Delhi High Court
Awas 39423 Ireland Ltd. & Ors. vs Directorate General Of Civil ... on 19 March, 2015
Author: Rajiv Shakdher
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgement reserved on: 05.03.2015
% Judgement delivered on:19.03.2015
+ WP(C) 871/2015
AWAS 39423 IRELAND LTD. & ORS. .....Petitioners
Versus
DIRECTORATE GENERAL OF CIVIL AVIATION
& ANR. ..... Respondents
+ WP(C) 747/2015
WILMINGTON TRUST SP SERVICES (DUBLIN)
LIMITED .....Petitioners
Versus
DIRECTORATE GENERAL OF CIVIL AVIATION
& ANR. ..... Respondents
Advocates appeared in this case:
For the petitioners: Mr Kevic Setalvad, Sr. Adv. with Ms Sneha Rao & Mr Amit A.
Pai, Advs. for the petitioners in WP(C) 871/2015.
Mr Ramji Srinivasan, Sr. Adv. with Mr Ravi Nath, Mr Ajay
Kumar, Mr Rohan Ghosh, Ms Neha Singh, Mr Karan Lahiri, Mr
Rajeev Kumar, Ms Radhika Mathur, Ms Sara Sundaram & Mr
Rishabh Kapur, Advs. for the petitioner in WP(C) 747/2015.
For the Respondents: Mr Sanjay Jain, ASG with Ms Anjana Gosain, Mr Pradeep
Desodya, Mr Arnab Naskar, Ms Saroj Bidawat & Mr Vidur
Mohan, Advs. with Mr S. Dutta, Director (Airworthiness) & Mr
M. Debula, Asstt. Director, for R-1.
Mr Sandeep Sethi, Sr. Adv. with Mr Atul Sharma, Mr Anand
Srivastava, Mr Milanka Choudhury & Mr Kshitiz Khera, Advs.
for R-2.
WP(C) 871/2015 & 747/2015 Page 1 of 49
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER,J
WP(C) 871/2015
WP(C) 747/2015 & CM Nos. 2894/2015 & 2895/2015
1. The captioned petitions pertain to entities, which essentially seek
de-registration of aircrafts (the details qua which I shall provide hereafter),
upon termination of the lease agreements with respondent no.2. The other
relief sought in both petitions are consequential in nature. Respondent
no.2, in both petitions, is an airline, by the name of, Spicejet Limited. For
the sake of convenience hereon, respondent no.2 will be referred to as
Spicejet. Furthermore, hereon I will be making a reference to aircrafts as
aircraft objects.
1.1 The other respondent in the two petitions is also common, which is
respondent no.1. Respondent no.1 in both petitions is the Director General
of Civil Aviation. Hereafter the Director General of Civil Aviation will be
referred to as DGCA.
1.2 In order to adjudicate upon the petitions before me, the following
facts are required to be noticed, which I would be setting out case-wise.
The discussion though, concerning both facts and the law, would be
common, as arguments have been advanced by counsels for parties on both
sides, based on the premise that there are no substantial differences on
facts in respect of the two matters.
FACTS
IN WP(C) 871/2015
2. There are three petitioners in this matter. Each of these petitioners
claim to be represented by their respective power of attorney holders. The
petitioners, apparently, entered into lease agreements, on various dates,
with Spicejet. At that stage, Spicejet executed two crucial documents in
favour of the petitioners. First, an Irrevocable De-Registration Power of
Attorney (IDPOA). Second, an Irrevocable De-Registration and Export
Request Authorization (IDERA). The details, with respect to the aircraft
objects in respect of which the aforementioned documents have been
executed, are as follows:
Petiti Aircraft Manufac Indian Lease IDPOA IDERA Certificate
oners Model turer's Registrat agreeme date date of
Sl. No ion Mark nt date registration
1 B 737- 39423 VT-SGZ 30.4.12 30.4.12 30.4.12 14.05.12
2 B 737- 39424 VT-SZA 22.5.12 24.5.12 24.5.12 04.06.12
3 B 737- 39427 VT-SZB 17.10.12 23.10.12 18.10.12 29.10.12
2.1 As would be evident from the details given in the table above, that
Certificate of Registration (COR) was issued by the DGCA in respect of
each of the three aircraft objects. The COR, inter alia, certifies that the
aircraft objects, described above, have been duly entered in the Indian
Civil Aviation Register (in short ICAR), with effect from the date
indicated therein, in accordance with the Convention on International Civil
Aviation dated 07.12.1944 and the Aircraft Act, 1934 (in short the Aircraft
Act), as also the Rules framed thereunder. In the three CORs issued vis-a-
vis the aforementioned, it is sated that they are hypothecated by an entity
by the name of Wells Fargo Bank, Northwest National Association.
2.2. Apparently, according to the petitioners, the defaults, in payment of
lease rents, by Spicejet, prompted them to issue default-cum-termination
and re-delivery notices. There were three separate notices of even date,
i.e., 18.12.2014, issued qua each of the aircraft objects. The said notices,
inter alia, alluded to the failure on the part of the of Spicejet to pay basic
and supplemental rent, in accordance with the terms of the lease, within
three business days of the payments falling due; triggering an event of
default under Section 17(a) of the Aircraft Lease Agreement (in short the
Lease Agreement). The notices went on to state, that consequently, the
lease, was terminated with immediate effect in accordance with the
provisions of Section 18(a) (v) of the lease agreement. A demand was also
made that Spicejet should, at the petitioners' expense, immediately return
the aircraft objects, together with all documents at the location set out in
the notices.
2.3 Spicejet, did not comply with the directive contained in the default
notice, which propelled the petitioners to approach the DGCA. In this
connection, petitioners wrote to the DGCA, on 19.12.2014. In the said
communication, a request was made to the DGCA that, it should call upon
Spicejet to ground the aforementioned aircraft objects and, take necessary
steps, to return the same to them to the place already indicated.
2.4 Since, Spicejet continued to operate the aforementioned aircraft
objects, even though the lease agreements vis-a-vis each one of them had
been terminated, the petitioners, made a request to the DGCA, vide three
separate communications of even date, i.e., 26.12.2014, to de-register the
aircraft objects from the ICAR and, to issue an "Export Certificate of
Airworthiness" - to enable them to ferry the aircraft objects out of the
country, at their costs.
2.5 As there was no response by the DGCA to the petitioners'
communications of 26.12.2014, by way of follow-up, once again, three
separate communications were sent, all of which were dated 29.12.2014, in
respect of the aforementioned aircraft objects.
2.6 In the interregnum, DGCA had issued a communication dated
26.12.2014, which the petitioners claim, they received on 29.12.2014 as an
attachment to an email of the same date, whereby they were directed to
submit the following documents/ information:
(i) Certificate of registration in original.
(ii) Confirmation on de-activation of aircraft objects address for "Mode
S transponder".
(iii) Application for issuance of Export Certificate of Airworthiness.
2.7 The petitioners, promptly, replied to this communication vide a
letter dated 02.01.2015, whereby it informed DGCA that, in so far as COR
was concerned, the same was available with Spicejet, as the operator of the
Aircraft, and that, in any case, in terms of the relevant provisions of law,
the original was to be retained by the operator. In so far as the photocopy
of the same was concerned, the same had already been handed over to it.
2.8 As regards confirmation of de-activation address allotted to them for
"Mode S" Transponder was concerned, it was indicated that the said
exercise was normally carried out after the aircraft objects was de-
registered. In any event, the petitioners undertook to furnish the necessary
information; and, for that purpose, requested that they be provided the
required format.
2.9 As regards issuance of Export Certificate of Airworthiness was
concerned, the petitioners indicated that they would not be requiring the
same vis-a-vis aircraft objects bearing manufacturer's serial no. 39423 and
39427. In so far as aircraft objects bearing manufacturer's serial no. 39424
was concerned, it was indicated that an application in the prescribed format
would be submitted for the said purpose.
3. It is pertinent to point out that there were two separate letters of the
same date, i.e., 02.01.2015, which were issued. The contents of both
letters were common except the last part referred to above, that is,
requirement of Export Certificate of Airworthiness. Pertinently though,
the request for the de-registration, was reiterated in both letters.
3.1 However, by a subsequent letter dated 08.01.2015, it was clarified
that even for the aircraft objects bearing manufacturer's serial no. 39424,
the petitioners did not require the Export Certificate of Airworthiness. In
other words, ultimately for none of the three aircraft objects, the said
certificate was required. By this letter, while the petitioners' earlier
request for de-registration remained intact, they indicated their revised
preference for grounding the aircraft objects, as against what was indicated
in their earlier communication.
3.2 In the earlier communication, the request made was that the aircraft
objects be grounded at a place in Ireland, however, in this letter, it was
indicated that the aircraft objects could either be grounded at the Hosur
Airport, in Belagondapalli or, at the Indira Gandhi International Airport, in
New Delhi.
3.3 The aforesaid communication by the petitioners was followed by a
communication dated 09.01.2015, addressed to the DGCA. In the said
letter, a reference was made to the proposed amendment to be carried out
in Rule 30 of the Aircrafts Rules, 1937 (in short the Aircraft Rules). While
doing so, the petitioners sought to bring to the notice of DGCA the
following:
(i) That the petitioners, i.e., the lessors, were the authorized parties
under IDERA executed by Spicejet qua each of the aforementioned aircraft
objects.
