Aviation Industry in India

Laws and Regulations applicable

The Ministry of Civil Aviation (“MoCA”) is the nodal Ministry responsible for the
formulation of policy and regulation of civil aviation in India.  The MoCA 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 Aircraft Act 1934 is the primary domestic legislation which governs the Indian aviation
sector. Its primary function is to empower the federal government to make rules for
regulating the manufacture, sale, use, operation, export, import and safety of all civil aircraft.
The Aircraft Rules 1937 generally apply to Indian-registered aircraft (and to persons
thereon), wherever they may be (with certain exceptions), and all aircraft present in or over
India. These rules set requirements for flying conditions, registration, airworthiness and
licences, among other things. Where an aircraft is registered in a foreign country, the
regulations of that country will apply, provided that their underlying standards are based on
those established by the Chicago Convention. Further, the extent of application usually
depends on the agreement between the two countries.
The Civil Aviation Requirements (“CARs”): the CARs are issued by the DGCA under Rule
133A of the Aircraft Rules, 1937 and provide the standards expected to be met before a
licence, certificate, approval or permission is granted/accorded.
The Carriage by Air Act, 1972: 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.
The Tokyo Convention Act, 1975
This legislation was enacted to implement the provisions of the Tokyo Convention. 18 It
applies the penal law of India to an act or omission committed on board an Indian-registered
aircraft while in flight elsewhere than in or over India
The Anti-Hijacking Act, 1982
The Anti-Hijacking Act implements the Convention for the Suppression of Unlawful Seizure
of Aircraft and provides for punishment for the offence of hijacking.
The Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1982
The Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1982 implements the
above mentioned Convention and provides for punishment of various offences like
committing violence on board an aircraft in flight, offences at airports, causing destruction of
or damage to navigation facilities etc. The objective of the Convention is achieved through
both these legislations.
Aircraft (Security) Rules 2011, deal with the air safety and security regulations for
aerodromes and aircraft.
Other legislation relevant to Indian civil aviation includes:
o the Airports Authority of India Act 1994;

o the Airports Economic Regulatory Authority of India Act 2008;

o the Aircraft (Investigation of Accidents and Incidents) Rules 2012.

International Conventions
India has ratified the following international conventions:
 the Convention for the Unification of Certain Rules Relating to International Carriage
by Air, signed in Warsaw on October 12 1929;
 the Convention on International Civil Aviation, signed in Chicago on December 7
1944;
 the Convention on the International Recognition of Rights in Aircraft, signed in
Geneva on June 19 1948;
 the Convention on Damage Caused by Foreign Aircraft to Third Parties on the
Surface, signed in Rome on October 7 1952;
 the Convention on Offences and Certain Other Acts Committed on Board Aircraft,
signed in Tokyo on September 14 1963;    
 the Convention for the Suppression of Unlawful Seizure of Aircraft, signed in The
Hague on December 16 1970;
 the Convention on the Suppression of Unlawful Acts against the Safety of Civil
Aviation, signed in Montreal on September 23 1971;
 the Convention for the Unification of Certain Rules for International Carriage by Air,
signed in Montreal on May 28 1999; and
 the Convention on International Interests in Mobile Equipment, signed in Cape Town
on November 16 2001.

Regulatory authorities

 The Ministry of Civil Aviation administers the Aircraft Act and the Aircraft Rules,
and various other aviation-related legislations. It is responsible for formulating
national policies and programmes that help in developing and regulating the Indian
civil aviation sector. It exercises administrative control over entities such as the
Directorate General of Civil Aviation (DGCA), the Bureau of Civil Aviation Security
 (BCAS) and the Airports Authority of India (AAI), and has the authority to enter into
air service agreements with other countries.
 The DGCA primarily deals with safety and operational issues. Its role and functions
include:
o registration of civil aircraft;

o formulation of standards of airworthiness for civil aircraft registered in India

