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Some contracts require more than mutual assent, they require regulatory grace. Although Indian aviation contracts, particularly aircraft lease, wet lease, maintenance, and engine support agreements, are formally governed by the Indian Contract Act, 1872, yet their performance, continuation, and termination are inseparably conditioned on regulatory permissions issued under the Aircraft Act, 1934 and the Aircraft Rules, 1937. Unlike conventional commercial contracts, aviation agreements cannot be performed simply by mutual consent; they require continuous statutory validation through registration, airworthiness certification, and operational approval by the Directorate General of Civil Aviation (DGCA). Indian courts, however, have largely avoided analysing this dependence within contract doctrine. Instead, disputes arising from regulatory obstruction are resolved through writ jurisdiction, administrative law principles, or statutory interpretation. This article argues that this judicial practice obscures the true nature of aviation contracts, which are best conceptualised as regulatory-conditioned contracts, agreements whose enforceability and performance are structurally dependent on regulatory action.
Rule 30 of the Aircraft Rules, 1937 mandates that an aircraft must be registered and certified as airworthy before it can be operated1. These standards function as conditions for performance, rather than simply external regulatory impediments2. An aircraft lease agreement, however valid under Sections 10 and 23 of the Contract Act, cannot be effectively implemented unless these statutory conditions are continuously met3. Indian courts have always recognised that when a contract depends on the occurrence of an uncertain future event, performance is dependent upon that event in accordance with Section 32 of the Contract Act4. Aviation contracts encompass more than simple provisions: regulatory approval is not a stated requirement but an implicit legal assumption, the lack of which nullifies the contract. This aligns with the Supreme Court's observation in Naihati Jute Mills Ltd v Khyaliram Jagannath that contracts dependent on statutory clearances must be interpreted in conformity with the existing legal framework5.
The legal doctrine of frustration in India has been notably constrained. In Satyabrata Ghose v Mugneeram Bangur & Co, the Supreme Court ruled that frustration applies only when a subsequent occurrence undermines the essential foundation of the contract6. Subsequent rulings, such as Energy Watchdog v CERC, confirmed that regulatory or governmental actions do not inherently absolve contractual responsibilities unless they render performance legally impossible. This generates conceptual strain in aviation contracts7. Grounding orders, suspension of airworthiness certificates, or refusal to deregister aircraft may not formally nullify contractual obligations; rather, they render fulfilment commercially and legally impracticable. Courts have infrequently considered whether such regulatory interventions should adjust responsibilities under Sections 56 of Contracts Act, opting instead to see them as issues of public law8.
The integration of the Cape Town Convention into Indian legislation via Rule 30(7) of the Aircraft Rules substantially transformed the contractual framework9. Within this context, the invocation of an Irrevocable Deregistration and Export Request Authorisation (IDERA) compels the DGCA to deregister the aircraft without resolving any underlying contractual disputes. In AWAS 39423 Ireland Ltd v DGCA, the Delhi High Court concluded that the DGCA's role is purely ministerial upon fulfilment of the IDERA's requirements10. The Courts used writ authority to force statutory compliance instead of following the usual contractual principles of breach, termination, or frustration. In VFS Leasing Co (Ireland) Ltd v Union of India, the same reasoning was used, regulatory delay was seen as an administrative flaw instead of a failure of contract11. These cases demonstrate that regulatory action directly determines whether contractual remedies can be realised, even though courts avoid articulating this dependence within contract law itself.
The exclusion of aircraft objects from the Insolvency and Bankruptcy Code moratorium regime further evidences the regulatory conditioned nature of aviation contracts12. In Wilmington Trust SP Services v DGCA, the Delhi High Court held that insolvency proceedings could not obstruct deregistration obligations under the Aircraft Rules13. This approach acknowledges that aviation contracts hold a unique legal status, wherein regulatory compliance takes precedence over general principles of private law. However, this acknowledgement continues to be disjointed within the realms of statutory interpretation and administrative law, rather than being cohesively incorporated into the framework of contract theory.