(ii) The lessors/ owners and mortgagees were the only "registered
interest holders", in respect of the said aircraft objects, and that, there were
no other registered interest holders in existence.
3.4 Accordingly, with this letter dated 09.01.2015, the petitioners
appended the following for DGCA's reference:
(a) IDERAs.
(b) Priority interest search certificates in respect of airframes and related
engines, as on the said date.
(c) Consent letters of respective owners and mortgagees dated
12.12.2014 and 18.12.2014 respectively, which had already been
submitted to the Director of Airworthiness, DGCA.
3.5 As a result of the aforesaid communication, DGCA was propelled to
act and, consequently, it issued an email on the same date, i.e., 09.01.2015,
to Spicejet wherein, it adverted to the fact that, since, it had failed to abide
by its commitment with regard to de-registration request of the petitioners/
lessors, it should surrender the COR, of the aircraft objects , and de-
activate the "Mode S Transponder" Code allocated to the said aircraft
objects. Reference in this regard was made to Spicejet's mail dated
07.01.2014. DGCA made it clear that the aforesaid was required to be
done in order to process the lessors', i.e., the petitioners' request for de-
registration of the aircraft objects from ICAR on account of termination of
the lease agreement. Furthermore, Spicejet was called upon to treat the
matter as "most urgent".
3.6 It appears that the petitioners received no response to their request
for de-registration of the aircraft objects, and hence, sought an update from
the DGCA vide letter dated 13.01.2015.
3.7 Despite, the aforesaid communications sent on the issue by the
petitioners, there was no movement in the matter. Consequently, the
petitioners were compelled to move this court by way of a petition under
Article 226 of the Constitution.
4. The captioned petition was moved on 30.01.2015 when, both DGCA
and Spicejet, were represented by counsels. Ms Gosain, who appeared on
that date, on behalf of DGCA, submitted that her client was not able to
process the case for de-registration, as Spicejet had not complied with its
directive. Since, Ms Gosain, was not able to assist me, as to whether
DGCA was invested with any coercive powers either under the Act, or the
Rules and Regulations framed thereunder - the presence of the concerned
officer, was sought, for that purpose on the next date of hearing. It is in
this background, that arguments were heard on the returnable date, and the
dates thereafter, whereupon the matter was reserved for judgement.
FACTS IN WP(C) 747/2015
5. In this case, there is only one petitioner. The petitioner executed
three separate lease agreements of even date, i.e., 07.08.2013, with
Spicejet, in respect of three aircrafts. In addition, the IDPOA and IDERA
were also executed. The details of the lease agreements, the IDPOA and
IDERA, and other information qua the aircraft are provided hereinafter in
the tabular chart:
S. Aircraft Manufac Indian Lease IDPOA IDERA Certificate
No. Model turer's Registrat agreeme date date of
Sl. No ion Mark nt date registration
1 B 737- 37364 VT-SZI 7.8.13 3.10.13 03.10.13 14.10.13
2 B 737- 41397 VT-SZJ 7.8.13 24.1.14 24.1.14 03.02.14
3 B 737- 41398 VT-SZK 7.8.13 21.5.14 21.5.14 26.5.14
8GJ
5.1 As in the other case, Spicejet defaulted in payment of lease rent,
which resulted in the petitioner issuing a common default notice dated
10.12.2014, as a termination event had occurred, as provided for in clause
23(a) of the subject lease agreements.
5.2 The petitioner thus, sought re-delivery of the aircraft objects, along
with documentation on board, as early as possible, though no later than
five days from the date of the notice. Spicejet was directed to deliver the
aircraft objects at the specified place in Singapore.
5.3 The aforesaid communication was followed by three separate letters
of even date, i.e., 19.12.2014, which were addressed to Spicejet. By virtue
of these communications, lease qua each of the aircraft objects was
terminated. As in the previous communications, the Spicejet was asked to
re-deliver the aircraft objects at the specified site in Singapore.
5.4 On the same date, letters were also issued to the DGCA (i.e., letter
dated 19.12.2014). By this communication, the DGCA was informed of
the fact that, the petitioner had terminated the lease qua the aircraft objects.
The said letters were accompanied by the following documents pertaining
to each of the aircraft objects:
(i) The termination letter dated 19.12.2014.
(ii) Certificate of Registration.
(iii) Certificate of Airworthiness.
(iv) IDERA and IDPOA.
5.5 Furthermore, vide this very communication, the DGCA, was also
informed, that there, was no litigation initiated either by the Airport
Authority of India or, any private airport in India, in respect of the
aforementioned aircraft objects. A request was made to the DGCA that it
should permit the lessee (i.e., Spicejet), to transfer the custody of the
records of the aircraft objects and, any parts removed therefrom, to their
representative, at Spicejet office in Gurgaon, in India.
5.6 Spicejet was, similarly, requested by the petitioner to liaise with the
DGCA for obtaining necessary permission for return of the aircraft objects.
Separate letters were issued in respect of each of the aircraft objects.
5.7 Having failed to prevail upon Spicejet, to do the needful in the
matter, on 30.12.2014, the petitioner, once again, by three separate
communications, issued qua the aforementioned aircraft objects, made a
request that they be de-registered from the ICAR, with immediate effect.
It was indicated that the petitioner will be willing to ferry the aircrafts out
of the country at their own costs, and that, they would deliver the COR to
it, immediately, upon receipt of the same from the Spicejet.
5.8 This was followed by a letter dated 06.01.2015, wherein they
reiterated the fact that they had, as far back as on 10.12.2014, requested
Spicejet to allow the export of aircraft objects at their expense upon
termination of the respective lease agreements. The petitioner, sought
assistance of the DGCA, in de-registration of aircraft objects in
consonance with their earlier request dated 30.12.2014. A passing
reference was also made with regard to the fact that, they had a "bad
experience", like other companies, in respect of another Indian airline
company, i.e., Kingfisher, and hence, were concerned about getting
involved in a lengthy repossession process.
5.9 The aforesaid was followed by yet another communication by the
petitioner, on the subject, dated 09.01.2015. In this communication, inter
alia, a reference was made to a meeting which its representatives had
attended on 08.01.2015, with the Jt. Secretary in the Ministry of Civil
Aviation.
6. The DGCA was reminded that, at the meeting they were informed
by its Deputy Director of Airworthiness that, under the IDERA route, it
would de-register the aircraft objects within five working days, upon
documents being furnished. It appears, in the said communication a
reference was also made to the Draft Rule 30(7) of the Aircraft Rules.
6.1 Consequently, by another letter sent on the same date (i.e.,
09.01.2015), by the petitioner, to DGCA, information was given to the
effect that: (i) it was the only IDERA holder for the three aircraft objects;
and (ii) that it was also the only registered interest holder in respect of the
three aircraft objects.
6.2 As in the other case, the original IDERAs of the three aircraft
objects, and priority search certificates, in respect of airframe and related
engines, as obtaining on that date, were furnished.
6.3 Propelled by the aforesaid, DGCA on 09.01.2015, issued a missive
to Spicejet to surrender the COR and de-activate the "Mode S"
Transponder code allocated qua the aircraft objects leased out by the
petitioner. Once again, reference was made to Spicejet's mail dated
07.01.2014.
6.4 Evidently, Spicejet continued to disregard the directive of DGCA,
which compelled the petitioner to dispatch an email dated 12.01.2015, on
the subject. A copy of this communication was sent to Spicejet, as well.
In this communication the petitioner indicated that they had re-submitted
their request for de-registration of the aircraft objects, and that, they would
like to complete the process of de-registration, as soon as possible, by a
process which was as orderly as possible, under the given circumstances.
6.5 The petitioner, optimistically, reiterated this request to the DGCA
vide its letter dated 16.01.2015. In this letter, reference was also made to
the applicable Convention, i.e., the Convention on International Interest In
Mobile Equipments (in short the Convention) and the Aircraft Protocol (in
short the Protocol).
6.6 Being aggrieved by the fact that DGCA had not taken its directive
dated 09.01.2015 any further, the petitioner, chose to approach this court,
under Article 226 of the Constitution. This petition was moved on
28.01.2015.
6.7 On that date, DGCA was represented by Ms Gosain. On being
queried, Ms Gosain informed that the matter pertaining to de-registration
was under consideration, and that, she would revert with instructions on
the next date. Since, Spicejet was not represented, notice was issued to the
said entity in the matter. It was made clear, in case the respondents chose
to resist the petition they would file their respective counter affidavits
before the next date of hearing.
6.8 On the returnable date, i.e., 20.01.2015, it was found that while
Spicejet had filed its counter affidavit, DGCA, had failed to do the needful.
On account of urgency expressed in the matter, arguments were heard on
that date and on several dates thereafter. The judgement, was finally
reserved, in this matter as well, on 05.03.2015.