and granting certificates of airworthiness to such aircraft;
o granting air operator certificates to Indian carriers and regulation of air
transport services operating to, from, within and over India by Indian and
foreign operators, including clearance of scheduled and non-scheduled flights
of such operators;
o investigating accidents and incidents and taking accident prevention measures,
including formulating implementation of safety aviation management
programmes;
o monitoring aircraft noise and engine emissions and collaborating with the
environmental authorities; and
o safety oversight of all entities approved, certified or licensed under the
Aircraft Rules.
 The BCAS sets and monitors standards and measures with respect to the security of
civil flights at international and domestic airports in India for airport and airline
operators and security agencies.
 The AAI was formed with a view to accelerate the integrated development, expansion
and modernisation of the operational, terminal and cargo facilities at airports in India
in conformity with international standards. Its main functions include:
o the design, development, operation and maintenance of international and
domestic airports and civil enclaves;
o the expansion and strengthening of operation areas (eg, runways, aprons and
taxiways);
o the control and management of Indian airspace extending beyond the
territorial limits of the country; and
o the provision of communication and navigation aids.

Procedure of Registration of an Aircraft

Rule 30 of the Aircraft Rules, 1937 enpowers the DGCA to register aircraft and to grant
certificate of registration in India.
A scheduled service operator in India that provides services using an aircraft with a take-off
mass of 40,000kg or more must necessarily purchase or lease a minimum of five aircraft with
a start-up equity requirement of 500 million rupees. For each addition of up to five aircraft,
additional equity investment of 200 million rupees is required. With respect to an aircraft
with a take-off mass of less than 40,000kg, the start-up fleet minimum remains at five aircraft
– purchased or leased – with a minimum equity requirement starting at 200 million rupees
and growing by 100 million rupees with every five additional aircraft.
For non-scheduled operators, the fleet requirements are nominal; namely, they require
possession of only one aircraft and equity requirements exist based on the number of aircraft
owned or leased by the operator, which create an additional financial barrier to entry.
An aircraft may be registered in either of the following two categories:
a. Category 'A', where the aircraft is wholly owned either by citizens of India; a
company; a corporation registered and having its principal place of business within
India; or the central government or any state government, or any company or
corporation owned or controlled by either of the said governments.
b. Category 'B', where the aircraft is wholly owned either by persons resident in or
carrying on business in India who are not citizens of India; or a company or a
corporation registered outside India but carrying on business in India.
In a case where the usual station of an aircraft and its area of operation are not situated in
India, the DGCA may decline to accept an application for registration of the aircraft in India,
or, as the case may be, to permit the aircraft to remain registered in India, if, in its opinion,
the aircraft could more suitably be registered in another country.
Application for Registration
The owner or his authorized representative may apply for registration of the aircraft in the
prescribed form completed with the following documents at least five working days for
aircraft on outright purchase and ten working days for aircraft on lease, before the expected
date of issue of Certificate of Registration.
i. Customs clearance certificate / bill of entry of the aircraft.
ii. Certificate of deregistration from the previous registering authority.
iii. An evidence to the effect that the aircraft has been purchased or wholly
owned by the applicant. For this purpose, a copy of invoice shall be
accepted.
iv. For aircraft purchased from a previous owner, an affidavit as required.
v. In case the aircraft is taken on dry lease a copy of the lease agreement.
vi. In case the aircraft is owned by a company or corporation, a document of
registration of the company and the names, addresses and nationalities of
the Directors.
vii. A copy of the import license issued by Director General Foreign Trade or
permission for import issued by the Ministry of Civil Aviation/DGCA.
Where the aircraft is imported for private use, it will be registered in the
name of the person or company to whom the import license has been
issued.
 viii. In cases where the aircraft has been mortgaged/ hypothecated, the
owner/operator shall submit his consent for the same and the papers to this
effect. Such a mortgage/hypothecation shall be endorsed on the Certificate
of Registration.
ix. Fee for registration as prescribed in Rule 35 paid by web based online
transaction system of DGCA (Bharatkosh).
Leasing of Aircraft
There is no principal domestic legislation applicable to aviation finance and leasing.
However, various aspects of an aircraft leasing and financing transaction are governed, inter
alia, by the Indian contract laws, Indian company laws and Indian foreign exchange
regulations. Also, the (Indian) Aircraft Act, 1934, read with the (Indian) Aircraft Rules, 1937
and the Civil Aviation Requirements, as prescribed by the Directorate General of Civil
Aviation (DGCA) from time to time, governs certain aspects of aircraft leasing in India.
Letter of Intent
A letter of intent (LOI) typically precedes any aircraft lease agreement as a first contractual
step, and outlines the broad terms of agreement between the parties. The LOI simply clarifies
the key technical and commercial points, and provides safeguards in the event that further
negotiations do not succeed. This document is also commonly referred to as “heads of terms”,
“memorandum of understanding”, or “term sheets”.
Conditions Precedent
The conditions precedent (CP) to delivery under any lease agreement are those pre-
conditions, whether factual, documentary or otherwise, which must be satisfied before the
relevant party is obliged to proceed with delivery and acceptance, and the lease term
commences. A lease agreement typically includes at least the following conditions precedent:
● No total loss of aircraft ● Lessee satisfactory inspection of aircraft and documentation
within an agreed timeframe ● Aircraft being in agreed delivery condition.
Insurance
The requirement for the Lessee to procure and maintain hull and liability insurance is one of
the most important requirements from a Lessor perspective; consistent with the principle that
Lessee assumes all risk associated with the operation and us of the aircraft during the lease
period.
Payment and Security
Aircraft lease agreements are typically structured as net leases. The net lease concept means
that the Lessee will, in addition to the agreed rental fee, also pay for the all costs associated
with ownership of the aircraft including expenses associated with operation and maintenance.
The net lease is often structured with the rental fee provisions as absolute and unconditional,
which ensures that the payment of the rental fee is an absolute obligation. Therefore, no
matter what, the Lessee will always have to pay the rental fee, regardless of any breach of
Lessor obligations.
Registration
The aircraft register in India is maintained by the DGCA. This register contains details in
relation to the aircraft such as the following:
 the type of aircraft;
 the year of manufacture;
 the full name and address of the owner or lessor; and
 the full name and address of the operator or lessee.
This register is open for inspection by members of the public, both at the DGCA headquarters
and on the DGCA website.
India has ratified article 83-bis of the Convention on International Civil Aviation and has also
suitably amended the Aircraft Rules. There is no engine-specific register in India.
DGCA’s aircraft register is an owner registry, although it also includes details of the operator,
if different from the owner. There is no separate register for leases and aircraft engines
maintained in India. Further, once registered with the DGCA, there is no requirement to have
the aircraft ownership registered at any other registry in India. In case of a leased aircraft, in
addition to the details mentioned above, details (names, nationalities and address) of the
lessor and lessee, including the period of validity of the lease agreement, will also be required
to be mentioned.
Criteria for leasing of aircrafts by Indian operators
I. Permission from the DGCA - DGCA permission is mandatory before leasing an
aircraft in India.1 An Indian operator can either take an aircraft on lease from a
foreign operator or another Indian operator.

