Apr 10, 2024

Aviation 2024

This practice guide provides insights into the regulatory framework, trends and developments governing the aviation sector in India.

1.1        Please list and briefly describe the principal legislation and regulatory bodies which apply to and/or regulate aviation in India.

The Ministry of Civil Aviation (“MoCA”) is the nodal Ministry responsible for the formulation of policy and regulation of civil aviation in India.  It oversees the planning and implementation of schemes for the growth and expansion of civil air transport, airport facilities, air traffic services and carriage of passengers and goods by air.  The principal regulatory authorities functioning under MoCA are:

  1. The Directorate General of Civil Aviation (“DGCA”) enforces civil aviation regulations and regulates air transport services, air safety and airworthiness standards.
  2. The Airports Authority of India (“AAI”) creates, upgrades, maintains and manages civil aviation infrastructure both on the ground and in the Indian airspace.
  3. The Airport Economic Regulatory Authority (“AERA”) determines the tariff for aeronautical services and Passenger Service Fees to monitor performance standards relating to quality, continuity and reliability of service.
  4. The Bureau of Civil Aviation Security (“BCAS”) ensures that the aviation security standards follow national and international obligations/treaties on air safety, to which India is a signatory.

Based on the activity concerned within the aviation sector, the applicability of regulatory laws may also differ.  Some of the principal legislations are as follows:

  1. The Aircraft Act, 1934 (“Aircraft Act”) and the Aircraft Rules, 1937 (“Aircraft Rules”): (i) regulate the manufacture, possession, use, operation, sale, and import and export of aircraft; and (ii) stipulate the parameters for determining air worthiness, maintenance of aircraft, general conditions for flying and safety, registration of aircraft and the conduct of investigations.
  2. The Airports Authority of India Act, 1994 (as amended) (“AAI Act”):  establishes the AAI and makes the AAI responsible for the development, finance, operation and maintenance of all airports in India.
  3. The Civil Aviation Requirements (“CAR”): as issued by the DGCA provide standards expected to be met before a licence, certificate, approval or permission is granted/accorded.  The DGCA also issues Aeronautical Information Circulars (“AIC”) which contain explanatory or advisory information concerning flight safety, air navigation, technical, administrative or legislative matters.
  4. The Carriage by Air Act, 1972 (as amended) (“Carriage Act”): governs the rights and liabilities of air carriers and is applicable to both domestic and international carriage by air, irrespective of the nationality of the aircraft performing the carriage.
  5. Airports Economic Regulatory Authority of India Act, 2008 (as amended) (“AERA Act”) provides for: (i) the establishment of AERA; (ii) regulates tariff and other charges for services rendered at airports; and (iii) establishes an appellate tribunal for the adjudication of disputes.
  6. Aircraft (Security) Rules 2011 (as amended): deals with the air safety and security regulations for aerodromes and aircraft.

1.2        What are the steps which air carriers need to take in order to obtain an operating licence?

Rule 134 of the Aircraft Rules provides that no person shall operate any scheduled air transport service from, to, in, or across India except with the permission of the Central Government, granted in accordance with the provisions of Schedule XI of the Aircraft Rules.

The aforesaid permit is equivalent to an Air Operator’s Certificate that is required to be issued by a Member State of the International Civil Aviation Organization (“ICAO”).  Besides other requirements, the issuance of a permit shall depend on the applicant demonstrating adequate organisation, method of control and supervision of flight operations, training programme and maintenance arrangements consistent with the nature and extent of the operations specified.

The Air Operators Certification Manual (CAP 3100), issued by the DGCA, provides guidance to an applicant seeking an Air Operator’s Permit (“AOP”) on the systematic procedures to be followed during the certification process which has been classified and divided into different phases as follows:

  1. Pre-application phase – The applicant is required to submit a letter of intent to the DGCA outlining its proposal and apply to the MoCA for issuance of a No-Objection Certificate upon examining its proposal from financial, economic and legal perspectives, which may also include a pre-application meeting.  Upon being satisfaction of these aspects, MOCA may issue the No-Objection Certificate.
  2. Formal application – The applicant is required to submit a complete application in the prescribed form to the DGCA, along with prescribed fees and relevant supporting documents; upon completing the assessment of the applicant’s proposal, the DGCA may invite the applicant for a formal meeting to discuss further details relating to the certification process.
  3. Document evaluation – The DGCA shall conduct a series of discussions to assess the applicant’s capability to conduct aircraft transport operations by verifying the documents submitted by the applicant.  The documents should reflect precisely the mode and way the applicant intends to conduct the proposed operations, and, upon approval, they shall form a part of the understanding between the DGCA and the applicant regarding future functioning of the applicant as the operator.
  4. Demonstration and inspection – The applicant is then required to demonstrate to the DGCA its capability of conducting the proposed operations in accordance with the procedures detailed in the documents reviewed during the previous phase.  All information provided by the applicant shall be scrutinised in detail, including inspection of facilities and sufficiency of resources.  In the event the DGCA is satisfied with the authenticity of the documents and the inspection process, approved flight(s) will be conducted to destinations of intended operations, as determined by the DGCA.  In the event the DGCA requires the applicant to make operational changes, the same shall be carried out by the applicant prior to moving on to the next phase.
  5. Certification – Upon completion of the procedure stated in the previous phases and the fulfilment of criteria stipulated by the DGCA to the DGCA’s satisfaction, an AOP shall be issued by the DGCA along with the associated operations specifications.

Once certified, the operator is responsible for continued compliance with the initial conditions of certification and applicable legislative requirements including DGCA’s requirements promulgated from time to time.

1.3        What are the principal pieces of legislation in India which govern air safety, and who administers air safety?

India follows the ICAO guidelines on Safety and Standards and Recommended Practices (“SARPs”).  The DGCA regulates the safety requirements to be observed by aircraft, including foreign aircraft operating in India.  The Aircraft Rules in Part II (General Conditions of Flying), Part III (General Safety Conditions) and Part VI (Airworthiness) stipulate the conditions of safety that an aircraft is required to be compliant with in order to be operated in Indian airspace.  The DGCA issues a Certificate of Airworthiness (prior to the flying of aircraft) confirming that it conforms to the design standards, is safe for operation, and meets minimum requirements with respect to engineering, inspection and maintenance.  Each aircraft either manufactured in India or imported into India for which a Certificate of Airworthiness is issued must conform to the design standards and be in a condition for safe operation.  To be eligible for issuance of a Certificate of Airworthiness, an aircraft must be Type Certified, viz its type certificate validated or its type accepted by the DGCA.

Section 5 of the CAR dealing with Air Safety provides mechanisms for reporting air accidents/incidents and the procedure for accident/incident investigation.  Further, it requires every aircraft operator to formulate a flight safety manual (as approved by the DGCA) which should clearly lay down the operator’s safety policies as well as its Flight Safety Awareness and Accident/Incident Prevention Programme. Additionally, the Flight Data Analysis Program (“FDAP”) contained under Section 5 of the CAR provides a systematic tool for proactive identification of hazards in aircraft operations before they result in accidents or serious incidents and requires all scheduled and non-scheduled operators to establish the FDAP to determine hazards/shortcomings in the operation of aircraft, as part of their safety management system.

The DGCA had released a five-year National Aviation Safety Plan (2018–2022), which incorporated the Safety Enhancement Initiatives contained in the Regional Safety Plan of the Regional Aviation Safety Group – Asia Pacific and is in line with ICAO’s Global Aviation Safety Plan.