SUBMISSIONS OF COUNSELS
7. In the background of the aforesaid facts, arguments in WP(C)
871/2015 were advanced by Mr Kevic Setalwad, Sr. Advocate on behalf of
the petitioners, while in WP(C) 747/2015, submissions were made by Mr
Ramji Srinivasan, Sr. Advocate. In so far as the DGCA was concerned,
submissions were made by Mr Sanjay Jain, the learned ASG, assisted by
Ms Anjana Gosain, while Spicejet was represented by Mr Sandeep Sethi,
Sr. Advocate, assisted by Mr Atul Sharma.
8. On behalf of the petitioners (i.e., in WP(C) 871/2015) Mr Setalwad,
broadly, argued as follows:
(i) That the lease qua the aircraft objects, having been terminated,
followed by the lodgement of the IDERA with the DGCA, the provisions
of Article IX of the Protocol had been triggered. The petitioners, being the
only registered interest holders, with none having a ranking higher than
theirs, they were entitled to the de-registration of the aircraft objects.
(ii) The remedy under Article IX of the Protocol was, in addition, to
remedies provided under chapter III of the Convention.
(iii) The right to seek the de-registration of the aircraft objects, remained
unaffected by any declaration deposited by India qua Non-Consensual
Right or Interest (in short NCRI) under Article 39 of the Convention.
(iv) The declaration made in Form No. 1, under clause (a) and (b) by
Republic of India, under Article 39 (1)(a) of the Convention, were required
to be registered in terms of Article 40 of the Convention. For this purpose,
reliance was placed on Form No. 6, clause (a) and (b), of the Declaration
lodged by India.
(v) The failure to register the liens, which are delineated in Form No. 1,
clause (a) & (b), would render them inefficacious. In so far as liens in
favour of repairers of aircraft, as described in Form No. 1 clause (c) is
concerned, that would be dependent on their position and limited by the
extent of service or services performed on and value added to, the aircraft
objects.
(iv)(a) In support of this submission, my attention was drawn to Article 1
(m), (bb) and (cc) of the Convention.
(vi) The DGCA, upon being informed that the lease in respect of the
aircraft objects is not in force, is required to cancel its registration as
reflected in the ICAR. The fact that this obligation is cast on DGCA is
clearly provided in Rule 30 (6)(iv) of the Aircraft Rules.
(vii) Post, the amendment of Rule 30, by insertion of sub-rule (7), in the
said Rule, any doubt, as to the mandatory nature of the duty, cast upon
DGCA to de-register the aircraft after the lease is terminated, was
removed.
(vii)(a) The amendment, which was brought about by gazette notification
dated 09.02.2015, prescribes that registration of an aircraft, registered in
India, to which the Convention or the Protocol applies, shall be cancelled
by the Central Government, as provided in the Protocol, if an application is
received from IDERA holder, prior to expiry of the lease, along with the
following documents:
(a.1)The original or notarized copy of IDERA.
(a.2) A certificate that all registered interests, ranking in priority, have
been discharged, or the holder's of such interests have consented to the de-
registration and the export of the aircraft objects.
(vii)(b) The petitioners having lodged both these documents with their
letter dated 09.01.2015; the DGCA was bound, in law, to de-register the
aircraft objects.
(viii) A mandamus could issue to the DGCA to discharge its duties cast
upon it, in law, once the conditions prescribed therein, stood fulfilled. The
law required placement of documentary evidence of a fact that the lease
qua the aircraft objects, on the date when request for de-registration was
lodged was not in force. The factum of the lease having been terminated,
is reflected by the termination notice, which in turn, is based, on the rights
conferred on the petitioners under IDERA.
(viii)(a) The other requirement that, there was no other registered
interest which ranked higher than the petitioners', having also been
fulfilled upon lodgement of a priority interest search certificate, the
DGCA, was bound to proceed to de-register the aircraft objects.
(ix) In support of his submissions, reliance was placed by Mr Setalwad,
on the judgement of this court in Corporate Aircraft Funding Company
LLC vs Union of India & Ors., (2013) 199 DLT 327, and the Division
Bench judgement in the same case, which is dated 10.05.2013, passed in
LPA No. 226/2013, titled: Directorate of Revenue Intelligence vs
Corporation Aircraft Funding Company LLC & Ors. On the aspect of
the power of the court to issue a writ of mandamus in certain
circumstances, reliance was placed on the judgements of the Supreme
Court in CAG vs K.S. Jagannathan, (1986) 2 SCC 679 and in the case of
State of Bombay vs Pandurang Vinayak, AIR 1953 SC 244.
9. Mr Srinivasan, in full measure, supported the stand taken by Mr
Setalwad, except qua one aspect which, I would advert to immediately
hereafter.
9.1 The learned counsel, in no uncertain terms, stated before me that, in
so far as the petitioner, he was representing, was concerned, for the
moment, was only interested in obtaining the de-registration of the aircraft
objects.
9.2 Like Mr Setalwad, Mr Srinivasan took me through the provisions of
the Convention and Protocol to buttress his point of view.
10. On the other hand, Mr. Sethi, appearing for Spicejet, made the
following submissions :
(i). That the issue involved in the present writ petitions was similar to
the one, which arises in LPA No.32/2015. The said appeal, is pending
adjudication before a Division Bench of this court and, therefore, this court
ought to hold its hand rendering a decision in the instant petition.
(i)(a). In respect of aforesaid submission, I may only note that I was
informed that, though initially, the Division Bench, had reserved orders in
the appeal, it had refrained from pronouncing an order as, an application
had been moved, bringing on record the fact that an amendment had been
brought about in Rule 30 of the Aircrafts Rules. Accordingly, the decision
in the appeal, it appears, has been deferred.
(ii). The petitioners, cannot be granted reliefs as there are, disputed
questions of fact involved in the matter.
(iii). The petitioners, qua the alleged disputes have initiated proceedings
in the High Court of Justice, Queens Bench Division, Commercial Court in
London against Spicejet. The claim lodged in those proceedings is based
on an identical cause of action. There is a similarity both, in respect of
facts as well as reliefs.
(iii)(a) It may only be noted that claims in the English Court, evidently,
were lodged on 04.02.2015.
(iv). The petitioners are holding with them security deposits far in excess
of their respective claims.
(iv)(a). Reference in this respect was made to the details of deposits held
by the petitioners, as set out in paragraph 13 of the counter affidavit, filed
in each of the two petitions.
(v). The issue, as to whether the petitioners are entitled to terminate the
subject lease agreements, is an aspect, which requires determination by a
competent court of law.
(vi). Spicejet has filed a scheme of reconstruction and revival for
enabling take over of its ownership, management and control with the
Government of India, Ministry of Civil Aviation, on 15.01.2015. The said
scheme has received the approval of Government of India on 22.01.2015.
The scheme of acquisition of interest by the new promoter has also
received approval of the Competition Commission of India vide order
dated 19.02.2015.
(vii). In case the petitioners are allowed to repossess the aircraft objects,
great prejudice would be caused to Spicejet which, cannot be compensated
in terms of money. The repossession of aircraft objects will engineer a
collapse of the turn-around plan and, would, consequently, impact public
interest as, it would impinge on the employment prospects of the personnel
engaged with it. This apart, the interest of passengers, who have already
booked their air passage with Spicejet, would get affected. For such
passengers the cost of air travel, would become expensive.
(viii). The petitioners prayer for de-registration of the aircraft objects
cannot be allowed till such time the claims, as stipulated in the declaration
are settled.
(viii)(a) For this purpose, reliance was placed on paragraph 18 of the
counter affidavits filed in the present petition; to demonstrate that,
Spicejet owed a sum of Rs.1,580 Crores to various creditors, which
included, the Airport Authority of India (AAI), Private and International
Airports; the Tax Authorities, Aircraft Lessor and other creditors.
(viii)(b) The submissions in this behalf were pivoted on the declarations
filed by the Government of India under Article 39 of the Convention. The
other provisions, which were relied upon were Article 40 of the
Convention read with Article IX and XI of the Protocol.
(ix). This court, could not in any event issue a mandamus to DGCA for
de-registration of the aircraft objects . The DGCA, is required to exercise
its power of de-registration in line with the declarations made by the
Government of India under Article 39 (1)(a) of the Convention.
(x). The amendment to Rule 30, carried out by way of insertion of Sub-
Rule (7) did not materially change the existing position, which is that, the
DGCA on receiving the request for de-registration, would have to
consider, whether or not to issue a direction as sought, having regard to the
subsisting lien(s) qua wages of employees, taxes, and the dues owed by the
Airline i.e., Spicejet to various statutory authorities. In this case, since,
admittedly, payments were outstanding towards employees and statutory
authorities, the DGCA, cannot direct de-registration.
10.1 In support of his submissions, Mr Sethi placed reliance on the
following judgments: judgment dated 10.05.2013, passed in LPA
226/2013, titled: Directorate of Revenue Intelligence Vs. Corporate Air
Craft Funding Company LLC and Ors.; and the judgements of the
Supreme Court in U.P. State Road Transport Corporation and Anr. Vs.
Mohd. Ismail and Ors., (1991) 3 SCC 239 and Union of India and Anr.
Vs. Bilash Chand Jain and Anr., (2009) 16 SCC 601.
