Lexology Aviation Finance and Leasing 2021
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India Nitin Sarin, Ritesh Aggarwal, Dhawal Jain and Vinamra Longani Sarin & Co OVERVIEW Transfer document requirements 5 What are the formalities for creating an enforceable transfer Conventions document for an aircraft? 1 To which major air law treaties is your state a party? The transfer document should ideally note that a valid contract has India has ratified the Rome Convention (1933), the Chicago Convention been entered into, (ie, that there has been an offer by the seller, the (1944), the Montreal Convention (1999), the Cape Town Convention offer has been accepted by the purchaser and consideration has been (2001) and the Beijing Convention (2010). India is not a party to the received by the seller). Geneva Convention (1948). If a bill of sale is executed in any language other than English, a translated copy must be presented for its proper enforcement. Further, Domestic legislation notarisation (and in certain cases apostillation) is also recommended. 2 What is the principal domestic legislation applicable to aviation finance and leasing? REGISTRATION OF AIRCRAFT OWNERSHIP AND LEASE INTERESTS There is no principal domestic legislation that exclusively deals with aircraft finance and leasing. In India, aircraft finance and leasing Aircraft registry transactions are governed by various Acts of parliament, rules and 6 Identify and describe the aircraft registry. regulations, the prominent ones being the Aircraft Act 1934, the Aircraft Rules 1937, the Foreign Exchange Management Act 1999 (and the rules The register is known as the Indian aircraft register and is a federal framed thereunder) and the Reserve Bank of India regulations. register, maintained by the Directorate General of Civil Aviation (DGCA) in New Delhi, India. The registry records both the details of the owner Governing law and the operator. The register is open to inspection by the general 3 Are there any restrictions on choice-of-law clauses in public. Aircraft registered on the Indian aircraft register are given a contracts to the transfer of interests in or creation of security three-letter registration number prefixed with the letters ‘VT’, for over aircraft? If parties are not free to specify the applicable example ‘VT-XYZ’. law, is the law of the place where the aircraft is located or The details that are contained in the certificate of registration and where it is registered the relevant applicable law? the aircraft register are: • the type of aircraft; Indian law recognises the principal of autonomy of parties, and, hence, • the manufacturer serial number or certification number; the parties are allowed to choose any law to govern their contract. • the year of manufacture; • nationality and registration marks; TITLE TRANSFER • the full name, nationality and address of the owner or lessor; • the full name, nationality and address of the lessee; Transfer of aircraft • the usual station of the aircraft; 4 How is title in an aircraft transferred? • the date of registration; • the period of registration; and Under Indian law, as long as there is an offer by one party that is • the name of the mortgagee or hypothecator. accepted by another for consideration, such an act or series of acts shall constitute a transfer of title. A bill of sale is an effective document to India has entered into article 83-bis agreements, however these are prove the transfer of title. sparingly used and, in fact, permitted only in extraordinary circum- A bill of sale should ideally note that a valid contract has been stances. India does not have a specific engine registry. entered into, namely, that there has been an offer by the seller, the offer has been accepted by the buyer and consideration has been received by the seller. www.lexology.com/gtdt 1 India Sarin & Co Registrability of ownership of aircraft and lease interests register records certain particulars relating to the lease such as period 7 Can an ownership or lease interest in, or lease agreement of validity of the lease and the names, nationalities and addresses of over, aircraft be registered with the aircraft registry? Are the lessor and the lessee. The whole process may take up to four there limitations on who can be recorded as owner? Can an weeks from the date of application. All supporting documentation (as ownership interest be registered with any other registry? may be requested by the DGCA) must be notarised. Can owners’, operators’ and lessees’ interests in aircraft There is no separate register for leases in India. engines be registered? Certificate of registration The aircraft registry records the details of ownership, the details of 11 What is the regime for certification of registered aviation the lease interest (if different from the owner) and the details of the interests in your jurisdiction? operator. A person or entity claiming to be owner of an aircraft must be able to prove ownership by way of a valid title document in its favour. The DGCA issues a certificate of registration in relation to an aircraft. There are no other registries (apart from the International Registry) The certificate of registration contains the following details: where an ownership interest may be registered. • the type of aircraft; There is no separate registry for aircraft engines in India. • the manufacturer serial number or certification number; • the year of manufacture; Registration of ownership interests • the nationality and registration marks; 8 Summarise the process to register an ownership interest. • the full name, nationality and address of the owner or lessor, or both; To record an ownership interest in an aircraft, the DGCA requires a • the full name, nationality and address of the lessee; number of documents. Apart from a document of title (duly notarised), • the usual station of the aircraft; the DGCA will require no objection letters from all other parties denoted • the date of registration; on the aircraft’s certificate of registration (if the aircraft is already regis- • the period of registration; and tered on the aircraft registry) and evidence of authority in favour of the • the name of the mortgagee or hypothecator. signatories of such documents. For recording an ownership interest, a fee is payable and the DGCA may take up to four weeks for issuance of There is no engine certificate of registration issued by the DGCA. a new certificate of registration. In the case of a change of ownership of an aircraft already registered in India, it is illegal for anyone to operate Deregistration and export an aircraft without the name of the new owner having been endorsed 12 Is an owner or mortgagee required to consent to any on the certificate of registration. Therefore, specific permission must deregistration or export of the aircraft? Must the aviation be sought from the Director General to operate the aircraft pending authority give notice? Can the operator block any proposed the processing of the application for endorsement of the new owner on deregistration or export by an owner or mortgagee? the certificate of registration. Costs may also vary, depending on what supporting documentation the DGCA may request. All documents to be The owner or mortgagee or both, as the case may be, shall be required submitted with the DGCA must be notarised. Title to an engine does not to give their consent in case of any deregistration in India. In usual automatically vest in the owner of a host aircraft. The title of the owner circumstances, the DGCA will give notice to the concerned party of an engine, though not registrable in any registry in India, shall be seeking their comments or no objection. In India, there are several recognised on the basis of a valid title document. methods by which the registration of an aircraft may be cancelled by the DGCA. For all other methods, apart from the method prescribed Title and third parties under Aeronautical Information Circular (AIC) 12 of 2018 (the Cape 9 What is the effect of registration of an ownership interest as Town Convention and Aircraft Protocol regulations), require the to proof of title and third parties? consent of the operator. For other methods, therefore, the operator may block the proposed deregistration and export by an owner or The register maintained by the DGCA contains the name of the owner mortgagee. and that shall be taken as a prima facie proof of ownership by Indian authorities. The effect of registration in India acts as notice to all third Powers of attorney parties including a person claiming to be a bona fide purchaser for 13 What are the principal characteristics of deregistration and consideration with no notice. Third parties could rely on the accuracy export powers of attorney? of the public registration of the ownership interest as recorded on the certificate of registration. However, double verification from the A deregistration and export power of attorney (DPOA) should satisfy records of the DGCA is always recommended. the general principles of powers of attorney (ie, it should not confer If the title is defective, the actual owner attempting to enforce its any power that the issuer itself does not possess). While, theoretically, rights against the person claiming to be the owner will have to prove a DPOA should enable an owner or mortgagee to freely deregister and its title on the basis of valid title documentation. The actual owner export the aircraft from India, in practice, however, there may be vari- would then need to apply to the DGCA for amendment of its records, ations to how the DPOA is perceived by the DGCA. The introduction failing which, an aggrieved party would have to approach a court of law of AIC 12 of 2018 has virtually resulted in the DPOA losing its signifi- for determination of rights. cance in relation the deregistration and export, thereby resulting in an IDERA being considered a superior tool to enable deregistration Registration of lease interests and export.