TaxTMI 
TaxTMI 
2023 (7) TMI 485
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.... For the Petitioner Through: Mr. Satvik Varma, Senior Advocate with Mr. Ravi Nath, Mr. Ankur Mahindru, Mr. Rohan Taneja, Mr. Aditya Kapur, Mr. Tanveer Oberoi, Mr. Tushar Mudgil, Mr. Mehul Jain, Mr. Tarun and Mr. Ankit, Advocates. Mr. Dayan Krishnan, Senior Advocate Mr. Mukul Rohtagi and Mr. Arun Kathpalia, Senior Advocates with Ms. Meghna Rajadhyaksha, Ms. Medha Sachdev, Mr. Rishabh Jaisani, Ms. Salonee Kulkarni, Ms. Riya Basu, Mr. Ajay Kumar, Mr. Kshitij Wadhwa, Mr. Aditya Dhupar and Ms. Diksha, Advocates. Mr. Ajay Kumar, Ms. Anchal Nanda, Mr. Hetram Bishnoi, Advocates. Mr. Rajiv Nayyar, and Mr. Amit Sibal, Senior Advocates with Ms. Marylou Bilawala, Mr. Premaya Goyal, Ms. Sharleen Lobo, Ms. Neetika Sharma, Mr. Girish Shankar, Mr. Chiranjin Sharma, Mr. Vinamra Kopariha and Mr. Mayank Bharghav, Ms. Apoorva Kaushik, Advocates Mr. Gaurav Mitra and Mr. Pai Amit with Mr. Nimish Vakil, Ms. Bhavna Duhoon & Mr. Rahat Bansal, Advocates. Mr. Nitin Sarin, Advocate. For the Respondents Through: Mr. Rajesh Gogna, CGSC for R1/UOI. Ms. Anjana Gosain, SPC with Ms. Avshreya Pratap Singh Rudy, Ms. Nippun Sharma, Advocates for R- 1/UOI/DGCA. Mr. Ramji Srinivasan, Senior Advocate with Mr. Anuj Berry....
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....eferred to as "the Lease Agreement(s)"]. In all, the Respondent/Go Air had leased 30 Aircraft from these 8 Petitioners. 3.2 For ease of reference, certain relevant details qua the Petitioners are reproduced in the table below: S.No Petition No. & Case Title and Interim Application Details Details of the Aircraft Leased Lease Agreement Date(s) IDERA Date(s) Lease Agreement Termination Date(s) Date of De-registration Application lodged with DGCA Whether an Appeal has been filed in the NCLAT? 1 WP(C) 6569/2023- ACCIPITER INVESTMENTS AIRCRAFT 2 LTD V UOI CM APPL. 25806/2023 FOR INTERIM RELIEF Airbus A320-214 MSN 5811 IRM VT-GOO 04.10.13 23.02.18 02.05.23 04.05.23 YES, appeal filed Co App (AT) (Ins) 631/23 2 WP(C) 6626/2023- EOS AVIATION 12 (IRELAND) LTD. Vs. UOI CM APPL. 26011/2023 FOR INTERIM RELIEF Airbus A320-271N MSN 11111 IRMVT-WDB 08.09.22 03.10.22 02.05.23 03.05.23 YES, appeal filed Co App (AT) (Ins) 633/23 3 WP(C) 7214/2023- PEMBROKE AIRCRAFT LEASING 11 LTD VS DGCA AND ORS CM APPL. 30784/2023 FOR INTERIM RELIEF Airbus A320NEO MSN 7858 IRMVT-WGN 02.05.18 04.05.18 02.05.23 03.05.23 NO 4 WP(C) 7369/2023- SMBC AVIATION CAPITAL LIMITED AND ORS Vs. ....
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....-271N MSN 8464 IRM VT-WGW 11.05.18 9. Airbus A320-271N MSN 8482 IRM VT-WGX 11.05.18 10. Airbus A320-271N MSN 8503 IRM VT-WGZ 18.10.18 3.3 Pursuant to the execution of the Lease Agreement(s), the Respondent/Go Air also executed and submitted before the Respondent/DGCA, an Irrevocable De-Registration and Export Request Authorisation [hereinafter referred to as "IDERA"] for each Aircraft, as is defined in Rule 3(28A) of the Aircraft Rules, on dates as mentioned in the table hereinabove. 3.4 The IDERA, being almost identical in all the cases, is extracted from W.P. (C) 6626/2023 and reproduced below: "IRREVOCABLE DE-REGISTRATION AND EXPORT REQUEST AUTHORISATION [DATED] To Directorate General of Civil Aviation Re: Irrevocable De-Registration and Export Request Authorisation The undersigned is the registered operator of the Airbus Model A320-271N aircraft bearing manufacturer's serial number 11111 and registration number VT-WDB (together with all installed, incorporated or attached accessories, parts and equipment, the 'aircraft'). This instrument is an irrevocable de-registration and export request authorisation issued by the undersigned in favour of Eo....
