2024 (5) TMI 207 - HC - Insolvency and Bankruptcy

Failure to deregister Aircraft(s) in contravention of Sub-Rule (7) of Rule 30 of the Aircraft Rules, 1937 - requirement of consent of the lessee prior to deregistration and export of an Aircraft - mandate of Rule 30(7) of the Aircraft Rules - termination arising out of or as a consequence of Insolvency or not - applicability of provisions of the IBC or not - disturbance to possession during moratorium - applicability of principles of Dura lex sed lex - HELD THAT - IDERA is an acronym for an Irrevocable De-Registration and Export Request Authorisation. It operates under Article XIII of the Cape Town Protocol and provides that the Petitioner/Lessor is the sole person entitled to procure the deregistration of the Aircraft by the Respondent/DGCA and to procure and physically export the Aircraft from India. The table in Paragraph 3.2 above, contains the date on which each IDERA has been furnished by Respondent/Go Air to the Petitioners/Lessors. Undisputedly, the Petitioners/Lessors in the present case are the IDERA Holders in respect of all 54 Aircraft which form the subject matter of the present Petitions. The purport of Rule 30 (7) of the Aircraft Rules has been dealt with by a Coordinate Bench of this Court in the Awas case 2015 (3) TMI 1427 - DELHI HIGH COURT . After analysis of the provisions of the Aircraft Rules, the Court in the Awas case, held that the Respondent/DGCA has to proceed in accordance with Rule 30 (7) of the Aircraft Rules which is a mandatory requirement and the Court cannot interfere even on grounds of equity; keeping in mind, the protection of private business transaction law in India, international conventions such as Cape Town Convention must be followed. It was held that the disputes qua validity of the termination of the lease are not relevant for the purposes of deregistration and the contention that public interest will be impinged if the deregistration is granted is not a valid ground for refusal - An argument made in the Awas case that the entitlement of the Petitioners/Lessors to terminate the Lease Agreements would require determination by a competent Court of law, was also repelled by the Court as being misconceived in view of the provisions of the Cape Town Convention and Cape Town Protocol. While Rule 30(6) of the Aircraft Rules uses the term may , Rule 30(7) of the Aircraft Rules uses the term shall be cancelled . This signifies that the legislative intent that by use of the word shall , the intention was to make Rule 30(7) of the Aircraft Rules, mandatory. This Court concurs with the judgment of a Coordinate Bench of this Court in the Awas case. The Respondent/DGCA is thus, mandatorily required to cancel the registration subject to the fulfilment of the documents and conditions as set forth in Rule 30(7) of the Aircraft Rules. Jurisdiction of High Court under Article 226 of the Constitution vis- -vis NCLT/NCLAT a creature of Statute No power of Judicial Review - HELD THAT - The NCLT and the NCLAT are statutory bodies constituted under the provisions of Sections 408 and 410 respectively of the Companies Act, 2013 and have the powers to adjudicate upon matters which relate to the IBC. The NCLT is created under the IBC and its jurisdiction therefore is limited to the extent as provided under the IBC. The NCLT cannot assume control over other government authorities in the realm of public law. The scope of Section 63 and Section 231 of the IBC is restricted to matters which the NCLT or the NCLAT have jurisdiction. In fact, recognising this limitation, the NCLAT has in a judgment, titled as Canara Bank v. Deccan Chronicle Holdings Limited 2017 (10) TMI 856 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI , while modifying an order passed by the NCLT, held that the power of the Supreme Court and the High Court under Article 32 and 226 of the Constitution, respectively, cannot be curtailed by any provision of an Act or Court and further held that the moratorium would not affect the High Court under Article 226 of the Constitution - The NCLT does not have the authority to assume the jurisdiction exclusively conferred on the High Courts and the Supreme Court and which cannot be curtailed by any statute. No Nexus between Deregistration and Insolvency - HELD THAT - On an analysis of the GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. 