time, by retaining control over government dues and public service claims, the act ensures that the financial interests of the Indian state and its employees are not compromised.
Provisions of the Act
Application of Convention and Protocol (Section 3)
The act gives the Cape Town Convention and Aircraft Protocol the force of law in India, subject to specific declarations lodged by the government. This formal incorporation ensures international creditors can rely on uniform, internationally recognized rules when dealing with aircraft objects in India.
Role of Registry Authority (Section 4)
The Directorate General of Civil Aviation (DGCA) is designated as the registry authority, empowered to issue directions for implementing provisions of the Convention and Protocol. The Directorate General is responsible for the registration and deregistration of aircraft.
Obligation of Debtors and Creditors (Section 5)
The act places specific obligations on debtors to maintain and submit financial records of dues relating to aircraft objects. Creditors, on the other hand, cannot enforce remedies without notifying the registry authority of a declared default.
Remedies on Insolvency (Section 6)
The Act incorporates Article XI of the Aircraft Protocol, subject to India’s declarations, providing secured creditors internationally enforceable rights over aircraft objects in cases of insolvency. However, these remedies are contingent upon certain conditions:
- The debtor must be a body corporate or firm incorporated or registered in India or a person domiciled or whose principal place of business is in India
- The international interest should be registered under the Convention
- Parties should not have expressly excluded the application of these provisions by agreement
De-Registration and Export Requests (Section 7)
The Act enforces Article XIII of the Protocol, facilitating expedited deregistration and export of aircraft by creditors upon debtor default. This process is subject to rules under the Bharatiya Vayuyan Adhiniyam, 2024. It prevents operational hold-ups often experienced in asset recovery from defaulting airlines.
Jurisdiction (Section 8)
Jurisdiction for all legal actions under the Convention and Protocol lies with the High Court having territorial jurisdiction. This provision eliminates jurisdictional conflicts and ensures judicial efficiency in disputes concerning aircraft interests.
Overriding Effect (Section 9)
The Act explicitly provides for an overriding effect, where its provisions prevail over conflicting domestic laws. However, it safeguards sovereign and public service interests by preserving the government’s right to detain or arrest aircraft objects for unpaid dues, taxes, or statutory claims, protecting India’s fiscal and regulatory priorities.
Rule-Making Powers (Section 10)
Section 10 of the Protection of Interest in Aircraft Objects Bill, 2025, empowers the Central Government to frame rules through official notifications, as deemed necessary for effectively implementing the provisions of the Act as well as the obligations under the Cape Town Convention and its Protocol.
Specifically, these rules may address procedural matters such as:
- The manner of issuing directions under Section 4.
- The forms and procedures to be followed under sub-sections (1) and (2) of Section 5.
Ordinarily, any rules proposed under this provision must be published in advance for public feedback. However, in matters of public interest, the government retains the discretion to waive this requirement through a written order.
Additionally, every rule made under this act must be presented before both Houses of Parliament for a total of 30 days, which can be spread across one or multiple sessions. During this period, Parliament holds the authority to:
- Modify the rule, or
- Annul it entirely.
If such modifications or annulments are agreed upon by both houses within the specified timeframe, the rule will either operate in its amended form or cease to have effect accordingly. Importantly, any such changes will not impact the validity of actions already undertaken under the rule before its modification or annulment.
Central Government’s Power to Manage Declarations (Section 11)
The central government can make, amend, or withdraw any declarations or any subsequent declaration in accordance to the convention or protocol. The central government can give effect to such a declaration by notification in the Official Gazette and amend the second schedule to this act.
Removal of Difficulties (Section 12)
The act allows the central government to issue orders, not inconsistent with the act, to address difficulties in its implementation for up to three years from its commencement date. No such order shall be made after the expiry of a period of three years from the date of the commencement of the Act. Every such order shall be laid before the parliament as soon as it is made.
India’s Key Declarations under the Convention and Protocol
- Article 39(1)(a) Declaration: Prioritizes liens for unpaid wages of airline employees, government taxes, and repairer liens over international interests.
- Article 39(1)(b) Declaration: Asserts the government’s right to detain aircraft for unpaid statutory dues.
- Article 40 Declaration: Allows registration of non-consensual rights such as tax liens and court-ordered attachments as international interests.
- Article 53 Declaration: Confers jurisdiction to High Courts.
- Article 54(2) Declaration: Allows remedies under the Convention to be exercised without leave of court.
These declarations reflect a balanced approach: aligning with international practices while protecting essential sovereign, fiscal, and employee rights.
Conclusion
The Protection of Interests in Aircraft Objects Bill, 2025, constitutes a significant legislative advancement in India’s aviation regulatory framework. By giving statutory effect to the obligations under the Cape Town Convention and its Protocol, the Act effectively addresses a longstanding problem that has historically undermined investor confidence and escalated leasing costs within the Indian aviation sector.
This enactment holds particular relevance in the context of India’s ambitious civil aviation expansion strategy, which envisions substantial growth in passenger volumes, airport infrastructure, and fleet size. The operationalization of Cape Town-compliant protections is expected to enhance the country’s attractiveness as an international aircraft leasing and financing destination, thereby aligning India’s aviation legal regime with internationally recognized best practices. It is imperative that complementary reforms be undertaken in parallel to sustain the momentum generated by this legislative development.
If efficiently implemented, the bill has the potential to transform India’s standing in global aviation financing markets and contribute meaningfully to the nation’s broader economic and connectivity objectives.