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....rs on 02.05.2023, 03.05.2023 and 04.05.2023. 3.8 The notice of default and termination sent by the Petitioners to Respondent/Go Air [hereinafter referred to as "Termination Notice"] inter-alia stated that the Respondent/Go Air was to immediately cease operation of the Aircraft; and the Petitioners were "assuming" possession of the Aircraft. The Termination Notice further directed the lessee to provide the necessary assistance and cooperation for deregistration and export of Aircraft. 3.9 As a necessary corollary to the Termination Notice, Application(s) for deregistration of the Aircraft with immediate effect, under Rule 30(7) of the Aircraft Rules, were filed by the Petitioners for deregistration of the Aircraft with the Respondent/DGCA [hereinafter referred to as "Deregistration Application"]. Along with the Deregistration Application, the requisite documents were also enclosed by each Petitioner. 3.10 In the meantime, the Respondent/Go Air initiated proceedings before the NCLT, under Section 10 of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as "IBC"] for initiation of voluntary Corporate Insolvency Resolution Process [hereinafter referred to as "CIRP"]. ....
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....from IDERA Holder prior to expiry of the lease along with:- (i) the original or notarised 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." (iii) Relying on the judgment in the case of Awas 39423 Ireland Ltd. & Ors. v. Directorate General of Civil Aviation & Anr. 2015 SCC OnLine Del 8177, it is submitted that the deregistration of an aircraft is only a 'ministerial act'. The relevant paragraphs of the Awas case relied upon are below: "21.1 As would be evident upon a careful reading of the proviso to sub-rule (1) that, in case of a leased airc....
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....the Respondent/DGCA has no option but to deregister the Aircrafts. (v) Mr. Krishnan further submits that even though the Respondent/Go Air has filed for Corporate Insolvency under the provisions of the IBC and a moratorium under Section 14 of the IBC has been imposed by order dated 10.05.2023 of the NCLT, and, since NCLT is not entitled to hear pleas in relation to the deregistration of the Aircraft, there is no alternative remedy available to the Petitioner except to approach this Court under Article 226 of the Constitution of India. (vi) It is further submitted that upon termination of the Lease Agreement(s), the Aircraft does not meet the mandatory requirements for flying under the Aircraft Act, 1934 and the Aircraft Rules and hence, can no longer be used by the lessee, i.e. in this case the Respondent/Go Air. In the interim period, it has been prayed that the directions be passed against the Respondent/Go Air, to not, in any manner, operate and fly the Aircraft and permit inspection by the Petitioner or their Authorised Representatives. 4.2 Submissions of Mr. Satvik Verma, Senior Advocate: (i) Mr. Verma submits that the Respondent/DGCA has not challenged the applications o....
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....two Petitioners each of whom have 10 aircrafts, on lease to Respondent/Go Air. It is submitted that the Lease Agreement(s) for all 20 Aircrafts belonging to both Petitioners were terminated on 02.05.2023 i.e., 8 days prior to the date the NCLT admitted the Petition for voluntary insolvency as filed by the Respondent/Go Air. (ii) Mr. Nayyar draws the attention of the Court to the aircraft bearing no. MSN 6072 which is a subject matter of W.P.(C) 7369/2023 to submit that the Lease Agreement dated 01.05.2014 between SMBC Aviation Capital Limited and Respondent/Go Air expired by efflux of time on 13.05.2023. Mr. Nayyar submits that the mandatory maintenance/engine runs of MSN 6072 are required to be conducted by Respondent/Go Air and permission in this regard needs to be granted by Respondent/DGCA for this mandatory maintenance on an urgent basis. (iii) Mr. Nayyar further submits that unless immediate steps are taken for operation and maintenance of all the Aircrafts including MSN 6072, irreparable loss and damage shall be caused to the Petitioner. (iv) Lastly, it is submitted that the lease in all 20 aircrafts owned by the Petitioners have been terminated either by termination or b....