1.4        Is air safety regulated separately for commercial, cargo and private carriers?

The safety of commercial, cargo and private carriers are not regulated by different safety conditions.  However, the application processes for obtaining an AOP for commercial, cargo and private carriers are different.

1.5        Are air charters regulated separately for commercial, cargo and private carriers?

No air transport service, other than a scheduled air transport service, can be operated by any undertaking except with the special permission of the Central Government or under a non-scheduled operator’s permit granted by the Central Government.

Air charter operations are regulated for passenger services which only apply to twin-engine aeroplanes with seating capacity of not more than nine seats, single-engine aeroplanes and single-piston engine aeroplanes.  Cargo operations can only be undertaken by non-scheduled air transport operators which operate multi-engine fixed-wing aircraft (freighter version) and single or multi-engine helicopters.

The DGCA also regulates the operation of tourist charter flights to and from India as part of an Inclusive Tour Package under the AIC dated February 6, 2020.

1.6        As regards international air carriers operating in India, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators?  By way of example only, restrictions and taxes which apply to international but not domestic carriers.

The DGCA and AAI regulate foreign aircraft operating in India and Indian airports.  As per the Bilateral Air Services Agreements entered into between India and other foreign countries, every such foreign country is required to designate airline(s) for operating the agreed services on specified routes and to withdraw or alter such designations.

However, as per CAR (Section 3 – Air Transport Series ‘F’ Part I Issue II) dated 7th December, 2017 international flights are not permitted to pick up passengers/cargo at any place in India for disembarkation at any other place in India, i.e. “cabotage” is not permitted.

AIC 09/2020 dated June 12, 2020 on “Requirements for grant of Operating Authorisation to Foreign Airlines under the Bilateral Air Services Agreements” (“AIC No. 9”) imposes conditions on ownership, effective control and the safety qualifications of foreign airlines.

The Airports Authority of India (Ground Handling Services) Regulations, 2018 (as amended) (“GH Regulations”) and the AVSEC Order No. 03/2009 dated August 21, 2009 (as amended), also contain certain restrictions on foreign airlines undertaking self-handling in respect of passenger- and baggage-handling activities.

1.7        Are airports state or privately owned?

Airports in India can be owned, developed and operated by State entities, such as the AAI under the AAI Act, as well as private parties after they have obtained a licence to operate airports from the DGCA and by entering into operation, management and development agreements (“OMDAs”) with the AAI.  All airports, whether managed by AAI or private parties, must be operated according to the provisions of the AAI Act as well as the Aircraft Act.

In line with the Government’s open-skies policy, the AAI has collaborated with private entities for operation, management and development under the public-private partnership model (“PPP model”).  The airports of Ahmedabad, Bengaluru, Cochin, Delhi, Guwahati, Hyderabad, Jaipur, Lucknow, Mangalore Mumbai and Thiruvananthapuram are currently operated under the PPP model by way of entering into OMDAs with the AAI.  As on June, 2020, the AAI manages a total of 137 airports which include 24 International airports, 10 Custom Airports and 103 Domestic airports.  Further, as at the time of writing this chapter, the Government of India (“GoI”) has granted “in principle” approval for setting up about 21 greenfield airports in the country, to be developed by private parties, State Government or other Government agencies.

1.8        Do the airports impose requirements on carriers flying to and from the airports in India?

The Aircraft Rules and the AAI Act restrict and qualify access to airports in India.  Further, AIC No. 9 imposes certain requirements such as conditions on ownership, effective control and safety qualifications of foreign airlines.

1.9        What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?

The SARPs contained in the 19 Technical Annexes to the Convention on International Civil Aviation are applied universally and produce a high degree of technical uniformity which has enabled international civil aviation to develop in a safe, orderly and efficient manner.  According to the provisions laid down in Annex 13 to the Chicago Convention on Aircraft Accident and Incident Investigation, Contracting States are required to investigate or delegate the investigation of accidents which have occurred in their territory.

The Aircraft (Investigation of Accidents and Incidents) Rules, 2017 (“Accident Rules”), provide for the establishment of the Aircraft Accident Investigation Bureau of India (“AAIB”), which is responsible for the investigation of accidents or incidents arising out of, or during, navigation in or over India of any aircraft, and prescribes a list of powers and functions of the investigating body, procedure of investigation, reporting of incidents and powers of the inquiry officer.  The Schedules to the said Rules also lists out guidance on damage to the aircraft and enlists various instances of serious accidents.

Section 5 of the CAR dealing with Air Safety also provide for implementing Flight Safety Awareness, and an Accident/Incident Prevention Programme for all operators engaged in scheduled or non-scheduled air transport services.

Further, AIC No. 16/2021 issued on September 23, 2021 provides for a voluntary reporting system of anyone who witnesses or is involved in or has knowledge of a situation which may possess a potential hazard/threat to flight safety and provides for maintenance of confidentiality of the reporter.

1.10      Have there been any recent cases of note or other notable developments in India involving air operators and/or airports?

  1. Go First Airlines (“Go First”) filed for voluntary bankruptcy under the Insolvency and Bankruptcy Code, 2016 (“IBC”) amidst arbitral proceedings with an engine supplier.  Subsequently, the NCLT imposed a moratorium.  The DGCA stated that due to the moratorium it was unable to deregister the Aircraft under the Irrevocable De-Registration and Export Request Authorisations (“IDERA”) invoked by the lessors.  Several aircraft lessors of Go First approached both the NCLT (against Go First) and the Delhi High Court (against the DGCA) seeking the court’s intervention to regain possession of the aircraft and to deregister their aircraft with the DGCA.  The Delhi High Court has passed directions to Go First in its order dated October 12, 2023 (i) to provide the lessors with aircraft technical records, (ii) permit the lessors to contract security services and access various airports in the country where the aircraft are lying parked, and (iii) to continue to maintain the aircraft.  The insolvency proceedings are underway under the IBC. 2. Jet Airways (India) Limited (“Jet”) entered into a corporate insolvency process on June 20, 2019.  The NCLT, Mumbai by its order dated June 22, 2021 (“Order”) has accepted the Resolution Plan of the consortium of Jalan-Kalrock Capital as approved by the Committee of Creditors in the Jet bankruptcy proceeding under the IBC.  As per the Order, the bankruptcy proceeding has now ceased to exist.  Jet is currently under the control of a monitoring committee consisting of representative of the lenders and the consortium of Jalan-Kalrock Capital. However, the resolution of Jet has faced subsequent delays due to myriad disputes regarding implementation of the resolution plan.  In August 2023, Jet lost its IATA airline code “9W”, for being non-operational for more than four years.  The dispute regarding implementation of resolution plan remains sub-judice in Indian courts.
  2. Tata Group owned Air India has signed purchase agreements to buy 470 aircraft from Airbus and Boeing.  Air India successfully completed the acquisition of its first A350-900 aircraft through a finance lease agreement
    1. with HSBC, structured through GIFT-City.  This marked the first instance of a wide-body aircraft being leased through GIFT City.  Additionally, the Tata Group has received CCI approval for the proposed merger of its airlines viz Vistara and Air India.  With this consolidation, Air India will be India’s leading domestic and international carrier.  As part of the merger transaction, Singapore Airlines Limited (“SIA”) will also invest INR 2,059 crore in Air India.  Post the consolidation, SIA shall hold 25.1% shareholding in Air India.
    2. SpiceJet Limited (“SpiceJet”) is facing a series of legal issues in courts.  Contempt petitions have been filed by creditors in the Supreme Court alleging wilful, intentional and deliberate disobedience of an earlier order by Court wherein the Consent Terms contemplating a settlement of the winding up proceedings and enforcement proceedings of a foreign arbitral award executed between the parties was taken on record.  The Supreme Court directed SpiceJet to make certain payments and furnish proof before the Court.  Proceedings have also been initiated against SpiceJet by multiple aircraft lessors, under Section 9 of the IBC before the NCLT seeking initiation of corporate insolvency resolution process and the NCLT has, inter alia, suggested SpiceJet to consider settling its dues by allotting shares to the aircraft lessors and the matter remains sub-judice.
    3. IndiGo has placed an order of 500 Airbus A320 family aircraft which provide it with a steady stream of deliveries between 2030 and 2035.
    4. FLY91, a new, Goa-based airline, has received its no-objection certificate from MoCA and has been allocated its first set of routes under the UDAN Scheme.  It proposes to operate in Tier 2 and Tier 3 towns across India.
    5. Noida International Airport, also known as “Jewar Airport” is set to become operational by 2024 and is being developed through a PPP model by the international bidder Zurich Airport International A.G, as concessionaire, in close partnership with the GoI.  Once operational, Jewar Airport will become India’s largest airport.
    6. India Infrastructure Finance Company Limited, a major financier of airports in India has sanctioned a loan of INR 8,800 crore for the development of airports and civil aviation infrastructure in India. Development of several upcoming airports including Purandar Airport in Pune and Dhalbhumgarh Airport in Jamshedpur are proposed to further elevate India’s aviation profile.  Manohar International Airport in Goa (operated by the GMR Group) has commenced commercial operations in January 2023. The Navi Mumbai International Airport (joint venture of the Adani Group and CIDCO) is set to start operations in 2024 to alleviate the traffic at the present CSMIA airport in Mumbai.  The expansion of the Indira Gandhi International Airport in Delhi includes a new terminal, advanced facilities, an additional runway and improved capacity to handle more passenger is expected to be completed in December 2023.

