THE CAPE TOWN CONVENTION ACT, 2025 VS. IBC: RESOLVING THE LESSOR’S DILEMMA IN INDIAN AVIATION INSOLVENCY

India’s aviation sector, projected to become the world’s third-largest market by 2030, is also among the fastest-growing globally, with domestic passenger traffic expected to reach 300 million annually. Yet this growth has been accompanied by a structural vulnerability: It faces a critical paradox: while demand surges, the legal framework for aircraft leasing remains precarious. India’s aviation insolvency framework has, until recently, been perceived by global lessors as structurally hostile to asset recovery. The insolvency of Go First in 2023 exposed a severe legislative lacuna where the Insolvency and Bankruptcy Code, 2016 (IBC), came into direct conflict with India’s international commitments under the Cape Town Convention on International Interests in Mobile Equipment (CTC) and its Aircraft Protocol. While Section 14 of the IBC imposes a moratorium to preserve the corporate debtor as a "going concern," the CTC mandates the immediate deregistration and export of aircraft objects to lessors upon default. This paper critically analyses the Protection of Interest in Aircraft Objects Act, 2025, which aims to overcome this problem by giving treaty obligations precedence over domestic insolvency laws. Specifically, the paper examines the adoption of "Alternative A" (the 60-day strict timeline) and the IDERA mechanism. However, the author argues that while the 2025 Act addresses the statutory hierarchy, operational bottlenecks—specifically statutory liens exercised by airport authorities for unpaid dues—remain a critical unresolved risk for the global aviation lessor. The paper concludes that without a comprehensive "non-obstante" override against all statutory liens, the "India Risk" premium in global leasing markets will persist.