Fastercialmah

This article is written by the iPleaders team and reviewed by Adv Shashank Singh. He is specialised in aviation law with extensive experience advising on aircraft leasing, MRO agreements, and cross-border aviation contracts. He practices before the Supreme Court of India, Delhi High Court, and key tribunals, combining expertise in complex commercial disputes, white-collar crime, IBC and international arbitration with a strong focus on regulatory clarity and strategic outcomes.

Introduction

In the present-day digital schemes, the act of purchasing an airline ticket never stops at choosing a particular seat; one must always click “I agree” to a long list of terms and conditions. These often-underrated digital contracts are commonly loaded with complex legal jargon, having within their ambit clauses that exempt them from liability and any possible claims, having a requirement for mandatory arbitration, and placing strict limitations on claims grounded in negligence. The deliberately complicated provisions, lodged somewhere deep within the layers of fine print, have the ostensible intention of making easy-going corporate life, but in reality, most travellers are unaware of them.

In this cruel hypothetical air crash scenario of Air India Flight AI-171, families discovered that their rights to compensation were tied not to statutory protections but to the fine print of ticket contracts. This gloomy setting surely presents questions with bane: How aware are consumers of such types of situations? 

Had you indeed unknowingly waived the right to full compensation in case of a crash when clicking “I agree” to airline terms? In the more complex aftermath of such an incident, what truly are the legal boundaries on the enforceability of such digital agreements, and how will the evolution of case law affect the rights of victims going forward? How it plays into clauses of Aviation contracting will be delved into further. 

After all, “Clicking ‘I Agree’ should never mean surrendering the right to justice. The law cannot allow fine print to reduce human life to a clause.”

The anatomy of airline contracts: what do ticket T&Cs typically include?

When the passenger clicks on the “I agree” icon while booking flights online, one essentially accepts airline contracts that the Supreme Court has recognised as binding in law. The T&Cs form the civil basis for the passenger-carrier relationship, and yet only about 12% of consumers bother to read them. Hence, ticket agreements become a contractual black box full of complicated legal commitments.

The terms and conditions of airlines usually have a few standard clauses that are very much in favour of the carrier. Limitation of liability is a prominent clause. Airlines provide nominal compensation for lost baggage, limited under international conventions, like the Montreal Convention, 1999, of the order of roughly $8.33 per kilogram. 

Another important clause is one relating to mandatory arbitration. Instead of allowing passengers their day in court in local jurisdictions, airlines may insist on arbitration in a specific locale, often under Singaporean law or that of the U.S. This limits consumer access to convenient legal remedies and tilts the scales in the airline’s favour.

Force majeure clauses act to relieve airlines of liability by excluding responsibility for events out of the control of an airline: natural disasters or a pandemic. Consequential damages are usually excluded, meaning airlines do not pay for indirect losses, like missed wedding parties, interviews, or bookings for hotels, unless they are clearly at fault.

Adding on to the unfairness, many contracts also contain class action waivers. Such provisions block passengers from bundling efforts in challenging unfair practices; each alleged wronged traveller must proceed single-handedly on claims commonly too minor to justify pursuing.

Post-accident enforceability of waiver: balancing act in the law

After air crashes, passengers or their families are often confronted with airline waivers limiting their ability to proceed legally. Whether such waivers are enforceable depends on whether they survive judicial scrutiny employing principles of contract law fairness, transparency, and absence of unconscionability.

Courts have undertaken various legal tests in assessing waiver validity. One of the foundational principles under the law of contracts is that an agreement to be binding must be entered into voluntarily with free consent and must, therefore, not be oppressive to one party to the contract. Thus, unfair or hidden conditions, especially those limiting liability or imposing arbitration in very distant forums, can be declared unconscionable.

The Nandram case stressed the point about unconscionable contract terms, especially if they are foisted upon the weaker party without negotiations; they are subject to being declared void. The judgment stressed that freedom to contract cannot be absolute; it has to be weighed against the demands arising from justice and equity.

The Montreal Convention provides the basis for airline liability in international carriage, giving passengers minimum protection under Articles 17 to 21. They set strict liability depending on certain thresholds (i.e. bodily injury or death for 128,821 SDRs). While airlines cannot limit the passengers’ claims up to these limits, attempts to lower them through waivers are usually voidable. The courts have determined that waivers contrary to statutory protections cannot be enforced, thereby superseding mandatory international obligations.