2021 (3) TMI 340 - SUPREME COURT case, it is clear that the primary reason for termination of the agreement between the parties in that case was the initiation of insolvency proceedings. Paragraph 71 of the Gujarat Urja case, has held that in the absence of the insolvency of the corporate debtor, there was no ground to terminate the Power Purchase Agreement between the parties - The Supreme Court in the Gujarat Urja case further clarified that where a decision of a private party has been taken solely on account of the initiation of the insolvency, such a decision, not being one taken, in the public law domain, such as in the Embassy case, is distinguishable. The proceedings before this Court, indisputably are the Applications for deregistration and export (in some cases) of the Aircraft. Various prayers have also been made for the protection of the Aircraft. These do not solely arise from the insolvency of the Respondent/Go Air. Breach of Binding Lease Agreements Non-payment of Lease Rentals - HELD THAT - The fact that there was default of payment by Respondent/Go Air has not been disputed by Respondent/RP of Go Air. In fact, Respondent/RP of Go Air has laid the blame for non-payment of lease rentals in time on an American Company called Pratt and Whitney and on account of their supplying defective engines for the Aircraft. This averment was, however, not supported by any document. In any event, this cannot absolve the Respondent/Go Air of its obligations under the Lease Agreements entered into by them for each of the 54 Aircraft - Thus, clearly Respondent/Go Air had failed to fulfil its obligations under the Lease Agreements which resulted in the issue of default notices to them and subsequently to the termination of the Lease Agreements. The termination has neither arisen out of nor relating to the insolvency but on account of breaches to the Lease Agreements which occurred much prior in time to the Insolvency Commencement Date - concededly, as per Respondent/RP of Go Air as well, the insolvency has arisen out of defaults in payment and the inability of Respondent/Go Air to continue its commercial operations in view of these defaults. Applicability of the TATA Consultancy case - HELD THAT - While holding that it is settled law that the IBC is a complete code, it was held in TATA CONSULTANCY SERVICES LIMITED VERSUS VISHAL GHISULAL JAIN, RESOLUTION PROFESSIONAL, SK WHEELS PRIVATE LIMITED 2021 (11) TMI 798 - SUPREME COURT that the NCLT in its residuary jurisdiction has the power to stay the termination of the Agreement albeit, only if it satisfies the criteria laid down in the Gujarat Urja case - The Supreme Court in the TATA Consultancy case has also observed that while examining prayers for interim relief, the NCLT and NCLAT must keep in mind the exception crafted by the Court in the Gujarat Urja case. The order of NCLT does not indicate that the NCLT had applied its mind to the centrality of the facilities agreement and the corporate debtor survival as a going concern. Concededly, the termination has not been challenged by Respondent/Go Air or by Respondent/RP of Go Air in any judicial forum. As discussed above, the termination of the Lease Agreements between the Petitioners/Lessors and Respondent/Go Air was on account of breaches of the Lease Agreements which included non-payment of the lease rentals over extended period of time - The ratio of the Tata Consultancy case thus, squarely applies in the facts of the present case. The termination thus, does not arise out of the insolvency and is certainly not a consequence of the insolvency. The provisions of Section 60(5) of the IBC cannot be deemed to be applicable in the present case. Cape Town Convention vis- -vis the IBC - HELD THAT - There is no inconsistency between the provisions of moratorium under Section 14 of the IBC and the Aircraft Rules. The Cape Town Convention and the Cape Town Protocol on Aircraft as applicable to India in terms of the Declaration of Accession adopts a procedure for insolvency and the steps to be taken with respect of any Aircraft, Airframes and related objects. In any event, my ambiguity on this issue has been done away with by the MCA Notification, which makes it abundantly clear that aircraft, aircraft engines and airframes are excluded from the purview of the provisions of the IBC. This is, therefore a moot issue now which does not require to detain this Court further. MCA Notification dated 03.10.2023 - Prospective or Retrospective - HELD THAT - The MCA Notification has been issued to cure a lacuna in the existing law which will benefit the community. The legislative intent of the MCA Notification can also be seen from a reference to the Cape Town Convention and Cape Town Protocol and the date of accession by India all of which form part of this notification. The timing of the notification also assumes significance here. It cannot be deemed to be a co-incidence that the MCA Notification is close upon the heels of the controversy at hand. This