Aircraft on lease from a foreign operator - Where the Indian operator intends to
take a foreign registered aircraft on lease, charter or any similar arrangement from
a person holding Air Operator Certificate (“AOC”) issued by another state, the
following information has to be provided by the Indian operator to the DGCA at
least forty-five (45) days prior to the proposed date of operation with the leased
aircraft:- (a) name and address of the Indian operator and the lessor; (b) aircraft
details; (c) AOC details along with operations specifications, if any, of the lessor;
(d) name and contact information of the State of Registry; (e) a copy of the letter
of intent; (f) planned arrangements for operation and maintenance of aircraft
during the lease period; (g) proposed date of import into India.

II. Aircraft on lease from an Indian operator - In the event an Indian operator intends
to borrow an aircraft on lease from an Indian operator (for domestic or
international operations), the following information has to be provided to the
DGCA at least forty-five (45) days prior to the proposed date of operation with the
leased aircraft:- (a) name and address of the operator from whom the aircraft is
intended to be leased; (b) AOC details along with operations specifications of the

1
Section 3, Air Transport Series “C” Part I of the Civil Aviation Requirements lays down the criteria for leasing
of aircrafts by Indian operators.
 lessee and the lessor; (c) aircraft type, registration number and its main base; (d)
maintenance agency with scope of approval; (e) a copy of the draft lease
agreement and maintenance agreement; (f) any amendment proposed to be made
in the Operations Manual or other relevant documents; (g) a document giving
details of the respective responsibilities of compliance with regulatory
requirements such as FDTL, arrangements for Flight Operations Quality
Assurance, flight dispatch and responsibilities of the lessor and the lessee with
regard to operation, maintenance and quality system of the aircraft.