11. Mr. Jain, the learned ASG, while, substantially, supporting the
submissions made on behalf of Spicejet, stressed upon the following, in so
far as the declarations lodged by the Government of India are concerned :-
(i). The power to de-register an aircraft conferred on DGCA under Rule
30 of the Aircrafts Rules is an enabling power, and that, in exercising this
power, it would have to take into account the various liens that may obtain
vis-a-vis the aircraft objects.
(i)(a). It is pertinent to note here that the learned ASG on being queried as
to whether the declarations lodged by the Government of India could travel
beyond the Municipal Law - agreed that the declarations could not enlarge
the scope of the Municipal Law. On being further queried, as to what were
those Municipal Laws, under which liens were sought to be enforced, the
learned ASG, candidly, stated that this aspect of the matter had not been
examined by the DGCA.
(ii) Therefore, in the context of the above, the learned ASG submitted
that as long, as this court, were not to order export of the aircraft objects,
the other aspect of de-registration, could be dealt with in the present
petitions.
REASONS
12. I have heard the learned counsel for parties and perused the record.
What has emerged from the record is as follows:-
(i). The petitioners have taken recourse to the IDERA route, as
prescribed in Article IX of the Protocol.
(ii). The IDERA along with IDPOA have been voluntarily executed by
Spicejet. The IDERA, has been lodged with the DGCA.
(iii). The events of default have occurred qua the lease agreements in
issue; the details of which are provided hereinabove.
(iv) Consequent to the defaults occurring which, essentially, pertain to
non-payment of lease rents, the petitioners have terminated the lease
agreements.
(v). The DGCA, has been informed about the factum of termination of
the lease agreements.
(vi). The DGCA, has received the original IDERAs from the petitioners
qua each of the aircraft objects , as also, photocopies of Priority Search
Certificates, evidencing that the lessors, owners and mortgagees are the
only registered interest holders.
(vii). The DGCA, recognizing the request for de-registration and export of
the aircraft objects, outside the country, has called upon Spicejet to
surrender the original CORs and, to de-activate the "Mode S" transponder
code allocated to each of the aircraft objects. This aspect is evidenced by
the e-mails dated 09.01.2015, issued by the DGCA to Spicejet.
(viii) The provisions of Rule 30 have been amended to the extent that a
new sub-rule (7) has been inserted in the said Rule.
13. In the light of the aforesaid facts, what is required to be considered
is: whether the petitioners are entitled to seek de-registration of the aircraft
objects and, if so, what consequential reliefs, if any, ought to be granted to
them?
14. In order to consider the various submissions made before me, one
would have to examine the provisions of the Convention, the Protocol and
the Aircraft Rules, which were relied upon by the counsels for the parties
represented before me.
15. In this context, a broad frame-work of the Convention has to be
borne in mind. The preamble of the Convention would suggest that it
seeks to facilitate the acquisition and use of mobile equipment of "high
value" and economic significance. In other words, it encourages and
facilitates asset-based financing. While doing so, it seeks to recognize the
interest in such equipment and protects the same universally. The
Convention thus, in effect, provides a legal architecture for international
interest created in such equipment(s). For this purpose, the Convention
has put in place an international registration system.
15.1 The idea being to provide, uniformity, certainty and predictability in
commercial transactions involving high financial stakes. The Convention
while protecting the interest of the creditors seeks to give due deference to
the National Legal Regime, i.e., the Municipal Law of the Contracting
State. Therefore, logically and, quite clearly, the Convention does not
affect National Legal Regimes which concern and are relatable to criminal
conduct and tortious liability. The Convention, also, does not appear to
impinge upon public law issues.
15.2 The thrust of the Convention is to make available private finance for
mobile equipments, to persons, situate in Contracting States.
15.3 The Convention, as currently positioned, deals with airframes and
aircraft engines; helicopters; railway rolling stock; and space assets. It is
the Protocol, which is, industry specific, which, provides the necessary
frame-work vis-a-vis the concerned industry. Therefore, the Aircraft
Protocol, which is referred to, for sake of brevity, as the Protocol, both
supplements and, wherever necessary, modifies the Convention (which is
more generic in nature), to the extent necessary, for the purposes of the
Aircraft Industry.
16. With this preface, let me deal with the submissions raised before me
with regard to the declarations lodged by the Government of India under
the Convention and their effect.
16.1 The Government of India, it appears, has lodged six (6) declarations
under the Convention and five (5) declarations under the Protocol, under
various Forms.
16.2 I will, however, for the sake of brevity, quote and discuss only those
declarations, which are necessary for the purposes of the present case,
albeit at the appropriate stage.
16.3 Suffice it to say, that Article 11(1) of the Convention, provides that
parties may agree in writing as to what would constitute an event of default
or otherwise give rise to rights and remedies, under Articles 8 to 10 and 13
of the very same convention. In each of the lease agreements, it is inter
alia provided that lessee's failure to make payment of the lease rent, would
constitute a "termination event or an event of default".
16.4 It is not disputed before me by Spicejet that, a termination event or
an event of default has been triggered. In these circumstances, the
remedies available to a lessor are those, which are provided in Article 10
of the Convention.
16.5 Article 10 provides that if, the event of default has occurred under a
leasing agreement as envisaged under Article 11 of the Convention then,
subject to any declaration that a Contracting State may have made under
Article 54, the lessor would have the right to either terminate the
agreement and take possession or, control of any object to which the
agreement relates or, could apply for a court order authorising or directing
either of these acts.
16.6 Article 54(1) of the Convention, provides that a Contracting State
may, at the time of ratification, acceptance, approval of, or accession to the
Protocol, declare that while the charged object is situated within, or
controlled from its territory, the chargee shall not grant a lease of the
object in that territory. Clause (2) of Article 54 specifically provides that,
the Contracting State shall, at the time of ratification, acceptance, approval
of, or accession to the Protocol, declare whether or not any remedy
available to the creditor under any provision of the Convention which is
not "there expressed" to require application to the court may be exercised
only with the leave of the court.
16.7 I may only note that under Article 54(2) of the Convention, the
Government of India has filed in Form No.13, with the following
mandatory declaration: "...Any and all remedies available to the creditor
under the Convention which are not expressed under the relevant provision
thereof to require application to the court may be exercised without court
action and without leave of the court." (emphasis is mine)
16.8 This would mean that in its declaration filed under the Convention,
the Government of India has made it categorically clear that unless the
remedy available to the creditor under the Convention, requires application
to the court, the same can be exercised "without court action and without
the leave of the court". This is important in the context of Article IX of
the Protocol, as would be evident from the discussion, set forth hereafter.
16.9 In these circumstances, the petitioners are entitled to approach a
court and, seek advance relief pending final determination under Article 13
of the Convention. The relief that the petitioners can seek under the said
Article, ordinarily would be of the following nature: (a) preservation of the
object and its value; (b). possession, control or custody of the object; (c).
immobilisation of the object; and (d). lease or, except where covered by
sub-paragraphs (a) to (c), management of the object and the income
therefrom.
17. Clause (2) of Article 13 of the convention empowers the court to
inter alia impose such conditions as it may deem necessary to protect,
interested persons, in the event the creditor i.e., the petitioners herein,
would either fail to perform any obligation qua the debtor under the
Convention or Protocol while implementing such order of the court
granting relief or, fails to establish its claim wholly or in part on the final
determination of the claim. Under clause (3) of Article 13, it is indicated
that the court may require notice of the request made to it, to be given to
any of the interested persons before proceeding to grant relief pending
final determination.
17.1 Article IX of the Protocol though, introduces modifications to the
default remedies in as much as it confers an additional right on the creditor
to procure: de-registration of the aircraft objects ; and, the export and
physical transfer of the aircraft object from the territory in which it is
situated. For these rights to operate, one would have to examine the other
clauses of Article IX, which I intend to extract, in the judgment, to the
extent necessary.
17.2 I may only indicate that Article X of the Protocol, similarly,
introduces certain modifications, regarding reliefs pending final
determination that a creditor may seek from the court. Since, there was
much discussion with regard to the provisions of clause (6) of Article X, I
would be adverting, in particular, to the same, in the course of my
discussion.
17.3 Article XI of the Protocol pertains to remedies available on
insolvency of the debtor. It provides for two alternatives i.e., Alternative
A and Alternative B. This article, one need not discuss any further, as the
debtor, admittedly, is not insolvent, as yet.
17.4 Article XIII of the Protocol speaks, inter alia, of what would be the
consequences of the debtor issuing an IDERA and, who could exercise the
remedies specified in Article IX (1).
17.5 Notably, clause (4) of Article XIII says that the "registry authority"
and other administrative authorities in the contracting State, "shall"
expeditiously, co-operate with and assist the authorised party in exercise of
the remedies provided under Article IX. Therefore, if a Contracting state
has made a declaration pursuant to Article XXX (1) of the Act, and if, an
IDERA is issued by the debtor, in this case, Spicejet, which is substantially
in the 'Form' annexed to the Protocol (which is recorded with the "registry
authority"), then, on the authorised person or its certified designee
triggering the remedy under Article IX (1) (having regard to the applicable
aviation safety laws and regulations), the same will have to be honoured by
the registry authority and other administrative authorities of the
Contracting States.