    1.11      Are there any specifically environment-related obligations or risks for aircraft owners, airlines, financiers, or airports in India, and to what extent is India a participant in (a) the EU Emissions Trading System (EU ETS) or a national equivalent, and (b) ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)?

    India is not a participant in the EU ETS.  However, the below mentioned regulations/circulars imposed on airlines and airports for environmental protection in India are noteworthy:

    1. CAR (Section 10 – Aviation Environmental Protection, Series “B”, Part I, Issue I, August 5, 2015) as updated from time to time (“Climate Change CAR”) provides for “Climate Change Initiatives and Local Air Quality Monitoring in Civil Aviation” and is applicable to the following:
      1. Indian airports that have more than 50,000 aircraft movements per calendar year; and
      2. all Indian scheduled and non-scheduled passenger and cargo airline operators except: a) flights of all small aircraft with MTOW <5,700 kg; b) flights engaged in search & rescue, patrolling or fire-fighting activities; c) flights engaged in humanitarian grounds and emergency medical service; d) flights engaged in carrying VVIP, Head of States and other eminent personalities; and e) all foreign registered airlines operating to/from India.As per the Climate Change CAR, airport operators and airline operators are required to develop an annual emission management report.  It provides for various other compliances for airport operators and airline operators including, fuel management by airline operators and emission management and Local Air Quality Monitoring by airport operators.
    2. The DGCA also issued a circular on September 16, 2009 for the creation of an Aviation Environment Cell in airlines, aerodrome operators and air navigation service provider organisations in order to address aviation environmental issues.

    India has not volunteered to participate in ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”).  However, the CAR (Section 10 – Aviation Environment Protection, Series “C”, Part I- CORSIA) which govern the rules and regulations towards monitoring, reporting and verifying annual CO2 emissions of aeroplane operators and offsetting requirements from international flights and is based on ICAO’s SARPs, as contained in Annex-16, Environmental Protection, Volume-IV: CORSIA.

    The GoI, issued a “White Paper on National Green Aviation Policy” in 2019 in order to create a simplified regime for sustainable and inclusive growth of the Indian civil aviation sector and align it with ICAO’s vision and mission.  As of today, the MoCA has not published any National Green Aviation Policy.

2.1        Does registration of ownership in the aircraft register constitute proof of ownership?

An aircraft in India is registered in terms of Rule 30 of the Aircraft Rules.  The register of the DGCA is merely a “notation” register; courts in India would accept the certificate of registration, issued by the DGCA, as prima facie evidence of lessor, lender or owner interest in the aircraft.  It would be difficult to defend a case in the courts against third parties if the owner has no title or a defective title as per the records of the DGCA.

2.2        Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?

There is no separate register of aircraft mortgages in India.  However, the CAR require the owner of an aircraft to file a notarised and apostilled copy of the mortgage documents evidencing the creation of the charge with the DGCA, which will endorse the name of the mortgagee on the certificate of registration.

As per Indian company law, if the mortgagor is an Indian company or a company with a registered place of business in India, the mortgagor must, within 30 days of its creation, register such charge (which includes a mortgage) created with the relevant Registrar of Companies in the prescribed form along with the complete particulars of the charge, including the instrument creating such charge.

2.3        Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?

India has ratified Article 83 bis of the Chicago Convention and therefore, prior to an Indian operator leasing an aircraft to/from a foreign operator, it is mandatory to obtain permission from the DGCA.  There is no specific requirement for a lease to be in any specified form/format or in any particular language.  However, the terms of the lease must be in compliance with the CAR ((Section 3, Air Transport, Series “C”, Part 1, dated March 24, 2017, as revised from time to time) in respect of criteria for leasing of aircraft by Indian Operators) and such other CARs as may be issued by the DGCA from time to time.  Further, the lessor/financier should also ensure compliance with the Aircraft Leasing Manual (CAP 3200) issued by the DGCA, relevant taxation laws, contract laws, foreign exchange laws and stamp duty laws.

2.4        As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

No, there is no concept of automatic “title annexation” of engines in India.  An aircraft in India is registered wholly with its engines, spare parts and other components attached to the aircraft.  As mentioned earlier, the Aircraft Registry of India is only a notation register and does not confer title upon registration, and in the event of dispute, title will have to be evidenced through relevant transfer of title documentation.  The DGCA does not maintain a separate register for aircraft engines.

In our experience, provisions in relation to title, security and obligations or restrictions in relation to spare parts are set out in the lease agreement, which also records evidence of the owner’s title and beneficial interest in relation to the parts (present and future) and also on the spare parts (present and future), whether such spare parts are repaired or replaced.  Title of replacement parts would not automatically transfer to the aircraft owner where the replacement part is annexed, and specific title transfer documentation would have to be entered in order to transfer title.

2.5        What (if any) are the tax implications in India for aircraft trading as regards a) value-added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

Indirect tax

  1. GST is applicable on taxable supply of goods or services in India.  For a transaction of supply of goods or services to be taxable under GST, its place of supply should be located in India.
  2. Under GST, the place of supply of goods, inter alia, would be as follows:
    1. If the supply of goods involves the movement of goods, then the place of supply would be the location of goods at the time at which the movement of goods terminates for delivery to the recipient.
    2. In case where the supply does not involve movement of goods, then the place of supply would be the location of such goods at the time of delivery to the recipient.

Based on the above, if the place of supply or delivery of the aircraft is determined to be outside India, then in our view, GST would not apply to such a transfer of aircraft.

Further, import of aircraft into India is subject to customs duty and integrated goods and services tax (“IGST”).  The applicability of customs duty and IGST on the import of aircraft is subject to any exemption provided under the relevant law.