Upon receipt of the above information, the DGCI finalizes the modalities for
operation of the leased aircraft at a meeting with the Indian operator. Where the
aircraft is taken on lease from a foreign operator, the representatives of the foreign
operator and the regulatory authority are also allowed to participate in the
meeting. The DGCA can conclude an agreement under Article 83bis2 with the
State Registry and the State Operator for transfer of certain regulatory functions. It
also has the discretion to impose conditions while granting permission to the
Indian operator for operations with the leased aircraft.

Lease agreement and stamp duty

Pursuant to the DGCA permission, the Indian operator can conclude a formal lease agreement
with the lessor. The agreement should include the conditions decided by the State of Registry
and the State of Operator and the ones imposed by the DGCA. A copy of the lease agreement
has to be, thereafter, filed with the DGCA at New Delhi (the DGCA usually asks for a
notarized copy from the airlines). The copy of the lease agreement does not attract stamp duty
in the State of Delhi but it is necessary to stamp the lease agreement in the relevant state, (the
state in which the airline is incorporated or has its operational base), prior to filing with the
DGCA. Stamping is necessary to ensure that the lease agreement is enforceable in a court of
law. In India, the stamp duty rates vary from state to state.
General requirements applicable to both dry and wet leases
For leased aircraft operations in India, the aircraft should have been type-certificated by
Federal Aviation Administration of USA or Joint Airworthiness Authority of Europe or Civil
Aviation Authority of UK or any other authority acceptable to DGCA. It is the operator’s
responsibility to confirm that the lease agreement does not contain any provision which will
be binding the DGCA. The lessor, on his part, has to give an undertaking in the lease
agreement that he will comply with all the applicable CAR rules. The DGCA can withdraw
permission for operation of a particular aircraft in India under lease agreement if during
service it is found that safety of the aircraft operations is in doubt or CAR requirements or
any other safety rules have not being complied with.

2
Article 83bis which entered into force on June 20, 1997, provides for the possibility of transferring certain
functions and duties from the State of Registry to the State of Operator. The State of Registry shall be relieved
of responsibility in respect of the functions and duties transferred. India has ratified Article 83bis and made
changes in the local regulatory provisions, which allows for transfer of responsibility for airworthiness and
operational control of leased aircraft operations. 4 CAR Section 3, Air Transport Series “C” Part I,
Under Indian law, the liability for damages is imposed only on the carrier and the
owner/lessor is not liable for the operator’s actions as long as ownership/lease is clearly
distinct from operation of the aircraft and the owner/lessor is not involved in the actual
operation of the aircraft.

Regulation of Foreign Aircrafts in India

The Indian aviation regulatory authority, the Director General of Civil Aviation (“DGCA”),
recently notified civil aviation requirements (“CAR”) which enable the Indian scheduled
operators to operate foreign registered Aircraft without registering them with the DGCA.
This is effective from January 31, 2018.
Previously, in order to operate a foreign aircraft on dry lease, it should have been registered
in India. Indian operators would therefore take aircraft on lease and have them registered with
the DGCA, even if lessors / lenders would prefer to have the aircraft registered in their home
state.
Per this new CAR, Indian scheduled operators will now be allowed to take on lease and fly
the foreign registered aircraft on domestic or international routes without the need of
registering them in India with the DGCA.
Indian scheduled operators will need to submit to DGCA certain documents, such as aircraft
leasing form in the prescribed format, copy of the proposed lease agreement, and consent of
foreign civil aviation authority, at least 90 days prior to the proposed commencement of
operations. Upon submission of the requisite documents, DGCA will get in touch with the
State of Registry for, inter alia, entering into an agreement under Article 83bis prior to
granting permission.
Upon grant of permission, the foreign registered aircraft will be entered in the scheduled air
operator certificate. The permission for operating the aircraft under lease may be withdrawn
in the event there is any issue relating to airworthiness and safety of the aircraft operations.
The leasing / import of foreign registered aircraft, inter alia, will be subject to the following:
 Indian customs regulations;
 FAA/EASA type certification;
 Provision of mandatory occurrence reports of the leased aircraft for the last 5 years by
the lessor / State of Registry;
 Meeting the age criteria;
 Certain licenses/permits including, certificate of registration, certificate of
airworthiness, airworthiness review certificate, noise certificate, et al.;