17.6 In the present case, a declaration has been filed by the Government
of India in Form No. 27 under Article XXX (1), as required under Article
XIII of the Protocol. The debtor i.e., Spicejet, has admittedly issued an
IDERA, which stands lodged with DGCA. Consequently, the remedies
under Article IX (1) of the Protocol, stand triggered.
17.7 Pertinently, none of the provisions of Article IX refer to court
intervention. In other words, remedy under Article IX can be availed of by
a creditor (i.e., lessor in this case), without having to approach the court or
having to seek its intervention.
17.8 The counsels for Spicejet and DGCA seek to contend that the
remedies sought under Article IX of the Protocol are not available to the
petitioners as there are in existence "registered interests", which rank
higher than that of, the creditor i.e., the lessors/ petitioners herein.
17.9 It is in this context that the counsels for the respondents have argued
that before the DGCA could act upon, the requests made for de-registration
and / or export and physical transfer of the aircraft objects from India - it
will have to take into account the NCRIs, which under the Municipal Law,
would have priority over an interest in the aircraft object equivalent to that
of the holder of a registered international interest.
17.10 This submission has been advanced by the counsels for the
respondents based, inter alia, on various clauses of Article IX of the
Protocol and Article 39 and 40 of the Convention. In this context, a
reference is also made to the definition of words and/or expression used in
the aforementioned provisions of the Convention and Protocol. I will
advert to the same and endeavour to explain the applicability of the
provisions of the convention and Protocol in juxtaposition to the facts
obtaining in the instant case as I go along with the discussion. But let me
first extract the relevant provisions.
"Article IX - Modification of default remedies provisions
1. In addition to the remedies specified in Chapter III of the
Convention, the creditor may, to the extent that the debtor has at
any time so agreed and in the circumstances specified in that
Chapter :
(a). Procure the de-registration of the aircraft; and
(b). Procure the export and physical transfer of the aircraft
object from the territory in which it is situated.
2. The creditor shall not exercise the remedies specified in the
preceding paragraph without the prior consent in writing of the
holder of any registered interest ranking in priority to that of the
creditor.
3. Article 8(3) of the Convention shall not apply to aircraft
objects. Any remedy given by the Convention in relation to an
aircraft object shall be exercised in a commercially reasonable
manner. A remedy shall be deemed to be exercised in a
commercially reasonable manner where it is exercised in
conformity with a provision of the agreement except where such
a provision is manifestly unreasonable.
4. A chargee giving ten or more working days' prior written
notice of a proposed sale or lease to interested persons shall be
deemed to satisfy the requirement of providing "reasonable prior
notice" specified in Article 8(4) of the Convention. The
foregoing shall not prevent a chargee and a chargor or a
guarantor from agreeing to a longer period of prior notice.
5. The registry authority in a Contracting State shall, subject to
any applicable safety laws and regulations, honour a request for
de-registration and export if:
(a) the request is properly submitted by the authorised party
under a recorded irrevocable deregistration and export request
authorisation; and
(b) the authorised party certifies to the registry authority, if
required by that authority, that all registered interests ranking in
priority to that of the creditor in whose favour the authorisation
has been issued have been discharged or that the holders of such
interests have consented to the de-registration and export.
6. A chargee proposing to procure the de-registration and export
of an aircraft under paragraph 1 otherwise than pursuant to a
court order shall give reasonable prior notice in writing of the
proposed deregistration and export to:
(a) interested persons specified in Article 1(m)(i) and (ii) of the
Convention; and
(b) interested persons specified in Article 1(m)(iii) of the
Convention who have given notice of their rights to the chargee
within a reasonable time prior to the de-registration and export.."
"Article 39 - Rights having priority without registration
1. A Contracting State may at any time, in a declaration
deposited with the Depositary of the Protocol declare,
generally or specifically :
(a). Those categories of non-consensual right or interest (other
than a right or interest to which Article 40 applies) which under
that State's law have priority over an interest in an object
equivalent to that of the holder of a registered international
interest and which shall have priority over a registered
international interest, whether in or outside insolvency
proceedings; and
(b). That nothing in this Convention shall affect the right of a
State or State entity, intergovernmental organisation or other
private provider of public services to arrest or detain an object
under the laws of that State for payment of amounts owed to
such entity, organisation or provider directly relating to those
services in respect of that object or another object.
2. A declaration made under the preceding paragraph may be
expressed to cover categories that are created after the deposit of
that declaration.
3. A non-consensual right or interest has priority over an
international interest if and only if the former is of a category
covered by a declaration deposited prior to the registration of the
international interest.
4. Notwithstanding the preceding paragraph, a Contracting
State may, at the time of ratification, acceptance, approval of, or
accession to the Protocol, declare that a right or interest of a
category covered by a declaration made under sub-paragraph (a)
of paragraph 1 shall have priority over an international interest
registered prior to the date of such ratification, acceptance,
approval or accession."
"Article 40 - Registrable non-consensual rights or interests
A Contracting State may at any time in a declaration deposited
with the Depositary of the Protocol list the categories of non-
consensual right or interest which shall be registrable under this
Convention as regards any category of object as if the right or
interest were an international interest and shall be regulated
accordingly. Such a declaration may be modified from time to
time.."
18. Having regard to the aforementioned extracts from the Protocol and
Convention, let me begin with the effect that of provisions of clause (5) of
Article IX of the Protocol on the issue under consideration. Article IX(5)
of the Protocol casts an obligation on the registry authority in the
Contracting State to honour a request for de-registration and export, if the
following two conditions, are fulfilled. First, the request made, is properly
submitted by an authorised party, under a recorded IDERA. Second, the
authorised party certifies to the registry authority that all registered
interests ranking in priority to that of the creditor in whose favour the
authorisation has been issued have been discharged, or that, the holders of
such interests have consented to the de-registration and export.
18.1 Admittedly, in this case both these conditions have been fulfilled.
18.2 The respondents, however, contend that since the definition of the
expression, "registered interests" means a registrable NCRI, the DGCA
cannot proceed to de-register the aircraft objects. In this context, the
definition of the following words and expressions needs to be kept in
mind. Let me therefore, cull out the definition of: NCRI, registered,
registered interests, unregistered interests, and registrable NCRI.
"non-consensual right or interest" means a right or interest
conferred under the law of a Contracting State which has
made a declaration under Article 39 to secure the performance
of an obligation, including an obligation to a State, State entity
or an intergovernmental or private organisation..." [Article
1(8), the Convention]
"registered" means registered in the International Registry
pursuant to Chapter V..." [Article 1(bb), the Convention]
"registered interest" means an international interest, a
registrable non-consensual right or interest or a national
interest specified in a notice of a national interest registered
pursuant to Chapter V..." [Article 1(cc), the Convention]
"unregistered interest" means a consensual interest or non-
consensual right or interest (other than an interest to which
Article 39 applies) which has not been registered, whether or
not it is registrable under this Convention..." [Article 1(mm),
the Convention]
"registrable non-consensual right or interest" means a non-
consensual right or interest registrable pursuant to a
declaration deposited under Article 40.. [Article 1(dd), the
Convention]"
18.3 A bare perusal provisions of the Article 39(1)(a) of the Convention
would show that the Contracting State is required to indicate (by filing
relevant declaration), the types of NCRIs (other than a NCRI to which
Article 40 applies) which, under the Municipal Law, have priority, over an
interest in the aircraft object equivalent to that of the holder of registered
international interest and, which shall have priority over a registered
international interest, without they themselves being registered as
international rights or interests.
18.4 In other words, a NCRI is a status, which is, conferred by the
Municipal Law of the Contracting State. It is not a right or interest created
by any agreement obtaining between the parties. The equivalent interest
alluded to in Article 39 would be that of a person, who has an interest
created under a charge or one, held by a conditional seller reserving title
under an agreement or, even a lessor under a lease agreement. The
petitioners, in the captioned petitions fall under the last category, that is,
they are lessors under a lease agreement.
18.5 Thus, quite clearly, these rights and interests, referred to in the
declaration filed under Article 39(1)(a) are created under the Municipal
Law of the Contracting State and, are not, conferred by the Convention.
18.6 Therefore NCRIs covered by the declarations lodged by the
Contracting State would have a priority over registered international
interest, even though, they are not registered themselves.
18.7 I may only note here that an interest is construed as an international
interest under the Convention, if it fulfils the requirements of Article 7 of
the Convention. In the context of the lessor, it would suffice if, the
agreement creating or providing for such an interest is: in writing; relates
to an object qua which the lessor has the necessary power of disposal; and
it enables the object to be identified in conformity with the Protocol. (Also
see, Article 2 of the Convention).
18.8 The arguments advanced by Mr. Setalvad, based on Article 40 of the
Convention that, NCRIs would not be enforceable unless they are
registered, overlooks the fact that under the Convention, there are two
distinct types of NCRIs. The first kind of NCRIs are those, which find
mention in Article 39 of the Convention. These NCRIs operate and have
priority by virtue of the declaration lodged by the Contracting State. Their
priority is not dependent on registration. There are other kinds of NCRIs,
which are registrable, and accordingly, provision for them is made in
Article 40 of the Convention. The use of the word, "registrable" as against
"registered" in Article 40 of the Convention makes that amply clear.