The litigator challenging these post-crash waivers is well-advised to consider several basic factors:

• Conspicuousness: Was the waiver clearly disclosed, or hidden in fine print?
• Consent: Did the passenger agree thereto knowingly or did conscience object?
• Bargaining Power: Could anything have been negotiated, or was it take it or leave it?
• Unconscionable: Has conscience itself been shocked by the ultra-one-sided bargain?

A good strategy points to the procedural unfairness and inequality of bargaining power and” in derogation of statutory or treaty protection.” Courts are much more likely to strike down the clauses that appear exploitative, particularly in the hyper-emotional context of aviation disasters.

In short, while waivers from airlines are common, their enforceability is not absolute. Courts weigh the liberty to contract with considerations of justice, especially when lives are involved.

Case spotlight: Air India flight AI-171 & digital ticket terms

The tragic Air India Flight AI-171 crash raised not only concerns about aviation safety but also the legal complexities concerning the terms of digital tickets. This accident during descent into Ahmedabad had many casualties and injuries. While the cause is still under active investigation, the families of the victims find themselves in legal battles surrounding the enforceability of ticket terms and conditions (T&Cs).

Arguably, the most contentious clause in the AI-171 ticket contract concerns arbitration being held in Bangalore with compensation capped at ₹50,000. Such conditions were set in the digital booking platforms and were “agreed” to when passengers or their representatives clicked through the booking process. After the crash, several grieving families were shocked at the thought that there existed such limiting provisions.

When the Bombay High Court was approached by several victim families, the legal wrangling began. The Court issued interim injunctions restraining Air India from acting on the arbitration clause. It was held that enforcement of such a clause perhaps would amount to a denial of substantive justice, especially in the aftermath of a fatal mishap. The public interest petition filed in conjunction with the case described this arbitration agreement as a “blanket denial of justice” in that the families simply did not have a real opportunity to negotiate or review these terms.

The ticket contract would be characterised as an adhesion contract. Such contracts, more so within the consumer context, do open themselves up for judicial scrutiny under the doctrines of unconscionability and unfair surprise. Basically, the courts look at whether the party who is the weaker one really had a choice and whether the terms were laid out before him in a conspicuous manner.

Here, the families argue that the clause for arbitration and the cap for compensation were not just unfairly buried from consideration but were, in reality, unremunerative of the anguish suffered. 

In practice, litigators can show families procedural unfairness, consider the lack of consent, and the fact that an undue burden has been placed on victims in pleading cases against enforcement. The important thing that weighs against enforcing such stiff clauses is the toll of the tragedy itself.

To flash around some of the points considered, the AI-171 matter clarifies the requirement for putting digital consent under the microscope in high-stakes contracts. It brings to the fore questions relating to justice, empathy, and the ethical limits within which an aircraft contract may be enforced.

Other aircraft disasters & how contractual issues intervened

An examination of major airline disasters reveals that ticket terms and conditions have constantly been a source of legal tussle, especially clauses relating to arbitration and limits of liability. Such contractual stipulations have, in many instances, been embedded in digital booking processes and have drawn judicial scrutiny in more than one jurisdiction.

In the MH 370 case of Malaysia Airlines, families were asked to agree to an arbitration in Hong Kong as a condition to partial compensation. This condition has received much negative criticism, and several families have legally defended this issue.

Similarly, in the aftermath of Lion Air Flight JT610 (2018) and Ethiopian Airlines Flight 302 (2019), the families of the victims filed their actions in the United States and in other jurisdictions.

Restrictive contractual provisions were bypassed by counsel for the plaintiffs, invoking elements considered in the Montreal Convention, chiefly Articles 17 and 21 relative to airline liability. This strategy thus allows for outward representation within public judicial systems instead of private arbitration forums.

As this happens in various tragedies, an express pattern appears: digital acceptance mechanisms are increasingly being challenged by passengers and their lawyers. In India, for instance, pleadings under the Consumer Protection Act, 2019 highlight the absence of real consent and the one-sided nature of airline contracts. Families contend that consumers are not meaningfully informed about dispute resolution clauses, let alone allowed to negotiate them.

