New Delhi (ABC Live): For years, India’s aviation sector carried a legal risk that rarely appeared in public debate but heavily shaped global aircraft-finance decisions. Although India joined the Cape Town Convention in 2008, it never fully enforced it at home. As a result, aircraft that should have moved freely across borders often became stuck between regulators, courts, and insolvency proceedings.

Consequently, India developed a credibility problem. Aircraft lessors did not doubt airline demand. Instead, they doubted legal certainty. Therefore, lease rentals rose, security deposits increased, and contract terms tightened. In effect, legal risk quietly turned into higher costs for airlines and slower fleet expansion.

Why Legal Uncertainty Raised Costs

Because enforcement remained unclear, lessors priced India conservatively. Moreover, insolvency proceedings regularly blocked repossession, even when international rules allowed it. Meanwhile, regulatory discretion over deregistration added yet another layer of delay.

As a result, financing aircraft in India became more expensive than in comparable markets. Ultimately, these higher costs flowed through airline balance sheets and, indirectly, into passenger fares.

What the 2025 Act Changes

Against this background, the Protection of Interests in Aircraft Objects Act, 2025, marks a long-overdue correction. Importantly, the Act gives Indian courts and regulators a clear command: the Cape Town Convention and its Aircraft Protocol are now enforceable law in India. For the first time, international aircraft-finance rules move from diplomatic promise to statutory reality.

The official text of the Act, as notified by the Government of India, is available here:
👉 https://www.indiacode.nic.in/bitstream/123456789/21133/1/A2025-17.pdf

However, this reform is not a clean break with the past. Instead, it reflects India’s familiar policy style—opening markets while keeping sovereign controls intact. While the Act strengthens creditor rights, it also preserves government dues, regulatory discretion, and executive control over treaty declarations. Therefore, India enters the Cape Town system cautiously, not completely.

The Central Question This Report Examines

This raises the core issue examined in this analysis:

Has India merely closed a credibility gap, or has it positioned itself as a true global aircraft leasing hub?

To answer this, the report:

• explains the Cape Town Convention in simple terms,

• examines the Act section by section,

• evaluates its impact on insolvency and aircraft repossession, and

• compares India with Ireland, Singapore, and the UAE using data tables.

What emerges is a clear conclusion. India has chosen compliance over competitiveness—for now. Whether this choice delivers lower costs, attracts long-term capital, and reshapes India’s aviation-finance future will depend not only on the law, but on how lightly the State uses the power it has kept.

What Is the Cape Town Convention — and Why It Matters

At its core, the Cape Town Convention is not an aviation safety treaty. Instead, it is a cross-border asset-finance framework designed to protect capital invested in high-value mobile equipment such as aircraft.

Key Features of the Cape Town Convention

• First, it creates a uniform international interest in aircraft and engines.

• Second, it establishes a global, notice-based International Registry.

• Third, it provides time-bound default and insolvency remedies.

• Finally, it ensures these rights work across borders.

Consequently, jurisdictions that apply the Convention effectively enjoy lower lease rentals, faster repossession, and deeper access to capital.

ABC Live — Editorial Box

The Cape Town Convention is not about airlines.
Instead, it is about capital certainty.

Airlines benefit only because finance becomes cheaper and more predictable.

Why India Needed the Protection of Interests in Aircraft Objects Act, 2025

Although India acceded to the Convention in 2008, it never enacted a comprehensive implementing law. As a consequence:

• DGCA often treated deregistration as discretionary.

• Courts prioritised domestic insolvency law.

• Aircraft remained grounded during airline failures.

Therefore, the 2025 Act became inevitable. By contrast with the past, it now gives the Convention and Aircraft Protocol direct statutory force, ending the era of “treaty without teeth”.

This approach mirrors a broader legislative pattern. As ABC Live earlier analysed in its review of the Jan Vishwas Bill, 2025, Parliament increasingly prefers legal certainty with sovereign safeguards rather than full market absolutism
👉 https://abclive.in/2025/08/19/jan-vishwas-bill-2025-analysis/

Structure of the Act: Section-by-Section Legal Analysis

Section 3: Convention Given Force of Law

Section 3 applies the Convention and Aircraft Protocol as law in India, subject to India’s declarations. Fundamentally, this satisfies Article 253 of the Constitution and removes enforceability doubts.

However, India’s declarations preserve wide state and tax priorities. Accordingly, the Convention’s creditor-first design is softened rather than fully adopted.

Section 4: DGCA as Registry Authority

DGCA is empowered to issue directions to implement the Convention. On the positive side, this turns DGCA from an obstacle into an executing authority.

Nevertheless, DGCA remains a safety regulator, not a commercial registry. Moreover, the Act provides no independent appellate oversight, increasing administrative risk.

Section 6: Insolvency Remedies and Alternative A

The Act applies Article XI (Alternative A) of the Aircraft Protocol. As a result, aircraft may be repossessed even during insolvency proceedings.

Previously, aircraft were trapped inside insolvency moratoria. Now, they exit on a time-bound basis. At the same time, this creates friction with the Insolvency and Bankruptcy Code. Whereas the IBC prioritises rescue, Cape Town prioritises exit. Consequently, the Act favours capital certainty over corporate rehabilitation.

Section 7: Deregistration and Export (IDERA)

Article XIII is applied, enabling deregistration and export through IDERA. However, this power remains subject to the Bharatiya Vayuyan Adhiniyam, 2024. Thus, regulatory override is preserved.

Section 9: Overriding Effect — With Sovereign Exceptions

Although the Act overrides inconsistent laws, it explicitly preserves:

• government dues,

• public service claims, and

• aircraft detention powers.

Therefore, India departs from the pure Cape Town model and adopts a sovereignty-balanced approach.

Why Lessors Care: The Economics Behind the Law

Data Snapshot: Lessor Impact

Taken together, these factors explain why lessors focus less on rhetoric and more on enforcement speed.

Where India Now Sits vs Global Leasing Hubs

Comparative Table: Cape Town in Practice

ABC Live — Editorial Context

Importantly, compliance does not equal competitiveness.
Therefore, India must be judged against global leasing hubs.

Final Assessment

What the Act Achieves

• Ends weak treaty enforcement

• Restores trust with global lenders

• Reduces aircraft financing costs

What It Keeps

• Strong state claims

• Regulatory control

• Executive power over treaty choices

Conclusion

In the end, the Protection of Interests in Aircraft Objects Act, 2025, fixes a long-standing legal failure. Without it, India would have remained outside the Cape Town system in practice.

Yet competitiveness needs more than a law. Therefore, India’s rise as a true aircraft-leasing hub will depend on simple rules, faster courts, and limited state interference.

ABC Live Bottom Line:
India has met the global standard.
Whether it can surpass it remains open.