is, thus, clearly to cure a lacuna which has been highlighted by the disputes between the Petitioners/Lessors and Respondent/Go Air. The circumstances surrounding the MCA Notification thus, all point to its retrospectivity. Keeping in mind the scope and purview of the Aircraft Act and Rule 30(7) of the Aircraft Rules and given the fact that India is a signatory to the Cape Town Convention and Cape Town Protocol since 31.03.2008 and at the time of its adoption of the Declaration of Accession has clearly agreed to the adoption of Alternative A of Article XI of the Cape Town Protocol for remedies on insolvency , this Court is of the considered view, for the reasons stated herein, that the words aircraft, aircraft engines, airframes ought to have been included in sub-Section (3) of Section 14 of the IBC from the date the sub-Section came into force, so as to ensure implementation of procedure set forth therein for remedies on insolvency in relation to Aircraft which form the subject matter of these Petitions. Effect of Delay in the MCA Notification - HELD THAT - A combined reading of Article XI Alternative A of the Cape Town Protocol along with Rule 30(7) of the Aircraft Rules reflects that aircraft, aircraft objects, airframes and aircraft engines are be kept out of the purview of other legislations, and the provisions in relation to insolvency as set forth in Article XI Alternative A be applied in its entirety. The MCA Notification, thus in that sense was delayed. In light of the judgment of the Nasa Finelease case 2013 (9) TMI 733 - DELHI HIGH COURT , this delay cannot come in the way of a beneficiary to such a notification. Thus, the MCA Notification merits acceptance and should be given retrospective effect - this Court holds that the MCA Notification is held to be retrospective in its effect. NCLT has no power to deregister the Aircrafts, powers can only be exercised by a High Court - HELD THAT - The Petitioners/Lessors are the IDERA holders in respect of all Aircraft. Indisputably, the Cape Town Convention and Cape Town Protocol apply to these Aircraft. The Respondent/DGCA has not placed on record any communication setting forth the deficiencies in the documents filed by the Petitioners/Lessors for deregistration. The Respondent/DGCA is bound to act within the mandate of the Aircraft Act and Aircraft Rules to deregister the Aircraft - since all the pre-conditions as set stand satisfied, subject to removal by the any deficiencies in the Deregistration Application by Petitioners/Lessors, the deregistration of the 54 Aircraft is to be proceed with by the Respondent/DGCA. Possession of Aircraft with Respondent/Go Air cannot be disturbed - HELD THAT - Placing reliance on the judgement of the Supreme Court in the TATA Consultancy case, this Court had already ruled that Section 60(5) of the IBC is not applicable in the circumstances of the present case as the termination does not arise solely on account of the insolvency. In addition, the Respondent/RP of Go Air s claim for possession or occupation of the Aircraft under Section 14(1)(d) of the IBC has been exercised after the Lease Agreements of the Aircraft had been terminated. The Insolvency Commencement Order was passed after the Lease Agreements were terminated. The termination has remained unchallenged by the Respondent/RP of Go Air. Thus, Respondent/Go Air acting through the Respondent/RP of Go Air, cannot be permitted to retain possession of the Aircraft. Dura lex sed lex - the law must be upheld - HELD THAT - No doubt, the return of the Aircraft would cause hardship to the corporate debtor, i.e. Respondent/Go Air. This, however, cannot be used as a defense to not deregister the Aircraft(s). The Supreme Court in Popat Bahiru case 2013 (8) TMI 930 - SUPREME COURT has held that although a statutory provision may impose hardship or inconvenience on a specific party, the Court is obligated to uphold and enforce the law without exception. The principle of dura lex sed lex applies here, emphasising that the law, no matter how harsh, must be upheld. The Courts have consistently maintained that inconvenience of a party alone cannot outweigh the legal obligation to interpret and apply statutes faithfully, even if it leads to perceived hardship . The impugned rejection letters / communications dated 11.05.2023, 12.05.2023 and 19.05.2023 issued by the Respondent/DGCA declining to process the Deregistration Applications of the Petitioners/Lessors are set aside - The Respondent/DGCA shall forthwith and no later than the next five working days process the Deregistration Applications as filed for the following Aircraft in terms of Rule 30(7) of the Aircraft Rules. Petition disposed off.

