TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 1427
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....on 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 t....
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....ement. 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....
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..... 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 ....
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.... 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. No. Aircraft Model Manufacturer's Sl. No Indian Registration Mark Lease agreement date IDPOA date IDERA date Certificate of registration 1 B 737800 37364 VT-SZI 7.8.13 3.10.13 03.10.13 14.10.13 2 B 737800 41397 VT-SZJ 7.8.13 24.1.14 24.1.14 03.02.14 3 B 7378GJ 41398 VT-SZK 7.8.13 21.5.14 21.5.14 26.5.14 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 ....
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.... 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 Aircraf....
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....ound 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-regist....
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....ments 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 Reve....
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.... 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....
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....e-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 IDER....
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....y 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 submission....
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....s 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 ....
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....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....
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....ons 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 Conven....
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.... 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 d....
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.... 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 p....
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....s 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....
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.... 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 ....
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....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-registrat....
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....ed 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, ....
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....rate 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 applicatio....
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....t 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 Conference 3.32 Article X(6) provides the trigger for action by the authorities where the....
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....ated 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 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 deregistration, 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 th....
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.... 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. 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 law), as a justification for failure to perform its obligation under a treaty. An international Convention, i.e., ....
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....ordingly, 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....