The slow but discernible shift now tends toward consumer protection from unfair contractual waivers.

Human life cannot be trivialised by contract

There is a need to draw a clear line between contracts for the carriage of goods and those for the carriage of passengers. Under Indian contract law, a carrier dealing with goods may, by agreement, limit liability for loss or damage. Courts have respected such waivers in cases involving cargo, recognising that both parties entered into the arrangement with a full understanding of the risks. But this principle has no place when it comes to passengers. Here, statutory protections step in and override any contractual attempt to curtail rights

The Carriage by Air Act, 1972, which incorporates the Montreal Convention, makes airlines strictly liable for death or bodily injury. Clauses that seek to cap compensation at token amounts or compel grieving families into distant arbitration forums have repeatedly been tested against public policy, fairness, and the doctrine of unconscionability. Recent case law brings this out sharply, in Vinay Shankar Tiwari v. IndiGo Airlines, 2013, the Ld. Uttar Pradesh State Consumer Disputes Redressal Commission held that airlines cannot rely on digital ‘I Agree’ booking systems to contract away their duty of care or basic fairness. The Commission observed: 

…“There is no doubt that a passenger is bound by the terms and contract of carriage, but… the Airlines Authority should help the passengers so that they can board the scheduled aircraft after completion of the security measures in time.”… 

Domestic consumer law vs privity and digital contracts

In the evolving legal landscape of airline disputes, Indian consumer law is now being used to challenge restrictive terms in digital contracts. The typical doctrines of contracts, privity or consent are set aside in favour of an alternate framework focusing on the fairness and welfare of the consumer under the Consumer Protection Act 2019.

On these lines, the CP Act protects consumers against unfair trade practices, including digital contracts with unilateral disclaimers and terms restricting legal remedies contained in hidden clauses. This Act recognises the imbalance of power prevailing in form contracts and allows consumer forums to knock down such terms when they go against public interest. Specifically, if an arbitration clause or a force majeure clause is an instrument that denies consumers access to justice, the forums may declare such provisions void.

International conventions & global consumer protection

Cross-border air travel places the passenger in the midst of international treaties and municipal laws. This regime is led by the Montreal Convention, 1999, which standardises airline liability for injury, delay, and baggage loss. The Convention expressly forbids carriers from contracting out of the minimum liability thresholds set by it, thus providing a baseline of protection to the passengers.

In the European Union, Regulation (EC) No 261/2004 (EU261) imposes further obligations on airlines so that compensation is to be paid in cases of cancellations, long delays, and denied boarding. Airlines have attempted to circumvent these obligations in the past through private agreements erga omnes, but the courts have, ever since the 2015 Paris terror attacks (Carnet case), stood resolutely against such attempts, thus declaring these rights under EU261 cannot be waived by contract. Consumer rights were neither suspended nor waived even in an act of terror.

Therein lies the jurisdictional challenge in India. While the Montreal Convention is binding as per international law, the enforcement under domestic jurisdiction has been specified by the Carriage by Air Act, 1972, Consumer Protection Act, 2019, and the Aircraft Rules, 1937. 

This complex interaction shows how treaty-based rights and national consumer protections together fortify passenger claims, despite aggressive contracting by airlines.

Negotiating the fine print: practical advice for passengers & lawyers

In the high-speed world of online airline bookings, passengers and their legal representatives must remain vigilant about the contract terms they are bound by. Most ticketing platforms embed extensive terms and conditions (T&Cs) that include arbitration clauses, governing law, and liability waivers, all of which can have serious legal consequences.

An arbitration clause and governing law clause would be something to watch out for-they’re usually so deeply buried in a digital scroll box. A clause setting forth a foreign jurisdiction or a seat of arbitration can really deprive passengers of recourse before their local laws.

Such clauses can be contested against the principles of consumer protection and public policy, especially under the Consumer Protection Act, 2019, and the statutory Passenger Charter.

Maintain documentation: take screenshots, list timestamps, and describe where disclaimers appeared on screen during booking processes. Such digital evidence may assist an aggrieved party in proving that the terms were not fairly disclosed.

Ultimately, passengers should approach local consumer forums instead of international arbitration centres. These forums allow for cost-effective, rights-based remedies and are increasingly assertive in refusing to enforce unfair airline contracts.