It may be noted that subject to certain conditions, the GST law provides for IGST exemption on the import of leased aircraft into India.  One of the prescribed conditions is that the importer undertakes to pay IGST on lease rentals.

Stamp duty

Under Indian laws, stamp duty differs from State to State; some States have enacted their own stamp duty laws, whilst other States have adopted the Indian Stamp Act, 1899 (with State amendments in respect of the rates of the prescribed stamp duty).  The liability to pay stamp duty in a particular State arises: (i) if the instrument is executed in that State; (ii) if it is executed outside that State, such instrument is brought into the State and relates to a matter or thing done or to be done in that State; or (iii) if it relates to property located in that State.  Any instrument that is not duly stamped is not admissible in evidence for any purpose, nor shall it be acted upon unless it bears the stamp prescribed by law.

In some States such as Maharashtra (where the city of Mumbai is located) copies of instruments relating to a property situated therein or in relation to a thing done or to be done must also be stamped with the same duty as the original.

2.6        Is India a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?

India is a party to the Warsaw Convention (1929), the Hague Protocol (1955) and the Montreal Convention (1999); the provisions provided therein, subject to the provisions of the Carriage Act, have the force of law in India in relation to any carriage by air irrespective of the nationality of the aircraft performing the carriage.

India ratified the Cape Town Convention on International Interests in Mobile Equipment (“Cape Town Convention”) and the Protocol to the Cape Town Convention on International Interests in Mobile Equipment (“Cape Town Protocol”) on March 31, 2008 (collectively “CTC”).

India has not ratified the Geneva Convention.

2.7        How are the Conventions applied in India?

Although India acceded to the CTC on March 31, 2008, only specific provisions of the same became effective from July 1, 2008.  From February 2015, the Aircraft Rules were amended to give the Central Government the power to cancel the registration of an Indian-registered aircraft, to which the provisions of the CTC apply by way of an application from the IDERA holder, prior to the expiry of the lease.

2.8        Does India make use of any taxation benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal of aircraft?

The Income Tax Act, 1961 (“ITA”) provides that a person who is eligible to avail benefits under a Double Taxation Avoidance Agreement (“DTAA”) signed by India has the option to be governed by the provisions of the ITA or the DTAA, whichever are more beneficial to him.  Lease rentals payable to a non-resident for use of aircraft for the purpose of a business carried on in India by the payer (whether resident or non-resident) are taxable in India as royalties under the domestic tax law and are subject to withholding tax at the rate of 10% (plus applicable surcharge and cess) on a gross basis.  Availability of DTAA benefits will be subject to the general anti-avoidance rule (“GAAR”) contained in the ITA.  GAAR applies to “impermissible avoidance arrangements”, which means an arrangement whose main purpose is to obtain a “tax benefit” (i.e. a reduction or avoidance of tax that would be payable under the ITA), and, amongst other things, such arrangement “lacks” or is “deemed to lack” commercial substance in whole or in part.  This could, if alleged by the tax authorities as applicable and successfully invoked by them, result in denial of a tax benefit, including denial of DTAA benefits.  There is an exemption from applicability of GAAR; however, the same applies only to income arising from a transfer of investments made prior to April 1, 2017.

Please also refer to our observations at question 5.1 in relation to International Financial Services Centres (“IFSCs”).

2.9        To what extent is there a risk from the perspective of an owner or financier that a lessee of aircraft or other aviation assets in India may acquire an economic interest in the aircraft merely by payment of rent and thereby potentially frustrate any rights to possession or legal ownership or security?

Please refer to our response at question 2.4.

An operating lease does not give rise to any equitable or other similar interest in an aircraft.  However, in case of a finance lease, while the law does not specify the interest of lessee in the aircraft, the Supreme Court in the matter of Association of Leasing and Finance Companies v. Union of India (2010 (20) STR 417) explained that a finance lease “is a form of long term financing.  In a finance lease, it is the lessee who selects the equipment to be supplied by the dealer or the manufacturer, but the lessor [finance company] provides the funds, acquires the title to the equipment and allows the lessee to use it for its expected life.  During the period of the lease the risk and rewards of ownership are transferred to the lessee who bears the risk of loss, destructionand depreciation or malfunctioning.  The bailment which underlies the finance leasing is only a device to provide the finance company with a security interest [its reversionary right].  If the lease is terminated prematurely, the lessor is entitled to recoup its capital investment [less the realizable value of the equipment at the time] and its expected finance charges [less an allowance to reflect the return of the capital]”.  In light of this judgment of the Supreme Court, if the lessee has made a considerable amount of rental payments towards the aircraft under a finance lease, it may be able to argue that it has obtained an equitable interest in the aircraft, and that the interest of the lessor is only a security interest.  However, this argument in respect of aircraft lease transactions is yet to be tested in courts, therefore adequate contractual safeguards should be provided in the lease to protect the proprietary interest of the lessor.

3.1        What rights of detention are available in relation to aircraft and unpaid debts?

The DGCA is expressly empowered under Section 8(1) (b) of the Aircraft Act to detain any aircraft if it is of the opinion that such detention is necessary to secure compliance with any provisions of the Aircraft Act or rules framed thereunder, or to implement an order made by any court.

3.2        Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement?

Typically, the lease agreement should set out the powers and responsibilities as well as the recourse in case of disputes, etc.  There is no specific statutory provision for self-help in India.

Reaching an amicable settlement for repayment or rescheduling of payment deadlines with the lessee/borrower is, perhaps, the only self-help available to a lessor or a financier.  Alternatively, contractual rights can be enforced by approaching the courts or initiating deregistration and repossession proceedings with the DGCA.

Rule 30(6)(iv) and 30(7) of the Aircraft Rules govern the process of deregistration of an aircraft prior to the expiry of the lease agreement on receipt of an application from the IDERA holder by the DGCA.  The DGCA must accept a valid and recorded IDERA (in the prescribed format) and deregister the aircraft within a time frame of five days when accompanied with a certificate stating that all registered interests ranking in priority have been discharged, or that the holders of such interest have consented to such deregistration and export.

3.3        Which courts are appropriate for aviation disputes?  Does this depend on the value of the dispute?  For example, is there a distinction in India regarding the courts in which civil and criminal cases are brought?

The subject matter of the dispute determines the forum for adjudication, for instance: disputes with respect to the Competition Act, 2002 (as amended) (“CA02”) are dealt with by the Competition Commission of India (“CCI”); individual consumer complaints are dealt with by consumer courts under the Consumer Protection Act, 2019 (“CPA”); accidents in the aircraft are looked into by the AAIB as per the Accident Rules; and payment of compensation related matters under Section 9B of the Aircraft Act are dealt with as per the existing agreement or by an arbitrator appointed by the Central Government.  Further, the value and nature of the dispute (civil or criminal) also determines which court shall have jurisdiction in the matter.

The Supreme Court of India is the final court of appeal concerning all forms of disputes.  The High Courts under their Writ Jurisdiction are a preferred forum for adjudication of aviation disputes.  Lessors have taken to the High Courts for lodging winding-up petitions against defaulting lessees, or praying for issuance of writs directing the DGCA to act upon their deregistration request in time.  Petitions of lessees requesting delay in the de-registration process so that they could reach settlements with financiers/lessors are not unheard of at the High Courts.

Aviation disputes concerning consumers vis-à-vis airlines and airports authorities are preferred in the three-tier consumer disputes redressal forums established under the CPA, with appeals lying before the Supreme Court.