There was controversy surrounding deregistration of foreign aircraft carriers subsequent to

the termination of aircraft lease agreements in India, which caused concern in the global
aviation market. This was settled by the Delhi High Court in Corporate Aircraft Funding
Company LLC v. Union of India and Awas 39423 Ireland Ltd and Ors v. Directorate General
of Civil Aviation and Ors. It was held that the DGCA is necessarily required to render
assistance to the aircraft in the process of deregistration. Although there may be dues that
have to be recovered under the Customs Act, it is no impediment to the process of
deregistration and there is no authority conferred under the Customs Act to prevent the
DGCA from deregistering the aircraft.

Procedure for obtaining permission for import or acquisition of aircraft

Section 5 of the Aircraft Act 1934, inter alia, empowers the central government to make rules
for regulating the export and import of an aircraft for securing the safety of operation. The
requirements for import of aircraft are laid down by the Directorate General of Foreign Trade
(DGFT) and by the Ministry of Commerce. In accordance with the order issued by the
MOCA, the DGCA issues permissions for the import or acquisition of aircraft by the
Scheduled Operator, Regional Scheduled Operator, Scheduled Commuter Operator, Non-
Scheduled Operator and Flying Training Organisations, and recommends that the DGFT
issues import licences for aircraft for private use. The DGCA also issues permissions to
individuals and companies, etc., for import of microlight aircraft, powered hang gliders and
hot air balloons for private use, hobby flying, joy rides, etc. The permission for the import of
aircraft, excluding aircraft for private use, is issued in two stages: in-principle approval, and
no-objection certificate (NOC) for import. The Directorate of Air Transport (DAT) issues in-
principle approval for all categories of aircraft in consultation with other relevant
directorates. In case of import of aircraft for private use, an import licence from the DGFT is
required. After the in-principle approval has been granted, a letter recommending the
issuance of an import licence by the DGFT is issued by the DGCA. All aircraft other than
private category aircraft can be imported without the need to obtain an import licence from
the DGFT.
The validity of the permission for import or acquisition of each aircraft is one year, which
may be extended for another six months on genuine grounds. However, in any case, the
permission will not be extended beyond the validity of the initial NOC issued by MOCA for
new applicants.

Aircraft Mortgages and Charges in India

There is no separate register of aircraft mortgages in India. However, the Civil Aviation
Requirements 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 mortgagor on the certificate of registration.
As per law, if the mortgagor is an Indian company or a company with a registered place of
business in India, the mortgagor must, within a prescribed period, register any charge (which
includes a mortgage) created with the relevant Registrar of Companies (“ROC“) in the
prescribed form. The Indian company laws require such filing to be made within 30 days of
the creation of the charge, in the prescribed form, along with the complete particulars of the
charge, including the instrument creating such charge.
The registration of a security interest is certified by an acknowledgement given by the ROC
at the time such registration is done by filing the prescribed forms along with the supporting
documents. The ROC maintains a register of charges, which evidences the existence of the
charge over the aircraft, records the nature and details of the instrument creating the charge.
The register of charges is a public document and constitutes notice to third parties of the
existence of such charge. Only charges created by Indian owners of aircraft are required to be
registered with the ROC. There is no requirement to do so for a foreign owner of an aircraft
operated in India. In respect of filings made with the DGCA, an acknowledgement of the
same may be obtained at the time of making the filing.
As per law, a mortgagee’s right in an aircraft is a right in personam. Indian law also
facilitates arrangements whereby a security trustee may hold the security for a changing
group of beneficiaries. When the underlying loan is transferred or if the lenders change,
although there is no security register in India it is advisable to intimate the DGCA about such
changes.