18.9 The declarations made in Form No. 1, filed under Article 39(1)(a)
and in Form No. 6 under Article 40 of the Convention, bring to fore this
distinction, as well. The declarations filed by the Government of India
under Article 39(1)(a), Article 39(1)(b) and Article 40 are set out below for
the sake of convenience :-
"..(i). Form No.1 [Specific opt-in declarations under Article
39(1)(a)]
The following categories of non-consensual right or interest
have priority under its laws over an interest in an aircraft
object equivalent to that of the holder of a registered
international interest and shall have priority over a registered
international interest, whether in or outside insolvency
proceedings, namely :-
(a). liens in favour of airline employees for unpaid wages
arising since the time of a declared default by that airline
under a contract to finance or lease an aircraft object;
(b). liens or other rights of an authority of India relating to
taxes or other unpaid charges arising from or related to the
use of that aircraft object and owed by the owner or operator
of that aircraft object, and arising since the time of a default
by that owner or operator under a contract to finance or lease
that aircraft object; and
(c). liens in favour of repairers of an aircraft object in their
possession to the extent of service or services performed on
and value added to that aircraft object.
(ii). Form No.4 [General opt-in declaration under Article
39(1)(b)]
Nothing in the Convention shall affect its right or that of
any entity thereof, or any intergovernmental organization in
which India is a member, or other private provider of public
services in India, to arrest or detain an aircraft object under
its laws for payment of amounts owed to the Government of
India, any such entity, organization or provider directly
relating to the service or services provided by it in respect of
that object or another aircraft object.
(iii). Form No.6 (opt-in declarations under Article 40)
The following categories of non-consensual right or
interest shall be registrable under the Convention as regards
any category of aircraft object as if the right or interest were
an international interest and shall be regulated accordingly,
namely :-
(a) liens in favour of airline employees for unpaid wages arising
prior to the time of a declared default by that airline under a
contract to finance or lease an aircraft object;
(b) liens or other rights of an authority of India relating to taxes
or other unpaid charges arising from or related to the use of
an aircraft object and owed by the owner or operator of that
aircraft object, and arising prior to the time of a declared
default by that owner or operator under a contract to finance
or lease that aircraft object; and
(c) rights of a person obtaining a court order permitting
attachment of an aircraft object in partial or full satisfaction
of a legal judgment.."
19. A bare reading of the declarations would show that via Form No. 1,
clause (a) and (b), liens have been created in favour of Airline employees
for unpaid wages arising since the time of the declared default by that
Airline. This apart, lien has also been created qua authorities in India in
respect of taxes or other unpaid charges, arising from or related to the use
of the aircraft objects and, owed by the owner or the operator of the
aircraft object. The lien adverted to is, one, which arises since the time of
the declared default by the concerned airline under the lease agreement.
The repairers of the aircraft objects have also been declared, as having lien,
over an aircraft objects in their possession to the extent of service or
services performed on and value added to the aircraft objects.
19.1 Under Article 39(1)(b) of the Convention, the declaration filed,
makes it clear that nothing in the Convention will affect the right of the
Government of India or any of the authorities or any inter-governmental
organisation, in which India is a member or that of a private provider of
public services in India to arrest or detain an aircraft object under its laws
for payment of amounts owed to any of the above, which, directly relates
to the service or services provided in respect of that object or another
aircraft object.
19.2 The declaration under Article 40 of the Convention makes a
distinction and, in that sense, is different to the one lodged under Article
39(1)(a) of the Convention, in as much as, though it adverts to the very
same liens pertaining to employees with respect to their unpaid wages,
taxes and unpaid charges of authorities in the Contracting State - it alludes
to a period arising "prior to the time of the declared default". [See Form
No. 6, clause (a)&(b)]. Therefore, unless such liens are registered, they
may not be efficacious.
19.3 Identical situation arises vis-a-vis rights of a person obtaining a
court order permitting attachment of an aircraft objects in partial or full
satisfaction of a legal judgment. The attachment will be recognized only
if, it is registered.
20. The above discussion would show that the existence of lien under
Article 39(1)(a) of the Convention has nothing to do with the remedy
which the petitioners seek to avail of under Article IX of the Protocol. De-
registration of the aircraft is not, in my opinion, hampered by the existence
of liens, if any, under the Municipal Law of the Contracting State. The
liens, as indicated above, under Article 39(1) (a) shall obtain if so provided
under the Municipal Law. The extent of the lien shall also be governed by
the Municipal Law and not by the Convention.
20.1 The learned ASG during the course of his submission was not able
to inform me, as to the Municipal Law under which DGCA has liens, and
whether, the appropriate stage had been reached for triggering any of the
liens, referred to in the declarations lodged by the Government of India.
21. This brings to the issue as to the statutory obligation cast on the
DGCA. The provisions of Rule 30 of the Aircraft Rules, are relevant for
this purpose. Once again for the sake of convenience, the relevant
provisions are extracted below :-
"...30. Certificate of Registration - (1). The authority
empowered to register aircraft and to grant certificate of
registration in India shall be the Central Government. The
certificate of registration shall include the following particulars,
namely :-
Type of aircraft, constructor's number, year of manufacture,
nationality and registration marks referred to under these rules,
full name, nationality and address of the owner, usual station of
aircraft and the date of registration and the period of validity of
such registration.
Provided that in the case of leased aircraft, the certificate of
registration shall also include the validity of the lease and the
names, nationalities and addresses of the lessor and the lessee:
(1A). x x x
(2). x x x
(3). x x x
(4). x x x
(5). x x x
(6). The registration of an aircraft registered in India may be
cancelled at any time by the Central Government, if it is
satisfied that -
(i). Such registration is not in conformity with the provisions of
sub-rule (2); or
(ii). The registration has been obtained by furnishing false
information; or
(iii). The aircraft could more suitably be registered in some
other country; or
(iv). The lease in respect of the aircraft, registered in pursuance
of sub-clause (iv) of clause (a) of sub-rule (2), is not in force; or
(v). The certificate of airworthiness in respect of the aircraft has
expired for a period of five years or more; or
(vi). The aircraft has been destroyed or permanently withdrawn
from use; or
(vii). It is inexpedient in the public interest that the aircraft
should remain registered in India.."
(emphasis is mine)
21.1 As would be evident upon a careful reading of the proviso to sub-
rule (1) that, in case of a leased aircraft, the COR should include inter alia
the factum of the validity of the lease. In the cases under discussion, the
lease is no longer valid; the lease agreements having been terminated.
21.2 The Central Government, which in this case, would be the DGCA,
upon termination of the lease is required to cancel the registration of an
aircraft, inter alia, under clause (iv) of sub-rule (6) of Rule 30 if, the lease
is not in force.
21.3 The argument advanced on behalf of the petitioners, proceeds as
follows, which is, that, a perusal of clauses contained in sub-rule (6) of
Rule 30 would show, once the conditions stipulated therein are fulfilled,
there is no discretion left with the DGCA, to defer the de-registration of
the aircraft.
21.4 This argument was sought to be supported by drawing my attention
to various situations, which were contemplated, inter alia, under clause (ii),
(v) and (vi) of sub-rule (6) of Rule 30. These are cases where de-
registration could be ordered if, the registrant has supplied false
information, or that, the certificate of airworthiness stood expired for a
period of five years or more, or if a situation arose whereby, the aircraft
was destroyed or permanently withdrawn from use. In other words, the
submission was, the word, "may" should be read as "shall".
21.5 As against this, the respondents have vehemently argued that it is
only an enabling power, and therefore, the decision in this regard will have
to be taken by the DGCA, and that, there can be no directive by the court
to act in a particular manner. It is, in this context, that the counsel for the
respondents had relied upon the Division Bench judgment of this court in
the case of: DRI Vs. Corporate Aircraft Funding Company LLC.
21.6 The argument that, this court cannot issue a writ of mandamus to
DGCA is sought to be supported by placing reliance on two Supreme
Court judgments, referred to in the Division Bench judgment in the case of
DRI Vs. Corporate Aircraft Funding Company LLC. These being: U.P.
SRTC & Anr. Vs. Mohd. Ismail & Ors. and UOI & Anr. Vs. Bilash
Chand Jain & Anr.
21.7 I may only note that the Division Bench in the case of DRI Vs.
Corporate Aircraft Funding Company LLC, concluded that the
instructions issued by DRI with regard to its dues, was not binding upon
the DGCA. The Division Bench, however, came to the conclusion that it
would be a factor which the DGCA will keep in mind while examining the
request of respondent no.1/lessor in that case, seeking de-registration of the
aircraft object under Rule 30 of the Aircraft Rules. The Division Bench
also, agreed that a writ of mandamus, directing the DGCA to de-register
the aircraft objects, could not have been issued. The court in its operative
directions, though, issued a writ of mandamus directing DGCA to exercise
its enabling power to take a decision on the request made by respondent
no.1/lessor for de-registration. [See Paragraphs 19, 22 and 24 of the
Division Bench judgment].
