India’s Protection of Interests in Aircraft Objects Bill: A New Legal Framework for Aviation

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Recently, Parliament passed the Protection of Interests in Aircraft Objects Bill, 2025.

Passed by Parliament in April 2025, Protection of Interests in Aircraft Objects Bill establishes a standardized legal mechanism to manage disputes between airlines and aircraft lessors.
It aligns India’s domestic aviation framework with global practices under the Cape Town Convention and Protocol.
Amid growing aircraft fleet expansions and recent airline bankruptcies, the Bill aims to create a more investor-friendly environment, particularly in light of past insolvency cases involving GoFirst and Kingfisher Airlines.

The Bill marks India’s full implementation of the Cape Town Convention and Protocol, a United Nations treaty adopted by the International Civil Aviation Organization (ICAO) in 2001.
India acceded to the treaty in 2008 but lacked a domestic enforcement mechanism. The new legislation addresses this gap by giving the treaty legal force in India.
Key provisions include:
- Empowering the Directorate General of Civil Aviation (DGCA) as the Registry Authority.
- Mandating record submission of airline dues.
- Granting lessors the right to repossess aircraft within two months of default.
- Overriding conflicting domestic laws such as the Insolvency and Bankruptcy Code (IBC).

The need for this legislation became urgent after complications in past airline insolvency proceedings. Notably:
- GoFirst’s 2023 insolvency left lessors unable to reclaim aircraft due to court-imposed moratoriums.
- Similar issues arose during the closure of Kingfisher Airlines and in disputes with SpiceJet.
India’s inconsistent application of the Cape Town Protocol led to its low compliance score (50) in the Aviation Working Group’s index.
The passage of this Bill has already helped raise the score to 62, with further improvement expected.

By clearly defining remedies and dispute resolution timelines, the Bill brings a new level of predictability and transparency for aircraft leasing contracts.
According to Civil Aviation Minister Ram Mohan Naidu, the Bill could reduce leasing costs by 8-10%, which may indirectly benefit passengers by lowering airfares.
The legislation also aims to strengthen GIFT City (Gujarat International Finance Tec-City)as a hub for domestic aircraft leasing by simplifying legal procedures and encouraging foreign lessors to operate in India.

While the Bill has been welcomed as a progressive move, the international leasing industry remains cautious. Concerns include:
- India’s complex taxation system, which often imposes additional burdens on foreign lessors.
- Lack of clarity regarding Special Purpose Vehicles (SPVs) and their tax obligations under Indian law.
- Scepticism about claims of lower airfares, as market dynamics, rather than lease rates, primarily determine ticket prices.
Executives from major lessors noted that airline creditworthiness and growth prospects, particularly for carriers like IndiGo and Air India, will continue to be more influential in shaping leasing terms than legal reforms alone.

Despite these reservations, the Bill is expected to foster increased confidence among investors and lessors. By mitigating risk and offering legal clarity, it may facilitate:
- More competitive leasing terms for start-up airlines and regional operators.
- Streamlined aircraft repossession processes, reducing litigation delays.
- Improved compliance with global aviation norms, enhancing India’s standing in the international aviation community.

The Protection of Interests in Aircraft Objects Bill, 2025, is a pivotal reform in India’s aviation sector.
It modernizes the legal landscape for aircraft leasing, offers safeguards to creditors, and seeks to restore global confidence in India’s aviation infrastructure.
While implementation challenges remain, particularly around taxation and regulatory consistency, the Bill signifies a bold step toward transforming India into a major aircraft leasing and aviation hub.