Furthermore, the AERA Appellate Tribunal was established under Section 17 of the AERA Act to adjudicate any dispute between service providers and consumers.  Appeals against the orders of the said Appellate Tribunal lie before the Supreme Court under Section 31(1) of the AERA Act.

Criminal proceedings shall be initiated by the Regional Director/Head of Directorate as per the procedure laid down in the Code of Criminal Procedure, 1973.  In view of the fact that offences under the Aircraft Act and Aircraft Rules (except violation of Rule 91 of the Aircraft Rules) are non-cognisable and bailable, a criminal complaint can be filed in the court of a Magistrate of competent jurisdiction depending on the Police Station where the offence was committed.  In case of violation of Rule 91 of the Aircraft Rules (which is a cognisable offence dealing with the prohibition of slaughtering and flaying of animals and depositing of rubbish and other polluted or obnoxious matters in the vicinity of aerodrome), a First Information Report  may be registered with the Police, who will prosecute the offenders directly.

3.4        What service requirements apply for the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

Section 27 and Order V of the Code of Civil Procedure, 1908 govern the applicable service requirements for service of court proceedings.  Summons are issued by civil courts and served to the defendant in person or to his/her legal representative, by way of paper publication, or are posted to his/her last known place of residence or work, for the defendant to appear and answer the claim within 30 days of the institution of the suit.

Additionally the Hague Convention, 1965 (to which India is a signatory) governs the procedure to be followed in case of domestic action against a non-domestic airline/party and provides that the civil court hearing the suit must forward a summons request to the central authority of the State concerned, along with the document to be served.

3.5        What types of remedy are available from the courts or arbitral tribunals in India, both on i) an interim basis, and ii) a final basis?

Interim injunctions, ex parte decrees, final injunctions and final orders/awards covering aspects such as damages, compensation, repossession or sale of aircraft are available.

3.6        Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise?

Rights of appeal exist and may arise as a matter of right or upon exercise of discretion by the courts.  For example, a judgment of a court may be challenged before a superior court if it is certified by the inferior court as involving a substantial question of law of general importance; or an arbitral award may be challenged on the ground that it suffers from legal mala fides, where enforcement would be contrary to public policy or that the arbitral tribunal did not have jurisdiction over the matter.

3.7        What rights exist generally in law in relation to unforeseen events which might enable a party to an agreement to suspend or even terminate contractual obligations (in particular payment) to its contract counterparties due to force majeure or frustration or any similar doctrine or concept?

The doctrine of frustration is incorporated under Section 56 of the Indian Contract Act, 1852.  A contract is treated as frustrated if the substratum of a contract is lost due to impossibility of performance.  If the entire performance of the contract becomes substantially impossible or useless without fault on either side, then such contract is prima facie dissolved by the doctrine of frustration.  The principles of frustration apply only if the contract does not have an express or implied “force majeure” clause.

The Supreme Court in the case of Energy Watchdog v. CERC [(2017) 14 SCC 80] held that Section 56 of the Indian Contract Act, 1852 must be considered to be exhaustive of the law relating to frustration of contracts in India and the courts cannot travel outside the terms of the section in the matter.  Force majeure clauses are to be interpreted narrowly – unless a particular event clearly falls within the ambit and scope of a force majeure clause in the contract, courts may not accept the invocation of “force majeure”.  The Bombay High Court in the case of Standard Retail Pvt. Ltd. v. M/s G.S. Global Corp & Ors. (Commercial Arbitration Petition [(L) No. 404 OF 2020)] held that the COVID-19 pandemic cannot be used as an excuse from performance of contract since the force majeure clause did not include any pandemic event.  Commercial unviability to perform a contract cannot be the basis to trigger the force majeure clause.

4.1        How does India approach and regulate joint ventures between airline competitors?

The CA02 is the principal statute that governs the anti-trust regime in India.  The CA02 is a general legislation and does not provide any rules or regulations specific to the airline sector.  A joint venture between two competing airlines may require assessment under the following two provisions under the CA02:

  1. The CA02 prohibits any anti-competitive agreement between competing enterprises, including cartels (“Horizontal Agreements”).  Such anti-competitive agreements include price-fixing, bid-rigging, limiting production, supply, etc.  A limited exception to Horizontal Agreements is the agreements entered into between competing enterprises, which are in the nature of a joint venture (“JV Exemption”).  However, the JV Exemption applies only when such an arrangement demonstrably increases efficiency in production, supply, distribution, storage, or acquisition of control of goods or services.
  2. The CA02 prescribes for a mandatory notification requirement for acquisition of shares, voting rights, control, assets or merger (including, in certain circumstances, JVs) (“Combination”) if the asset value and turnover of the parties involved breaching the jurisdictional thresholds prescribed under the CA02 and no other statutory exemption is applicable.  In case of a JV, a merger control notification requirement may be triggered only in case of brownfield JVs, or JVs which involve transfer of assets by JV parents.  The CA02 provides for a suspensory regime.  As such, in case of a notifiable Combination, parties are required not to complete or close the transaction until receipt of the CCI approval or the lapse of 210 calendar days (subject to statutory exclusions) from the date of filing of the notification, whichever is earlier.  As per a recent amendment of the CA02, the time period for the review of Combinations has been reduced to a period of 150 calendar days.  However, this amendment was not enforced as at the time of writing this chapter.  That said, a typical JV arrangement in the airline sector which involve commercial cooperation or joint business development on certain sectors do not typically qualify for merger control notification requirement.
  3. Further, as per the recent amendment to the CA02 (which was not enforced at the time of writing this chapter) which deals with “Combinations” provides for a deal value threshold and stipulates that any transaction in connection with acquisition of any control, shares, voting rights or assets of an enterprise, merger or amalgamation, the deal value of which exceeds INR 2,000 crore and if such enterprise (i.e. the one being acquired/merged/amalgamated) has “substantial business operations in India”, will require an approval from the CCI.

The CCI will in due course be issuing regulations to determine the modalities of what will constitute “substantial business operations in India”.

Further the CA02 as recently amended has also introduced a limitation period of three years for filing information/reference for anti-competitive agreements and abuse of dominant position.  However, this amendment was also not enforced at the time of writing this chapter.

4.2        How do the competition authorities in India determine the ‘relevant market’ for the purposes of mergers and acquisitions?

While assessing a pre-merger notification, the CCI is required to determine the relevant market with reference to the relevant product market (“RPM”) and relevant geographic market (“RGM”).  For the purposes of determining (a) the RPM, the CCI is required to consider various factors including physical characteristics, price, consumer preference, industrial classifications, etc. to map potential overlaps between products/services, and (b) the RGM, the CCI is required to make its determination based on factors such as regulatory trade barriers, transport costs, language, local specifications, etc.

4.3        Does India have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies?

As stated above, the CA02 provides for a mandatory suspensory regime whereby all notifiable Combinations that meet the jurisdictional thresholds and do not benefit from any statutory exemption are required to be notified to and approved by the CCI.  The CCI (procedure in regard to the transaction of business relating to combinations) Regulations, 2011 prescribe the thresholds/exemptions (“Combination Regulations”), which are now proposed to be replaced by the CCI.

However, there is no other anti-trust immunity or any other approval mechanism under the CA02 for any agreement entered into between competing enterprises: (a) that are not in the nature of a Combination; or (b) that do not entail a notifiable transaction to the CCI.

4.4        How does India approach mergers, acquisition mergers and full-function joint ventures?

The CA02 creates no distinction between the assessment of any notifiable Combination, i.e. a merger, acquisition or full-function joint venture.  Irrespective of the type of transaction, the assessment of the CCI is based on whether the proposed Combination would potentially cause an appreciable adverse effect on combination in India.