21.8 One cannot quibble with the proposition that a court cannot issue a
writ of mandamus where, an authority, is not required to act in a particular
manner by express provisions of law. This dicta finds reflection even in
Paragraph 12 of that judgement rendered in the case of UP SRTC & Anr.
Vs. Mohd. Ismail & Anr. The obligation, cast on DGCA under clause
(iv), sub-rule (6) of Rule 30 of the Aircraft Rules requires it to de-register
an aircraft if, the lease agreement qua the aircraft object is not in force.
Notably, like under clause (iv), each of the circumstances set out in sub-
rule (6) are independent of each other. It may be, in a given situation that,
more than one circumstance is attracted.
21.9 It is, therefore, quite possible that a statutory authority, which is
vested with the power to act, under the law, chooses not to act by citing
factors, with which the court finds fault: Would the court, in such a
situation, be obliged to refer the matter to concerned authority for a fresh
decision? I think not. The court, in my opinion, is not required to refer the
matter, once again, to the statutory authority for revisiting the issue if, the
necessary ingredients for exercise of that power are found to be in place,
and the reasons cited, not to act, by the statutory authority, are found, by a
competent court, to be legally untenable. In such a situation, the statutory
authority has no other option but to act, as that is the duty cast on it, under
the law. The court can thus issue a writ of mandamus. That, courts have
issued writ of mandamus in such like, situations is, evident on perusal of
the dicta and directions set out in the following cases: (i) Union of India
and Ors. Vs. Indo Afghan Agencies Ltd., (1968) 2 SCR 366; (ii)
Judgment dated 02.02.2012, passed in: WP(C) 423/2010, titled: Centre
for Public Interest Litigation and Ors. Vs. Union of India and Ors. (2G
case where the court ordered an auction to be carried out); and (iii) The
CAG and Anr. Vs. K.S. Jagannathan, AIR 1987 SCC 537.
22. In this context, I may only quote the following observations
contained in paragraph 20 of the judgment in the case of the CAG and
Anr. Vs. K.S. Jagannathan which are both instructive and illustrative of
the situations in which a court can issue a writ of mandamus:-
"..There is thus no doubt that the High Courts in India
exercising their jurisdiction under Article 226 have the power
to issue a writ of mandamus or a writ in the nature of
mandamus or to pass orders and give necessary directions
where the Government or a public authority has failed to
exercise or has wrongly exercised the discretion conferred
upon it by a statute or a rule or a policy decision of the
Government or has exercised such discretion malafide or on
irrelevant considerations or by ignoring the relevant
considerations and materials or in such a manner as to
frustrate the object of conferring such discretion or the policy
for implementing which such discretion has been conferred.
In all such cases and in any other fit and proper case, a High
Court can in the exercise of its jurisdiction under Article 226,
issue a writ of mandamus or a writ in the nature of
mandamus or pass orders and give directions to compel the
performance in a proper and lawful manner of the discretion
conferred upon the Government or a public authority, and in
a proper case, in order to prevent injustice resulting to the
concerned parties, the Court may itself pass an order or give
directions which the Government or the public authority
should have passed or given had it properly and lawfully
exercised its discretion.." (emphasis is mine)
22.1 In my opinion, a bare perusal of the unamended clauses of sub-rule
(6) of Rule 30 would show that all that the DGCA is required to do is to
ascertain whether circumstances exist, once it is found circumstances exist
as contemplated in the relevant clause, and the DGCA is found wanting, a
writ of mandamus could issue to compel performance. The fulfilment of
ministerial act and, therefore, vesting of a minor discretion in that behalf, if
it can be called one ought not to deter a court from not issuing a writ of
mandamus. The observations of the Supreme Court in this behalf in the
case of Sharif Ahmad & Ors. Vs Regional Transport Authority, Meerut
& Ors,. (1978) 1 SCC 1 being apposite, are extracted hereinafter:
".... It may describe any duty, the discharge of which involves
no element of discretion or independent judgment. Since an
order of mandamus will issue to compel the performance of a
ministerial act and since, moreover, wrongful refusal to carry
out a ministerial duty may give rise to liability in tort, it is
often of practical importance to determine whether discretion
is present in the performance of a statutory function. The
cases on mandamus show, however, that the presence of a
minor discretionary element is not enough to deter the courts
from characterising a function as ministerial.
We think that the Regional Transport Authority, pursuant to
the order of the Appellate Tribunal, had merely to perform a
ministerial duty and the minor discretionary element given to
it for finding out whether the terms of the Appellate Order
had been complied with or not is not enough to deter the
Courts from characterising the function as ministerial. On the
facts and in the circumstances of this case by a writ of
mandamus the said authority must be directed to perform its
function...."
22.2 The Division Bench Judgment of this court in DRI Vs. Corporate
Aircraft Funding Company LLC, has however, construed the power of the
DGCA under Rule 30 of the Aircraft Rules, as an enabling power. Being a
judgment of the Division Bench, concerning the issue at hand, it would
have to be followed both as a matter of propriety and in law, having regard
to the principle of judicial hierarchy.
22.3 This aspect of the matter, however, need not detain me any further
as, Rule 30 stands amended with the insertion of sub-rule (7) in Rule 30 of
the Aircraft Rules. The relevant amendments brought about in Rule 30,
vide notification no. GSR 78(E) dated 09.02.2015, issued by Ministry of
Civil Aviation read as follows :-
"...3. In Rule 30 the said rules, -
(a). In sub-rule (6), in clause (iv), for the words "is not in force;
or", the words "has expired or has been terminated in
accordance with terms of lease or" shall be substituted;
(b). After sub-rule (6), the following sub-rule shall be inserted,
namely :-
"7. The registration of an aircraft registered in India, to which
the provisions of the Cape Town Convention or Cape Town
Protocol apply, shall be cancelled by the Central Government,
as provided in the Cape Town Protocol, if an application is
received from IDERA Holder prior to expiry of the lease along
with :-
(i). The original or notarized copy of the IDERA; and
(ii). A certificate that all registered interests ranking in priority
have been discharged or the holders of such interest have
consented to the deregistration and export :
Provided that the deregistration of an aircraft by the Central
Government under sub-rule (6) or sub-rule (7) shall not affect
the right of any entity thereof, or any inter-governmental
organisation, or other private provider of public services in
India to arrest or detain or attach or sell an aircraft object under
its laws for payment of amounts, owed to the Government of
India, any such entity, organisation or provider directly relating
to the services provided by it in respect of that object.."
22.4 A bare reading of the aforesaid would show that with the insertion of
sub-rule (7) in Rule 30, the doubt, if any, as to whether the DGCA had any
discretion in the matter has got removed. Upon the creditor fulfilling the
conditions prescribed in clause (i) and (ii), of sub-rule (7), of Rule 30, the
DGCA is mandatorily required to cancel the registration.
22.4 Therefore, keeping in mind the aforesaid, in my view, a mandamus
shall issue to the DGCA to act in a particular manner, as the conditions
prescribed for acting in that manner, as required by law, stand fulfilled.
Any other direction would only frustrate the object and purpose with
which the amendment has been brought about in Rule 30. I am, thus,
persuaded to direct the DGCA to de-register the aircraft objects, which are
subject matter of the captioned writ petitions.
23. Before I conclude, let me also deal with other tertiary submissions
made by counsels.
23.1 As indicated above, one of the aspects qua which much argument
was advanced, pertained to, whether or not the remedies provided in
Article IX of the Protocol had to be given effect within five working days,
after the creditor notifies to the concerned authorities its intention to seek
relief in terms of the said Article.
23.2 This argument, advanced by Mr Srinivasan, stems from Article X(6)
of the Protocol. A careful perusal of Article X of Protocol would show
that it deals with modification of provisions regarding relief pending final
determination. The clauses (1) to (5) of Article X, give a clear indication
that they refer to the court route for seeking relief as provided in Article 13
of the Convention, as against IDERA route, as provided in Article IX of
the Protocol.
23.3 Therefore, once a creditor, takes recourse to the provisions of Article
13 of the Convention for seeking relief pending final determination by the
court, and such relief, is granted by the court, then the registry authority
and other administrative authorities (as applicable), in a contracting State,
are required to make available the specified reliefs as sought and granted
by the court, within five working days.
23.4 A confusion has arisen on account of the fact that both, in the
heading concerning clause (6) of Article X of the Protocol, as well as in
the body of the provision, there is a reference to Article IX(1) of the
Protocol. This appears to be incongruous, as Article X, relates to a remedy
which is sought by a creditor via court route. This conclusion, finds
support in the comments made in the Official Commentary, distributed
under the approval of UNIDROIT Governing Council, pursuant to
resolution no. 5, adopted by the Cape Town Diplomatic Conference1
23.5 Therefore, the argument of Mr Srinivasan, based on the provisions
of Article X(6) of the protocol, are not sustainable. However, this will not
have any impact on the aspect of de-registration by the DGCA, in view of
my discussion hereinabove.