Reform is possible: policy, courts, and airline self-regulation

Looking forward to a progressive path in airline contracting involves a combination of regulatory directives, judicial disciplining, and industry self-regulation. The DGCA can start out by promulgating directions requiring airline booking platforms to display arbitration clauses, liability waivers, and governing law terms plainly upfront. Presenting those clauses to passengers before payment would be one step in countering the practice of burying them in hyperlink text.

ICAO can be pressed internationally to lay down model directives on digital contract fairness, including disclosure standards and passenger consent mechanisms. These would help cross-fertilise consumer protection mechanisms across jurisdictions.

On the legislative side, India would do well to introduce a Consumer Protection (Digital Contracts) Bill 2024 that explicitly deals with standard-form digital contracts to maintain fairness, transparency, and true consent in aviation services. The present law can even go further and prohibit pre-dispute arbitration in consumer matters.

Another role courts can continue to act out is invoking public policy to strike down terms that are oppressive to passengers, who may have no negotiating power whatsoever.

Way ahead 

It is also important to recognise that aviation is not casual about safety. Organisations such as Air India Engineering Services Limited (AIESL) operate under one of the most rigorous regulatory frameworks in the world. Before a flight takes off, the number of inspections, certifications, and compliance checks is formidable, spanning airworthiness directives to routine and non-routine maintenance. These multiple layers exist precisely to make sure that the catastrophic scenarios discussed in the article remain rare exceptions.

Looking ahead, there are broader perspectives that could further strengthen law and policy in this field:

Uniform liability 

Extending Montreal-style compensation standards to domestic flights would prevent disparity between international and domestic passengers.

Advance compensation

Mandating transparent advance payment mechanisms would provide families with immediate relief after an accident, avoiding unnecessary hardship and litigation delays.

Digital contracting fairness

Passenger contracts should highlight statutory rights upfront in plain language, making aviation a benchmark for consumer protection in the digital space. Re-thinking consent: Regulations should clarify what cannot be tucked away in digital contracts, ensuring statutory protections remain untouchable.

Insurance enforcement

Compliance with mandatory liability insurance must be strictly monitored, so remedies remain real and enforceable.

Awareness campaigns

Periodic efforts by airlines and regulators to educate passengers about their rights, especially in digital ticketing contexts, would go a long way in reinforcing trust.

The real debate is not about airlines shirking responsibility, but about how law and regulation can continue to strike a balance. Transparency at the time of contracting, together with the formidable technical safeguards already woven into aviation practice, serves to protect both passengers and the industry. Clicking ‘I Agree’ must never mean giving up fundamental rights, and it should also remind us of the immense responsibility carriers and MROs shoulder in keeping every flight safe.

Conclusion

Airline ticket contracts often brush aside unfair terms with digital gloss, leaving passengers with nowhere to turn. This discussion outlines the methods by which courts, regulators, and consumers may oppose such unfair terms. The working definition of consent seems to require a real understanding and not just a click-induced, forced recognition. I therefore recommend the strengthening of disclosure requirements, judicial vigilance, and statutory safeguards, such as those envisaged by the Digital Contracts Bill. Industry players should also promote transparency and fairness. Passengers must insist on reading the key terms and document everything well, then enforce their rights in consumer forums. It is time to rebalance the skies; contracts should be for people, not against them. We should all rally for reform based on justice and transparency.

Frequently asked questions (FAQs)

1. Can airlines impose terms and conditions even if the person does not read them?

Yes, when the person clicks “I Agree”, then under contract law, it is generally considered a valid consent even if the person has not read the terms and conditions. On the other hand, the Court can also strike down the clauses that are unfair or violate any statutory protection. 

2. Do airlines have the right to completely avoid any liability related to crashes through contracts?

No, airlines cannot completely avoid the liability related to a crash through contracts. Domestic laws such as the Carriage by Air Act, 1972, and International conventions such as the Montreal Convention set a minimum standard related to the liability and cannot be waived off through the contracts. 

3. Do Indian passengers have different protection as compared to international passengers?

Yes, Indian passengers have different protection as compared to international passengers. The international passengers are protected under the Montreal Convention, and this also sets uniform global liability standards. On the other hand, the Indian passengers usually rely on the Carriage by Air Act, 1972, and the Consumer Protection Act, 2019. 