As stated above, in case of a non-notifiable combination or a commercial framework arrangement between competitors that may, in substance, act as a full-function JV, the parties would need to self-assess if the JV results in any of the efficiencies set out in question 4.1 above, in order to ensure compliance with the provisions of Section 3 of the CA02, which seek to prohibit Horizontal Agreements.

Besides the CA02, the Companies Act, 2013 and Securities Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (the “Takeover Code”) also govern mergers and acquisitions of unlisted and listed companies, respectively.  The NCLT is the adjudicating authority in case of unlisted companies, whereas the Securities Exchange Board of India is the nodal agency when it comes to mergers and acquisitions of listed companies as well as companies proposing to be listed on the stock exchange.  The Takeover Code specifies situations where any acquisition may trigger open offer requirements.

Further, the exchange control-related aspects of mergers and acquisitions are regulated by the Reserve Bank of India under the extant Foreign Exchange Management regulations, which prescribe strict reporting and pricing requirements.  Foreign investment-related aspects are dealt with by the Ministry of Commerce.

4.5        Please provide details of the procedure, including time frames for clearance and any costs of notifications.

As stated in response to question 4.3 above, all notifiable Combinations are required to be notified to and pre-approved by the CCI before coming into effect.  A brief overview of the timelines, costs and procedure is set out below:

  1. Form of the notification – The Combination Regulations specify that a Combination may either be notified in the shorter “Form-I” or a longer “Form-II” depending on the combined market shares of the parties to the Combination in the relevant market for overlapping business activities and in the markets that are vertically linked to each other.  The parties may choose to notify a Combination in Form-II if their combined market share is (i) more than 15% in the relevant market for overlapping business activities, or (ii) more than 25% in the markets that are vertically linked to each other.
  2. Obligation to notify – In the case that a Combination involves an acquisition of shares, voting rights or assets, the acquirer is required to notify the Combination to the CCI.  However, in case of a merger, the merging parties collectively are required to notify the Combination to the CCI.  The recent CA02 amendment (which was not enforced at the time of writing this chapter), creates an exception for on-market purchases (through open offer or acquisition of shares through a series of transactions on a regulated stock exchange).  Through this amendment, parties can compete on-market purchases and submit a post-facto notification to the Commission.
  3. Timing of the notification – A Combination can be notified to the CCI at any time after the binding transaction documents have been executed between the parties.
  4. Timeline for the approval – The CA02 mandates that the CCI should form its prima facie opinion on actual or likely appreciable adverse effect on competition (“AAEC”) of a Combination within 30 days from the date of notification.  In the event that the CCI prima facie observes that a Combination either has or is likely to have an AAEC in a relevant market in India, it has an additional 180 days to investigate further into the likely anti-competitive impact of the Combination on the relevant market, and either disallow or approve the same with necessary modifications if any, which may either be proposed by the CCI or the parties themselves.  Upon expiry of 210 days (150 calendar days when the recent amendment to the CA02 is enforced) from the date of notification, the Combination will be deemed to be approved by the CCI.

The CCI has introduced a deemed approval mechanism process which is called the Green Channel approval as notified on August 13, 2019.  The parties may avail of Green Channel approval only if they are not engaged in providing any similar/substitutable products, vertically linked products, or complementary products either directly or through any of their controlling or non-controlling stakes in any entity.  In the case that a Combination is notified pursuant to the Green Channel, CCI’s Deemed Approval will be considered as having been granted once the Combination has been notified in Form-I and the CCI has acknowledged the receipt of the notification.

With regard to the costs of notification, Form-I must be accompanied with a filing fee of INR 20 lakhs (approximately USD 24,200) while a Form-II will have to be accompanied with a filing fee of INR 65 lakhs (approximately USD 78,600).  However, these filing fees are proposed to be revised by the CCI for Form – I and INR 90 Lakhs for Form – II.

4.6        Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid?

There are no sector-specific rules that prescribe financial support or aid to air operators and airports.  The Central Government may, at its discretion, grant such aid or other financial support and facilities to the aviation sector as a matter of State policy, keeping in mind the growth and development of the aviation sector.

The current pattern of financing is predominantly based on internally generated resources of the AAI.  Funding through external assistance, external commercial borrowings, loans and equity has been negligible.  The allocation of budgetary grants is limited to certain airports in remote and inaccessible areas.

The National Civil Aviation Policy, 2016 (“NCAP”) introduced the Regional Connectivity Scheme (“RCS”) that, inter alia, seeks to provide various concessions and support to air operators, airports and other stakeholders; for example, an excise duty of 2% is levied on aviation fuel, no airport charges are levied for operations under the RCS, etc.

Under the UDAN Scheme, efforts have been made to provide support to Selected Airline Operator(s) in the form of Viability Gap Funding (“VGF”) and other concessions/support offered by the Central Government, State Governments and airport operators, including: reduction of VAT to 1% or less on ATF at RCS airports located within a particular State for a period of 10 years; provision of minimum land, if required, free of cost and free from all encumbrances for development of RCS airports; providing multi-modal hinterland connectivity (road, rail, metro, waterways, etc.) as required; providing security and fire services free of cost at RCS airports; provision of, electricity, water and other utility services at substantially concessional rates at RCS airports; and provision of a certain share (20%) towards VGF for respective RCS routes (pertaining to the State), provided the share of States in the North-Eastern region of India and Union Territories would be 10%.

4.7        Are state subsidies available in respect of particular routes?  What criteria apply to obtaining these subsidies?

The NCAP seeks to sustain and nurture a competitive market environment in the civil aviation sector, including enhancement of regional connectivity through fiscal support and infrastructure development, providing for an RCS.  The operation of the scheme is proposed to be through a market mechanism where operators will: assess demand on routes; submit proposals for operating/providing connectivity on such route(s); seek VGF, if any, while committing to certain minimum operating conditions; and the same shall be finalised in interaction with other market participants.

Further, the RCS scheme provides that: for up to 10 years from the date of commencement of flight operations under the RCS, there will be no airport charges levied for operations under the RCS; landing, parking and Terminal Navigation Landing Charges shall be waived; and Route Navigation and Facilitation Charges will be levied on a nominal basis.  Prioritisation of routes will be carried out and reviewed from time to time so that there is balanced growth of regional connectivity in different parts of the country.  The UDAN Scheme provides for the eligibility criteria, such as having a valid air operating permit, including the minimum performance specifications for an RCS flight.

As per the scheme, a State will identify international routes for which the AAI will determine a subsidy amount per seat and invite bids from domestic carriers.  This will be followed by airlines submitting their proposals, which will include the routes they wish to connect as well as the subsidy needed by them.  The GoI will grant financial aid only for the actual number of passenger seats that are unsold, even if the airline had sought subsidy for a higher percentage of seating capacity at the time of bidding.

4.8        What are the main regulatory instruments governing the acquisition, retention and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines and airports?

In India, data privacy and protection are governed by the provisions of the Information Technology Act, 2000 (“IT Act”), which provides legal recognition to transactions carried out by means of electronic data interchange.  Sensitive personal data includes, inter alia, information relating to: passwords; credit/debit card information; biometric information; and condition of physical, physiological and mental health, etc.