24. The other submission advanced on behalf of Spicejet, which is that
the petitioners having initiated action in the English Court, in which,
amongst others reliefs sought, includes the relief of de-registration, and
therefore, the instant petition is not maintainable, in my view, is also
untenable. The jurisdiction of this court, if rightly invoked, cannot be
3.32 Article X(6) provides the trigger for action by the authorities where the creditor follows the court
route. A creditor invoking Article X(6) must have obtained an order for advance relief under Article
13(1) from a court in a Contracting State which is the State of registry or an equivalent order from a
foreign court, which need not itself be a court of a Contracting State. In effect the order must be one
which gives possession or control to the creditor or otherwise removes control from the debtor. In the
case of an order by a foreign court the relief must be "recognized" by a court of the State of registry.
"Recognised" denotes recognition of the foreign court's jurisdiction to make the order granting the relief,
whether under the Convention or under other rules of recognition of the law of the State of registry. The
basic idea is that any order should be either made or recognized by a court in a Contracting State which
is the State of registry. The relevance of Article 13 is not apparent from Article X(6) because of a
drafting slip. The second reference to Article IX(1) makes no sense because nowhere in the Convention
or Protocol is there any reference to the grant by a court of relief under Article IX(1). The reference
should be to an order granting relief under Article 13(1) of the Convention, as is clear from (a) an earlier
draft presented by the Aviation Working Group in which the precursor of Article X(6) referred back to
the relief specified in what became Article 13 and (b) the fact that, as indicated by its heading, the whole
of Article X is concerned with the modification of provisions regarding relief pending final
determination. To trigger Article X(6) the creditor must notify the relevant authority (a) that relief has
been granted under Article 13(1) and (b) that the creditor is entitled to procure the remedies of de-
registration and export. The purpose of this requirement is to dispense with the need for the authority to
investigate external facts and to require it to rely solely on the creditor's notification. In short, the
process is perceived as purely documentary...."
ousted merely on the ground that the petitioner has instituted an action in
the English Court. Spicejet has not filed any proceedings in this court, in
the nature of an anti-suit injunction. The fact that the aircraft objects are
registered with the DGCA, and have their particulars mentioned in the
ICAR, is not in dispute. Therefore, in my opinion, this court would have
jurisdiction to deal with the captioned petitions.
25. This brings me to one yet another argument advanced on behalf of
the respondents. The argument is that, money, in the form of cash security
is available with the petitioners - which is, far in excess of what is claimed
by them, and therefore, reliefs of the nature, including the relief of de-
registration, sought for in the petition, ought not to be granted.
25.1 This is an argument, which is, pivoted, if at all, on equity. For the
record, the petitioners have disputed that the amount available with them is
sufficient to tied-over the arrears payable to them, and the recurring
rentals, which would add up on use of aircraft objects. The petitioners'
commercial sense, at least at this juncture, is that, continued engagement
with Spicejet is not a viable proposition. The fact that an event of default
has occurred, is not in dispute. The petitioners' right to seek remedies,
both under the Convention and Protocol, have got triggered. The court,
therefore, cannot impose its own view on the creditors, contrary to their
commercial judgement, when there is no justification for the same either
under the lease agreement or, the Convention or, the Protocol, or even the
Municipal Law of the land. The argument centred on equity, even if
considered, is tenuous in view of the apprehensions of the petitioners.
Equity, as is often said, can only follow law, and not precede it.
25.2 Furthermore, India is a signatory to the Convention and has ratified
the same. Article 5(1)2 of the Convention clearly sets forth, inter alia, an
obligation on the contracting States, to promote uniformity and
predictability in the application of the Convention. Article 51(c) of our
Constitution obliges the State to "foster respect for international law and
treaty obligations in dealings of organized people with one another".
The provisions of Article 51(c) of the Constitution when read with Article
263, 274 and 315 of the Vienna Convention clearly cast an obligation on the
contracting State to not only remain bound by the terms of a treaty entered
into by it but also obliges the State not to cite internal law (read municipal
Article 5. Interpretation and applicable law
1. In the interpretation of this Convention, regard is to be had to its purposes as set forth in the preamble,
to its international character and to the need to promote uniformity and predictability in its application.
Article 26. PACTA SUNT SERVANDA: Every treaty in force is binding upon the parties to it and
must be performed by them in good faith.
Article 27. INTERNAL LAW AND OBSERVANCE OF TREATIES: A party may not invoke the
provisions of its internal law as justification for its failure to perform a treaty. This rule is without
prejudice to article 46.
Article 31. GENERAL RULE OF INTERPRETATION:
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the
terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text,
including its preamble and annexes:
(a) Any agreement relating to the treaty which was made between all the parties in connexion with the
conclusion of the treaty;
(b) Any instrument which was made by one or more parties in connexion with the conclusion of the
treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a) Any subsequent agreement between the parties regarding the interpretation of the treaty or the
application of its provisions;
(b) Any subsequent practice in the application of the treaty which establishes the agreement of the parties
regarding its interpretation;
(c) Any relevant rules of international law applicable in the relations between the parties.
4. A special meaning shall be given to a term if it is established that the parties so intended.
law), as a justification for failure to perform its obligation under a treaty.
An international Convention, i.e., a treaty, is required to be interpreted in
good faith, in accordance with the ordinary meaning given to the terms of
the treaty, in their context, and in the light of its stated object and purpose.
25.3 With the insertion of sub-rule (7) in Rule 30 of the Aircraft Rules, in
my opinion, the position with regard to the manner in which the DGCA
has to proceed, once a creditor seeks recourse to the remedy under Article
IX of the Protocol, has only acquired greater clarity. The court, therefore,
cannot interdict the process of de-registration on the nebulous ground of
equity as it would be contrary to the provisions of the Convention and
Protocol, to which, India is a party.
25.4 There is another aspect, which has to be kept in mind, while dealing
with such like matters; which is that, a court ought not to proceed in a
manner which retards funnelling of much needed private finance for
business transactions in India. This is not to say where legitimate legal
rights surface under the Municipal Law, the court would ignore them.
Sans such legitimate legal rights, the courts must prod the concerned
statutory authorities to act in consonance with the provisions of
international conventions, to which the contracting State is a party. [see
Vishaka & Ors. vs State of Rajasthan & Ors., (1997) 6 SCC 241 and Jolly
George Varghese & Anr. vs The Bank of Cochin (1980) 2 SCC 360]
26. In passing, a reference was also made to the fact that the issue with
regard to the petitioners' entitlement to terminate the lease agreements,
would require determination by a competent court of law, and therefore, no
relief could be given in the present petitions. This argument, in my view,
is misconceived, because it ignores the provisions of Convention and the
Protocol, which proceed on documentary evidence vis-a-vis the remedy
sought under Article IX of the Protocol. Upon fulfilment of the
ingredients set out in Article IX of the Protocol, the petitioners become
entitled to the reliefs encapsulated therein. Entitlement to termination of
the subject lease agreements is not an ingredient of Article IX of the
Protocol. All that the petitioners have to demonstrate qua this aspect, is
that, they have exercised their right under IDERA, and thus, proceeded to
terminate the subject lease agreements. There is no dispute that this aspect
has been taken care of by the petitioners. The submission is, accordingly,
rejected.
27. I am also not impressed by the submissions advanced on behalf of
the Spicejet that de-registration and/or re-possession of the aircraft objects
would impinge upon public interest. As indicated above, there is as much
if not more public interest in ensuring that treaty obligations are honoured,
and that, the parties adhere to their respective contractual obligations. The
very fact that India has ratified the Convention and Protocol, gives rise to
the presumption that it has been done in, the larger public interest, as
against a narrow interest of one particular airline. The argument that
passages have been booked with Spicejet, does not improve the case put
forth by the respondents as this is a risk that every unsecured creditor will
take vis-a-vis its transactions with the airline. This interest cannot come in
the way of a larger public interest, which is the obligation undertaken by
the contracting State to honour its commitments under the Convention and
the Protocol.
28. Which brings me to other reliefs, prayed for in the petitions,
including the direction sought for the export of aircraft objects along with
documentation on board. Grant of these reliefs, may require a prior
decision of the DGCA qua NCRI liens. As noted above, the learned ASG
was not able to inform me as to whether or not, there are liens obtaining
vis-a-vis the aircraft objects under the Municipal law; as contemplated
under Article 39(1) of the Convention. The difficulty has been
compounded by the fact that the DGCA, has not filed its return in the
matter. Therefore, the DGCA will, take a decision in the matter qua liens,
if any, obtaining. The decision in the matter will be taken by the DGCA
within two (2) weeks from today.
28.1 The decision will, inter alia, indicate the existence lien(s), if any,
with reference to the relevant Municipal Law as required by the
declarations filed by the Government of India. DGCA's decision will also
indicate as to whether, the liens, as contemplated in the declarations filed,
in consonance with the Convention, are operable at present.
28.2 The DGCA will, thus specifically, deal with the prayer made by the
petitioners for export of the aircraft objects along with the documentation
on board, out of the country.
28.3 Furthermore, as indicated above, DGCA will, forthwith, de-register
the aircraft objects.
29. The writ petitions and the pending applications are, accordingly,
disposed of.
RAJIV SHAKDHER, J
MARCH 19, 2015
kk/yg