The legal structure of India's civil aviation experienced a significant restructuring with the implementation of the Bharatiya Vayuyan Adhiniyam, 2024, which officially abrogated the nearly 90-year-old Aircraft Act, 1934, and became effective on 1 January 202514. The new Act consolidates and modernises regulations pertaining to the design, manufacture, maintenance, possession, use, operation, sale, export, and import of aircraft, aiming to align India's domestic aviation law with current international standards and improve the ease of conducting business in a rapidly growing aviation market. The Adhiniyam replaces outdated colonial legislation, providing a more coherent regulatory framework for entities such as the Directorate General of Civil Aviation (DGCA) and clarifying oversight mechanisms throughout the aircraft operations lifecycle from certification and airworthiness to safety compliance and maintenance responsibilities thus diminishing the regulatory ambiguities that have historically affected aviation contracts and asset protection. The legislation shows how India is now modernising aviation governance and the legal necessity to simplify regulatory procedures that impact aircraft financing and contract enforceability.
The Protection of Interests in Aircraft Objects Act, 2025, further provides a comprehensive domestic implementation of the Cape Town Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment, collectively referred to as the Cape Town Convention and Aircraft Protocol15. Despite India's accession to the Convention in 2008, the lack of definitive implementing legislation has rendered aircraft lessors and financiers vulnerable to legal ambiguity, especially in insolvency situations where aircraft repossession is obstructed by moratoriums stipulated in the Insolvency and Bankruptcy Code, 2016 as clearly illustrated by the Go First airline insolvency, during which lessors faced challenges in asserting their rights16. The 2025 Act explicitly integrates the Convention and Protocol into Indian law, delineates the responsibilities of creditors and debtors concerning registered international interests, and offers legal certainty for repossession and deregistration, including mechanisms like IDERA, even amidst insolvency proceedings, thereby aligning India's framework with international aviation finance standards and substantially enhancing creditor protections in high-value aircraft transactions.
The principles of English contract law have demonstrated an increased openness to incorporating regulatory disruption within the framework of doctrinal analysis. In the case of Metropolitan Water Board v Dick Kerr, it was determined that government intervention during wartime effectively frustrated the contract by fundamentally changing its commercial foundation17. The House of Lords in Davis Contractors Ltd v Fareham UDC established that frustration occurs when the performance of a contract becomes "radically different" from the obligations originally agreed upon18. Aviation leasing practice in the UK and EU reflects this doctrinal clarity through express allocation of regulatory risk, governmental action clauses, and termination rights triggered by grounding or deregistration refusal. Scholarly commentary on the Cape Town Convention has repeatedly emphasised that predictability in aviation finance depends on transparent interaction between regulators and private contracts19.
Indian courts have pragmatically protected aviation lessors and operators through administrative remedies and statutory interpretation. However, this approach leaves contract doctrine underdeveloped and conceptually incomplete. Aviation contracts are not merely private bargains operating alongside regulation; they are regulatory-conditioned agreements whose performance, enforcement, and termination are structurally dependent on statutory actors. Recognising this category would not weaken regulatory authority. Instead, it would enable clearer allocation of risk, a more principled application of impossibility and contingency doctrines, and doctrinal coherence in a sector where private ordering is inseparable from public control20.
Co-Author – Ishaan Bisarya, intern
Footnotes
1 Aircraft Rules 1937, r 30.
2 Convention on International Interests in Mobile Equipment (2001); Aircraft Protocol (2001).
3 Indian Contract Act 1872, ss 10, 23
4 Indian Contract Act 1872, s 32.
5 AIR 1968 SC 522.
6 Satyabrata Ghose v Mugneeram Bangur & Co AIR 1954 SC 44.
7 Energy Watchdog v Central Electricity Regulatory Commission (2017) 14 SCC 80.
8 Indian Contract Act 1872, s 56.
9 Aircraft Rules 1937, r 30(7).
10 AWAS 39423 Ireland Ltd v Directorate General of Civil Aviation 2020 SCC OnLine Del 1127.
11 VFS Leasing Co (Ireland) Ltd v Union of India 2022 SCC OnLine Del 3470.
12 Insolvency and Bankruptcy Code 2016, s 14.
13 Wilmington Trust SP Services (Dublin) Ltd v Directorate General of Civil Aviation 2019 SCC OnLine Del 8003.
14 Bharatiya Vayuyan Adhiniyam 2024.
15 Protection of Interests in Aircraft Objects Act 2025.
16 National Company Law Tribunal, In re Go Airlines (India) Ltd CP (IB) No 264(PB)/2023.
17 Metropolitan Water Board v Dick Kerr and Co Ltd [1918] AC 119 (HL).
18 Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (HL).
19 Roy Goode, Official Commentary on the Cape Town Convention (4th edn, UNIDROIT 2019).
20 Hugh Collins, Regulating Contracts (OUP 1999).
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