The transfer of personal data (defined as sensitive personal data or information) is presently governed by the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“SPD Rules”).  The SPD Rules were issued under Section 43A of the IT Act, which holds a body corporate liable for compensation for any negligence in implementing and maintaining reasonable security practices and procedures while dealing with sensitive personal data or information.  The SPD Rules expand on the scope of these reasonable practices and procedures.  They define sensitive personal data and mandate the implementation of a policy for dealing with such data.  Further, various conditions such as consent requirement, lawful purpose, purpose limitation, subsequent withdrawal of consent, etc. have been imposed on the body corporate collecting such information.

The SPD Rules also require the prior consent of the provider of the information while disclosing sensitive personal data to a third party.  Transfer of sensitive personal data outside India is permitted on the condition that the same level of data protection is adhered to in the country, which is applicable to the body corporate under the SPD Rules.

Section 43A of the IT Act is proposed to be replaced with the Digital Personal Data Protection Act, 2023 (“DPDPA”) which has received assent from the President of India but is yet to be implemented.  Upon implementation, DPDPA will govern the processing of “digital” personal data.  For more details on DPDPA, please refer to our responses to question 5.1 below.

4.9        In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions?

The Information Technology (Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules, 2013 impose an obligation on all corporate entities, which includes airlines, to notify the Indian Computer Emergency Response Team  in case of a cybersecurity breach.

Additionally, upon implementation of the DPDPA, in the event of a personal data breach, data fiduciaries (such as airlines) will be required to notify the Data Protection Board of India and the data principal of such breach.

4.10      What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature?

Since India has acceded to the Agreement on the Trade Related Aspects of Intellectual Property Rights, various other pieces of legislation have been enacted over the years to protect Intellectual Property Rights (“IPRs”).  The following statutes provide protection and remedies available to the following IPRs:

  1. The Trade Marks Act, 1999 (as amended):  Remedies available are in the form of damages, account of profits, injunction, search and seizure, and forfeiture.  Trademark infringement and counterfeiting are cognisable offences.  False entries, applications or trade descriptions are offences and are punishable by way of imprisonment or fine.
  2. The Copyright Act, 1957 (as amended):  Remedies available under the said Copyright Act are similar to those under the Trademarks Act; furthermore, infringement of copyright is punishable with imprisonment that may extend up to three years, or a fine of up to INR 200,000.
  3. The Patents Act, 1970 (as amended) also provides for remedies pertaining to patent infringement.
  4. The Designs Act, 2000: Remedies available for the infringement of copyright are also available for the infringement of registered design owners.

In addition to the above-mentioned remedies, criminal remedies are also available for offences such as false entries in the register, false claims and false information given to the GoI.

In recent times, the courts in India have been strictly enforcing IPRs and protecting the rights lying therein.  While injunctions still remain a prominent and effective remedy,  courts have in exceptional cases awarded punitive damages.  Recently, IPR owners have increasingly been recording their IPRs, especially trademarks, before the relevant customs authorities to prevent counterfeit products from entering the Indian market.

4.11      Is there any legislation governing the denial of boarding rights and/or cancelled flights?

The CAR (Section 3, Series “M”, Part IV – Facilities to be provided to passengers by airlines due to denied boarding, cancellation of flights and delays in flights dated August 6, 2010 (as revised from time to time) (“Passenger CAR”)), governs the rules and regulations relating to denial of boarding rights and/or cancelled flights.  The CAR in question provides for the refund of the ticket fare amount and compensation in the event of denied boarding, even though the passenger has been given a confirmed booking for travel on the flight and has checked in for the flight well within the specified time ahead of the departure of the flight.

Airlines are required to inform the passenger of the cancellation at least two weeks before the scheduled time of departure and arrange an alternate flight/refund as acceptable to the passenger.  In case the passengers are informed of the cancellation less than two weeks before and up to 24 hours of the scheduled time of departure, the airline shall offer an alternate flight or refund the ticket, as acceptable to the passenger.  Additionally, the airline shall provide passengers with facilities at the airport in accordance with the Passenger CAR in the event the passengers have already reported for their original flight and whilst they are waiting for the alternate flight.

In case of foreign airlines, the amount of compensation paid to the passengers can be made in accordance with the regulations of their country of origin or as prescribed by the Passenger CAR.

Further, the airlines are required to display their policies in regard to compensation, refunds and the facilities that will be provided by the airline in the event of denied boarding, cancellations and delays on their respective websites as part of their passenger Charter of Rights.

4.12      What powers do the relevant authorities have in relation to the late arrival and departure of flights?

As per the Passenger CAR, in the event of delay, the airlines are required to provide facilities such as meals, refreshments and/or hotel accommodation depending on the number of hours of delay of the flight.  An exception to the above has been provided for delays caused due to extraordinary circumstances (as defined in the Passenger CAR) which could not have been avoided even if all reasonable measures had been taken.

4.13      Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

The AAI is the nodal authority controlling all airports in India.  It was established under the AAI Act, which includes a legal framework for airport privatisation, the functions of the AAI and provides guidance on the efficient management of airports, civil enclaves and aeronautical communication stations.  Further, it states that it is the duty of the AAI to provide an air traffic service and air transport service at any airport and civil enclave.  In the discharge of its functions, the AAI shall have due regard to the development of the efficiency, economy and safety of the air transport service.

4.14      To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger?

In case of airline operators and passengers, the DGCA has launched the “AirSewa” web-portal/mobile application to deal with travel-related passenger grievances.  The Passenger CAR also provides for passengers to file for grievance related to delays, cancellations, etc., on the AirSewa App or through the portal.  The AirSewa portal provides a facilitative platform for passengers to file complaints with the respective airline.  The CPA also provides an additional remedy for passengers to claim compensation for any deficiency in service provided by airlines.

In case of airport operators and passengers, there is no specific legislation and the general consumer protection legislation, i.e. the CPA shall apply.  In the case of Geeta Jethani v. Airport Authority of India (2004 (2) C.P.C. 428), the National Consumer Disputes Redressal Commission (“NCDRC”) held the AAI liable for deficiency in service in maintaining an escalator, resulting in the death of a young child at the Indira Gandhi International Airport.  The NCDRC, while holding that a complaint was maintainable under the CPA, stated that maintenance of the airport is a statutory function of the AAI.  It is the duty of the AAI to manage the airports, to provide air traffic service, air transport service and air safety service, to regulate the entry and exit of passengers and visitors at the airports, to provide transport facilities to the passengers travelling by air and to have due regard for the safety of such service.  The quantum of penalty in this case was decided on the basis of the criteria set out under the Carriage Act, as the complainants were non-residents.

4.15      What global distribution suppliers (GDSs) operate in India?

Computer Reservation Systems (“CRSs”) or GDSs are computerised systems that contain information about air carriers’ schedules, availability, fares and fare rules, through which reservations can be made or tickets may be issued.  In India, GDSs are not governed by specific legislation.  However, the DGCA has issued CARs (Section 3 – Air Transport Series M- Part III dated 31st July, 2010) to regulate and promote fair competition in the airline sector and to ensure that consumers do not receive inaccurate or misleading information on airline services.  The said CAR prescribes obligations on system vendors and participating carriers, as well as subscribers.

4.16      Are there any ownership requirements pertaining to GDSs operating in India?

The CAR are applicable to all CRS and GDSs, and to their essential elements operating in India displaying or selling air services, irrespective of: (i) the legal status or nationality of the system vendor; (ii) the source of the information used; or (iii) the location of the relevant data processing centre, and irrespective of where the air services are provided.  There are no specific ownership restrictions.

4.17      Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

A vertical integration which is in the nature of a combination between an air operator and an airport is not specifically governed under the provisions of the CA02.  Accordingly, such a combination, if permitted under other applicable laws, would be assessed by the CCI for any appreciable adverse effect on competition in India.