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....Rules employs the term "shall" in contrast to "may" in Rule 30(6). In this regard, reliance is placed on the Judgment of the Supreme Court in Wellington Associates Ltd v Kirit Mehta (2000) 4 SCC 272 to submit that the legislature has deemed it fit to use the word "may" in Rule 30(6) and "shall" in Rule 30(7) and the provision has to be construed accordingly. Hence, in compliance with the Aircraft Rules, it is a mandatory obligation of Respondent/DGCA to deregister the Aircraft within a period of 5 days from the date of receipt of a Deregistration Application. (iv) Mr. Kathpalia further submits that the Petitioner in this Writ Petition has not filed any appeal to the NCLAT and further the NCLAT has no jurisdiction over the Respondent/DGCA, so reliance by Respondents on the NCLT/NCLAT order is misplaced. 4.6 Submissions of Mr. Mukul Rohtagi, Senior Advocate: (i) Mr. Rohtagi seeks to rely on Section 18(f) of IBC to submit that the moratorium can be imposed on an asset owned by the Corporate Debtor, but the Interim Resolution Professional/Resolution Professional [hereinafter referred to as 'IRP' or 'RP' (as the case may be)] has no right to take over the assets of a third party suc....
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....rafts, as the remedy available to the Petitioners if they are aggrieved with the orders of NCLAT lies only before the Supreme Court. (iii) Mr. Salve relies on Section 63 of the IBC to submit that the Civil Courts have no jurisdiction, if the NCLT or the NCLAT is already seized of the insolvency of a Corporate Debtor. (iv) Relying on the judgment in the matter of Anand Rao Korada Vs. Varsha Fabrics (P) Ltd. and Ors. (2020) 14 SCC 198, Mr. Salve further submits that the Supreme Court have time and again frowned upon the High Court when the proceedings under the IBC have been stalled or impeded. (v) Mr. Salve submits that in terms of Section 14(1)(d) of the IBC, the moratorium as imposed prohibits recovery of any property by an owner or lessor whether such property is "occupied by" or "in possession of" the Corporate Debtor. Reliance in this regard is inter-alia placed on the extract judgment (paragraph 23) of the Supreme Court in the case of Rajendra K. Bhutta vs. MHADA AIR 2020 SC 3274 to state that the Aircraft at present are in the possession/occupation of Respondent/Go Air and hence the moratorium as imposed cannot be breached: "23. The conspectus of the aforesaid judgments ....
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....endra Lohia & Anr. 2023 scconline SC 260, in this regard as follows: "28. As we have pointed out earlier, the word "asset" is not defined, either in IBC or in any of the seven enactments referred to in Section 3(37) of the Code. But the word "asset" is defined in Section 102(2) of the Income Tax Act, 1961 to include "property or right of any kind". Though Section 102 applies as such to Chapter X-A of the Income Tax Act, the definition throws light on the fact that property or right of any kind is considered to be an asset." (iii) The Orders of the NCLT/NCLAT are "orders in rem" and have not been challenged by the Petitioners before any forum and that the Writ Court is not the appropriate remedy for its challenge. 5.3 Submissions on behalf of Mr. Ramji Srinivasan, Senior Advocate: (i) Mr. Srinivasan, submits that the registration of an Aircraft is mandatory for it to be used and flown, and that the same is important for the Corporate Debtor, in this case the Respondent/Go Air, to treat the Corporate entity as a "going concern". (ii) It is also submitted that termination of the Lease Agreement(s) would completely eliminate the existence of the Corporate Debtor, and hence all pr....
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....d either on the DGCA Portal and/or a hard copy was handed over by the Owners/Lessors of the Aircrafts as set out on the dates above. (ii) Ms. Gosain, while acknowledging that there is no quarrel with respect to the mandatory imposition of deregistration under Rule 30 (7) of the Aircraft Rules, submits that proceedings qua on the Deregistration Applications commenced from 04.05.2023, however, the 5 working days as is envisaged in the provision had not lapsed when the CIRP Order on 10.05.2023 was passed by the NCLT. This affected the process of deregistration. (iii) Ms. Gosain further submits that the Respondent/DGCA is required to comply with the directions of a Court and once the NCLT order was passed, the procedure for deregistration could not continue. In this regard, Ms. Gosain seeks to rely on Section 238 of the IBC to submit that the IBC has an overriding effect on all other laws and in the event of any inconsistency, the IBC is to prevail. It is contended that Respondent/DGCA is neither supporting the Lessor nor the Lessee, they are just performing their duties in accordance with law. 7. REJOINDER SUBMISSIONS ON BEHALF OF THE PETITIONERS: 7.1 In Rejoinder, learned Senior....
