TaxTMI 
TaxTMI 
2015 (3) TMI 1427
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.... 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 petitio....
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....sequently, 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 t....
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....15, 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) Tha....
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....ssist 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. 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.....
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....CAR, 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....
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....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 ....
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....tocol, 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 deregistration 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 als....
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....mmercial 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 ....
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...., 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,....
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....rame-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....
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....tance, 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....
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....ncy 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 C....
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....y 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: ....
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..... 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 nonconsensual 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 ....
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....ch, 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 regist....
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....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 accord....
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....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. Deregistration 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 re....
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....ng 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 deregistration 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 argue....
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...., 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) Th....
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....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 Aircraf....
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.... 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, gi....
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.... 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 deregistration 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...." 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 o....
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....forth in the preamble, to its international character and to the need to promote uniformity and predictability in its application. 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 26, 27 and 31 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 contex....
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....s 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....