References

Serato DJ Crack 2025Serato DJ PRO Crack

This article is written by the iPleaders team and reviewed by Adv Shashank Singh. He is specialised in aviation law with extensive experience advising on aircraft leasing, MRO agreements, and cross-border aviation contracts. He practices before the Supreme Court of India, Delhi High Court, and key tribunals, combining expertise in complex commercial disputes, white-collar crime, IBC and international arbitration with a strong focus on regulatory clarity and strategic outcomes.       

Beginning

For a long time, private planes have been the go-to travel choice for wealthy individuals. This has increased ever since the pandemic hit, in India and across the globe. With this, there has been a significant increase in private jet accidents as well.   

Now these accidents are quite different from commercial planes, as these tragedies don’t make headlines. This triggers a storm of legal, financial and reputational battles. Several questions come up: Who is the owner? Who is liable? Will insurers pay up? And what happens to the vast estate suddenly left behind? 

Just like the plane crash of Wagner chief Yevgeny Prigozhin, which resulted in his death in August 2023. He left behind his Embraer Legacy 600. This sparked a speculation of foul play, sabotage, pilot error and technical error.

On the outside, private aviation may look glamorous, but beneath that sheen lie serious gaps in laws and regulations.  

This compels us to imagine how courtrooms examine these types of cases. Moreover, a major question that arises here is, when the rich fall from the sky, do law and justice fall with them?

Private planes vs commercial airlines: how legal frameworks differ

Both do not differ on the surface. Both involve a licensed pilot, passengers and an airworthy plane. But what differs in the framework on which they work. 

Unlike commercial flights, private planes operate under far less scrutiny. Private jets usually operate under the Non-Scheduled Operator Permits (NSOPs) in India. This design gives flexibility to private operators, which is often misused, but they can choose their pilot, crew and set operational protocols. 

Yes, private planes have a regulatory eye of the Director General of Civil Aviation (DGCA), but the level of oversight is nowhere near that of commercial flights. Commercial flights have to go through safety audits, compliance reviews and standard operating procedures. Private planes, on the other hand, work on loose rules, few inspections and diluted accountability.  

This picture is not different on a global level. There are different frameworks that create a dense web of complications, like the Montreal Convention, DGCA protocols and ICAO norms, for commercial flights. But this web is far from the private planes. The NSOPs leave room for flexibility, which also dilutes accountability.

This is a huge challenge for the lawyers, insurers and the victim’s family. Which court has the jurisdiction? Compensation claims can be filed under which law? How will the damages be calculated? These are not abstract questions, but determine if the victim’s family gets fair compensation or stays stuck under a web of a long-running lawsuit.   

Passengers are not treated as  consumers

Which legislation helps when a commercial plane goes down?

The families of these passengers can file a lawsuit under the Consumer Protection Act, 2019. This is not the same for private aviation. The reason is basically because most of the passengers of private planes are either:

• Owners
• Company directors
• Family members, or
• Guests 

This creates issues for the lawyers and family members of these victims. How?

Since these passengers are not ‘regular ticket holders’, they cannot go to consumer courts. Their legal remedies shift to contract law, tort claims and insurance litigation, and this makes the compensation process technical, expensive and very long.

Contractual ambiguity and waivers

In private aviation, the stakes of forms and waivers that are often signed are the foundation of a legal maze. These charter agreements are not easy. The clauses in these documents quietly shape what happens if something goes wrong.

You will find clauses like, liability limitation clause, the waiver clause and the jurisdiction clause, which very conveniently push the dispute into faraway or foreign arbitration forums like New York or Singapore. Litigation gets more challenging because of other exclusion clauses.  

For the victim’s family, this creates an uphill battle. The legal battle is not shaped as per any straightforward legal rights but on the basis of the right waived when the agreement was signed. 

Where the compensation claims are guided by the statutory safety provision and international guidelines, the outcome depends much on the contract. Which means, when the accident happens, the question is not about negligence or law, but about what was buried in the fine-printed agreements that passengers often sign without even understanding them completely. 

Liability maze: Who can be sued after a private plane crash?