Summary

Issues Involved:
1. Deregistration of Aircraft by DGCA.
2. Jurisdiction of High Court under Article 226 of the Constitution vis-à-vis NCLT.
3. Nexus between Deregistration and Insolvency.
4. Applicability of Cape Town Convention and Protocol.
5. Retrospective or Prospective effect of MCA Notification dated 03.10.2023.
6. Possession of Aircraft with Go Air.
7. Impact of Delay in MCA Notification.

Summary:

1. Deregistration of Aircraft by DGCA:
The principal grievance of the Petitioners/Lessors is that the Respondent/DGCA has failed to deregister their Aircraft(s) in contravention of Sub-Rule (7) of Rule 30 of the Aircraft Rules, 1937. Rule 30(7) mandates deregistration within five working days upon receipt of the necessary documents, including IDERA. The High Court directed DGCA to process the deregistration applications forthwith, stating that the function of DGCA to deregister the Aircraft is a "ministerial act" and must be carried out mandatorily.

2. Jurisdiction of High Court under Article 226 of the Constitution vis-à-vis NCLT:
The High Court held that NCLT, being a creature of a special statute, cannot exercise the power of judicial review over administrative actions. The NCLT can only exercise powers within the contours of jurisdiction as prescribed by the statute. The High Court has the power to issue a writ of mandamus where a public authority has failed to exercise its powers as per the statute.

3. Nexus between Deregistration and Insolvency:
The High Court found no direct nexus between the deregistration of Aircraft and the insolvency of Go Air. The termination of Lease Agreements was due to continuous defaults in payment of lease rentals, which occurred much before the insolvency proceedings. The Court distinguished the case from the Gujarat Urja case, where the termination was solely due to insolvency.

4. Applicability of Cape Town Convention and Protocol:
India acceded to the Cape Town Convention and Protocol on 31.03.2008. The High Court held that the provisions of the Cape Town Convention and Protocol apply to the Aircraft in question. Rule 30(7) of the Aircraft Rules, which incorporates the Cape Town Convention and Protocol, mandates deregistration upon fulfillment of certain conditions.

5. Retrospective or Prospective effect of MCA Notification dated 03.10.2023:
The High Court held that the MCA Notification, which exempts aircraft, aircraft engines, and airframes from the moratorium under Section 14(1) of the IBC, is retrospective in nature. The Notification is a necessary adjunct to Section 14(1) of the IBC and must be given effect from the date the section came into force, i.e., 28.05.2016.

6. Possession of Aircraft with Go Air:
The High Court held that the Aircraft ceased to be in the possession of Go Air upon termination of Lease Agreements, which occurred before the moratorium was imposed. Therefore, the Aircraft cannot be covered under Section 14(1)(d) of the IBC, which deals with the possession of assets during the moratorium.

7. Impact of Delay in MCA Notification:
The High Court held that the delay in issuing the MCA Notification cannot nullify the legislative mandate of the enactment. The Notification, being procedural and a necessary adjunct to the statute, should be given retrospective effect. The Court emphasized that international treaty obligations must be strictly followed to avoid adverse effects on the country's business interests.

Directions:
1. The impugned rejection letters/communications issued by DGCA declining to process the Deregistration Applications are set aside.
2. DGCA is directed to process the Deregistration Applications within five working days.
3. All maintenance tasks with respect to the Aircraft shall be undertaken by the Petitioners/Lessors until deregistration and export.
4. DGCA and AAI shall aid and assist the Petitioners/Lessors in accessing the Airports where the Aircraft are parked.
5. Go Air and its representatives are restrained from accessing or operating the Aircraft.
6. Go Air is restrained from removing any parts or documents from the Aircraft.
7. Go Air shall provide up-to-date information and documentation in relation to the Aircraft to the Petitioners/Lessors.
8. Petitioners/Lessors in certain cases are permitted to export the Aircraft subject to compliance with the Aircraft Act, Aircraft Rules, and applicable laws.
9. The applications for impleadment of the Committee of Creditors (CoC) are dismissed.