The High Court in a recent case held that a scheme of arrangement under Section 366 of the Companies Act 2016 is an insolvency- related event to the Cape Town Convention and the Aircraft Protocol.
The High court was hearing a case of AirAsia X Berhad v BOC Aviation Limited wherein, AirAsia X Berhad (AAX) applied for leave from the court to hold a creditor’s meeting to consider and approve a proposed scheme of arrangement.
During the classification of scheme creditors, AirAsia X Berhad (AAX) treated the aircraft lessors as “creditors of AAX having security over the assets of AAX” and placed it in Class A creditors with the secured lenders. On behalf of AAX, it was argued that the aircraft lessors were secured creditors on account of the security deposits and maintenance reserves.
The High Court agreed with the aircraft lessors on the scheme of arrangement and gave the decision in their favor. The court further held that the Cape Town convention applies not just to the rights in rem but it also applies to rights in Personam.