The AAI entering into an OMDA with private parties for the development and modernisation of airports is one such example.  The OMDA sometimes prescribes restrictions on vertical integration between airline operators and airport operators.

To date, only horizontal mergers have taken place between airline operators in India, such as Air India and Indian Airlines, Jet Airways and Sahara Airlines, Kingfisher Airlines and Deccan Airlines, etc. and more recently the merger between Air India and Vistara is proposed to take effect in March 2024.

4.18      Are there any nationality requirements for entities applying for an Air Operator’s Certificate in India or operators of aircraft generally into and out of India?

The DGCA has prescribed conditions for effective control of airlines in the following manner:

  1. A scheduled or non-scheduled operator’s permit can be granted to:
    1. a citizen of India; or
    2. a company:
      • that is registered and has its principal place of business in India;
      • whose chairman and at least two-thirds of its directors are Indian citizens; and
      • that is substantially owned and effectively controlled by Indian nationals.
  2. An air cargo operator’s permit can be granted to:
    1. a citizen of India;
    2. a group of individuals of Indian nationality or a registered trust or society;
    3. a non-resident Indian or overseas corporate body; or
    4. an Indian-registered company having its principal place of business in India with or without foreign equity participation (excluding non-resident Indian equity).

5.1        In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in India, are likely to feature or be worthy of attention in the next two years or so?

The amendments to Aircraft Rules, 1937 (notified on October 10, 2023) have brought about some key changes to reduce the administrative burden in the aviation industry whereby the validity of licences in relation to Airline Transport Pilot License and Commercial Pilot License holders has now been increased from five years to 10 years.  Rule 118 with respect to validation of foreign licences has been removed as being redundant.  The erstwhile Rule stipulated that licences that were granted by the competent authority of a contracting state would be conferred with the same validity in India.

On October 3, 2023, the GoI issued a notification (“Notification”) whereby the provisions of Section 14(1) of the IBC relating to moratorium will not apply to transactions, arrangements or agreements under the CTC relating to aircraft, aircraft engines, airframes, and helicopters.  The Notification has significant implications for repossession of aircraft and engines in India since such assets are now exempt from moratorium and place aircraft, engine owners and lessors in a better position to repossess assets from defaulting lessees.  Under the CTC Protocol, India has issued a general declaration under Article XI dated March 31, 2008 providing for the application of Alternative A in its entirety to all types of insolvency proceedings, and that the waiting period for the purposes of Article XI (3) of that Alternative is two calendar months.  Considering this, one could argue that the waiting period under the CTC Protocol may apply.

The Aircraft Bill, 2023 introduced by MoCA is intended to be replaced with the Aircraft Act (a pre-independence era legislation having several archaic provisions) and aims to eliminate existing redundancies and provide for provisions that meet the current needs for regulation of civil aviation in India.  Further, under the Aircraft Bill, the DGCA, AAIB and the BCAS are empowered to discharge the regulatory and oversight function entrusted for implementation of the SARPs under the Chicago Convention.

The DPDPA governs the rights and duties of data principals (i.e., individuals to whom personal data relates) and data fiduciaries (i.e., persons who determine the purpose and means of processing personal data).  DPDPA applies to digital personal data that is processed outside India only if such processing is in connection with any activity related to offering goods or services to data principals in India.  The DPDPA also seeks to protect personal data collected prior to the implementation of the DPDPA.  It also provides for (i) the constitution of the Data Protection Board of India as an enforcement body which will have several powers such as to direct any urgent remedial or mitigation measures on receipt of intimation of breach of personal data, and impose penalties for non-compliances, (ii) the roles of Consent Managers and Data Processors, and (iii) penalties up to INR 250 crore for non-compliance of the DPDPA.

The GH Regulations have been amended in April 2023 to include the following key amendments:

  1. a ground handling company owned by an airline is prevented from providing ground handling services to third party airlines;
  2. airport operators can now appoint as the ground handling agency (“GHA”): (a) itself or its joint venture or its 100% owned subsidiary only if a transparent bidding process has been carried out and no bidder is selected; and (b) a subsidiary or joint venture of a public sector undertaking and if there is no subsidiary or joint venture of a public sector undertaking, a GHA shall be selected through a transparent bidding process; and
  3. no GHA or person(s) controlling such GHA shall have significant influence in any other GHA operating as such at the same airport.  If a GHA has significant influence due to an acquisition from a public sector enterprise, then: (a) the two GHAs shall be deemed to be a single GHA at the relevant airport; (b) airport operator shall promptly appoint another GHA through a transparent bidding process; and (c) such GHA/person(s) controlling the GHA shall restructure their ground handling business to ensure that on completion of 24 months of acquisition of significant influence, only one of the two GHAs operates at the relevant airport.  On expiry of 24 months, the GHA (of the two involved GHAs) with the shorter outstanding concession period shall be deemed to have surrendered its concession at the relevant airport.

The National Air Sports Policy, 2022 has been formulated by the GoI with the key objective of the promotion of air sports culture in India to include air sports such as drones, parachuting, paragliding, etc.  It is proposed that there would be a four-tier governing structure for air sports in India of which the Air Sports Federation of India, an autonomous body under MoCA, would be the apex governing body.  MoCA has also issued draft National Air Sports Guidelines, 2023 for comments whose key objectives, inter alia, include adoption of international safety practices, development of a stakeholder-friendly and effective governance structure, enhancing participation of Indian sportspersons in global air sports events and promoting design, development and manufacturing of air sports equipment in India.

The International Financial Services Centres Authority (“IFSCA”) issued a circular dated May 18, 2022, the “Framework for Aircraft Leases”, which, inter alia, provides guidelines for the establishment of a lessor entity in GIFT City.  Further, the DGCA amended the Air Transport Circular No. 02/2017 dated September 19, 2022 (as revised from time time) to include the requirement in relation to the import of aircraft and acquisition of Indian registered aircraft in GIFT-City.

In order to bring uniformity with tax deduction provisions, the Central Board of Direct Taxes under notification dated July 20, 2023 granted exemption from tax deduction at source under Section 194 of the ITA from dividend income paid by a unit of IFSC engaged in aircraft leasing business to a unit of IFSC engaged in the same business, subject to certain conditions.

Willis Lease Finance were among the first lessors to set up and structure multiple engine leases out of GIFT-City.  This year has seen an increase in registrations by Indian and foreign banks with the IFSCA as banking units.  Air India has also registered its subsidiary as a finance company in GIFT-City and is the first scheduled commercial airline in India to structure a commercial aircraft lease through GIFT-City.  It has successfully completed acquisition of India’s first wide – body A350-900 aircraft through a finance lease agreement with HSBC, structured through Air India’s GIFT-City subsidiary.  The MoCA published the Protection and Enforcement of Interests in the Aircraft Objects Bill, 2022 (the “CTC Bill”) on April 16, 2022 (revised on July 20, 2022) in order to implement the CTC in India with a view to discharging the treaty obligations and to avail benefits of the Indian accession to the treaty.  The CTC Bill also contains provisions that will accord primacy to the provisions of the CTC Bill in case of conflict with any other law in force in India, permit self-help remedies, and give effect to applicable insolvency provisions of the CTC.  Irrespective of whether the parties to an agreement have chosen India as the place of jurisdiction or not, the remedies under the CTC Bill will be applicable to all transactions that have a connection to India unless the same has been specifically excluded under the relevant transaction documents.  Presently, the CTC Bill is undergoing public consultations and it is difficult to ascertain when it will be promulgated as legislation by the Parliament.




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