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.... 5(11) and 5(12) of the IBC, it is further submitted that there is a difference between (Insolvency) initiation date and Insolvency commencement date. Insolvency proceedings may have been initiated prior to the date of the filing of the Deregistration Application but the Commencement Date of the Insolvency is the date when the NCLT admits the Application, which is 10.05.2023. Therefore, as the termination of Lease Agreement(s) and Deregistration Applications were filed prior in time, the Moratorium as imposed would not apply to the Petitioner. (viii) The Respondent/DGCA is not a civil Court/Arbitrator but a statutory body which should perform its obligatory duties by de-registering the Aircrafts. ANALYSIS: 8. I have heard the learned Senior Counsels and learned Counsels appearing for the Parties. The prayers made in the Petitions which are pending adjudication are similar to the extent that all 8 Petitioners pray for issue of a Writ of mandamus to Respondent/DGCA to direct deregistration of the respective Aircrafts owned by them [the details of which are set forth in the paragraph 3.2 above], and also to facilitate the export and physical possession of these Aircrafts. 8.1 Pen....
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.... insolvency resolution professional or similar official for Lessee or for substantially all of its property or assets, or (3) the liquidation, reorganization, dissolution, administration, examinership, corporate insolvency resolution process or winding up of Lessee, and such proceeding or petition continues undismissed for 60 days, save in respect of any frivolous or vexatious petition, which Lessee is contesting in good faith by appropriate proceedings and in respect of which adequate reserves have been made available by Lessee;....." 10.3 Admittedly, the Respondent/Go Air was in default of its rental payment obligations under the Lease Agreements qua all 8 Petitioners. 10.4 Amongst the remedies available to a Lessor, pursuant to an event of default as provided under the Lease Agreement(s), is de-registration by the Aviation Authority, i.e., the Respondent/DGCA and export of the Aircraft out of the Respondent/GoAir's jurisdiction. Clause 13.1.3 of the Lease Agreement(s)in this regard provides as follows: "13.1.3 Specific Remedies Without limiting the generality of the foregoing Lessor will have the right: ... ...(4) without need of any consent, authorization or actio....
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....oners' have terminated the Lease Agreement(s) and commenced the process of de-registration of the Aircraft, such Aircraft cannot be flown. 12. The arguments of the Petitioners can, thus be summed up as follows: (i) The provisions of Rule 30 (7) of the Aircraft Rules makes it mandatory for deregistration of Aircraft, once the requisite documentation is provided by the Applicant. (ii) The assets belonging to a third party are specifically excluded under the provisions of the Explanation (a) to Section 18 of the IBC and that the provisions of Section 14 of the IBC cannot be made applicable in such cases. (iii) Once a Lease is terminated, the lessor [Petitioners herein] are in de facto possession of the Aircraft and as such, the Aircraft is not operational in terms of the Aircraft Rules. However, there then is an imminent danger to the very valuable asset of the Petitioners being irreparably damaged on account of non-conduct of the maintenance activities. (iv) The five working days qua Deregistration Application would expire on 09.05.2023 in the matters where Petitioners had sent the notice for termination on 02.05.2023 and on 10.05.2023, where the Termination Notice was sen....
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....s and the Court cannot interfere even on grounds of equity; keeping in mind, the protection of private business transaction law in India, international conventions such as Cape Town Convention must be followed; the disputes qua validity of the termination of the lease are not relevant for the purposes of deregistration and the contention that public interest will be impinged if the deregistration is granted is not a valid ground for refusal. 15.1 It is apposite to refer to the following extracts of the Awas case in this regard below: "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[sic:22.5] 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 ....
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....on 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."' [Emphasis supplied] 16. Under sub-section (4) of Section 14 of IBC, an order for moratorium has effect from the date of such order till the completion of the CIRP as follows:- "14. Moratorium (1) .... (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approv....
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.... filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged. 27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law. 27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion. 27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not r....
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....rpreter of the Constitution and, therefore, of the limits of authority of the different organs of the State. It is to be noted that the British Parliament with the Crown is supreme and its powers are unlimited and courts have no power of judicial review of legislation." 30. The NCLT is not even a civil court, which has jurisdiction by virtue of Section 9 of the Code of Civil Procedure to try all suits of a civil nature excepting suits, of which their cognizance is either expressly or impliedly barred. Therefore NCLT can exercise only such powers within the contours of jurisdiction as prescribed by the statute, the law in respect of which, it is called upon to administer....." [Emphasis supplied] 17. The 30 Aircrafts are 'assets' owned by the Petitioners which were previously under a contractual agreement i.e., the Lease Agreement(s) with the corporate debtor. Explanation (a) to Section 18 of IBC excludes assets owned by a third party in trust or contractual agreement as follows:- "18. Duties of interim resolution professional.- (1) The interim resolution professional shall perform the following duties, namely- (a) .... .... (g) .... Explanation.-For the purpo....