When a commercial plane comes down, it is easy to trace the liability. Things are quite strict and clear here. But private planes? Things get complicated quickly when it comes to determining the liability.

Private planes are tucked behind layered corporate vehicles, trusts or consortiums. Finding out who is liable is like digging through corporate documents, charter agreements and insurance policies, yet investigation reports do not always give a definite answer. 

So who can be held liable? Let’s break down:

Pilot and cabin crew 

First stop of any investigation. 

They are at the centre of any investigation. Fatigue, human error or poor decision-making often put them at the centre of the liability claims. 

Operator company 

If the operator company neglects flight preparation, flight safety check or deployment of crew, then if any fatal accident happens, it finds itself in a legal crosshair. 

Aircraft owner 

Things are a bit tricky here. Often, the owner is not an individual, but a trust or a shell company registered in a tax haven. Finding out the real owner is an investigation in itself. They are usually hidden behind this network of shell companies.   

Maintenance firms

If the crash is the result of mechanical failures or faulty repairs, then maintenance contractors shall also fall into the maze of liability.

Charter broker

The claims of misrepresentation of the safety of the private flights or failure to exercise proper due diligence may come against the broker who arranges the flight. 

Manufacturer 

This is not common, but if any defect in design or system is discovered, then manufacturers may come under the radar.

Insurers 

Ultimately, compensation comes from the insurers and individual insurance policies. But it is often noticed that insurance companies act notoriously to avoid the obligation by conducting their own investigation and trying to pin blame elsewhere to limit payouts.  

Liability does not rest on one party, actually. Multiple parties share the liability, jointly and severally, to ensure that families receive proper compensation. Yet again same problem, the process can drag on for years. 

The lawyer’s uphill battle

The path to represent the victim’s family has practical hurdles. It takes months to trace ownership through offshore shell companies. Serving a cross-border notice requires understanding and compliance with the Hague Convention procedures or bilateral treaties. 

Next comes jurisdiction. Charter agreements often come with arbitration clauses that scatter disputes among different jurisdictions, sometimes three or more. 

The victim’s family finds themselves running from one place to another. Filing probate proceedings in one country, an insurance claim in another and a negligence suit in another.

This is like a legal marathon for them, draining both financially and emotionally.

Succession battles and the estate: death, wealth, and aviation disasters

A private plane carrying a high-net-worth individual (HNI) when crashes, then the tragedy rarely ends at the crash site. A lot happens when there is a sudden loss of a business leader or a public figure. Families shatter, empires destabilise, and a long legal dispute ensues. 

History witnessed this with the sudden demise of Sanjay Gandhi in a plane crash that left not only a personal political vacuum but also reshaped the direction of Indian politics in 1980. A recent incident of the crash of a Gulfstream G-IVSP that killed Flow La Movie, a Puerto Rican music producer. This tragedy did not leave a grieving family but a rich estate, stretching across royalties, offshore assets, intellectual property and claims in multiple countries.      

These assets that NHIs hold leave behind wealth scattered across bank accounts, private equity, offshore trusts, real estate and business ventures that span continents. Now, this situation in India is further complicated because of cultural and legal realities. Many family businesses still work on ‘handshake deals’ without any formal agreements and without a will and trust.  

Role of Insurance Policies

The impact of these tragedies is financial as well. Everything like aviation liabilities policies, keyman-person insurance and personal life insurance comes into play after the accident. And when these insurance payouts into hundreds or even thousands of crores, they can either stabilise the family or turn into a long-lasting court battle.  

A hidden tension comes to the surface when grief mixes with sudden liquidity. Insurance payouts can attract various people to fuel the power struggles, like business partners, distant relatives, and estranged spouses.    

So, what we get here is that a private place crash tests the strength of wealth planning, family unity and legal safeguards. Hence, for HNIs, succession planning is not a luxury, but it is the only real defence against decades of disputes.  

Insurance coverage and denial: the big money fight

Families naturally assume that insurance will ease at least a part of the financial blow. But in reality, the actual battle does not start in the court but with an insurer. They look for different possibilities to deny insurance payouts. 

One of the most common grounds for denial is pilot error. Even a minor issue with licensing can be a ground for denial. For instance, if a pilot is flying at night and he lacks a valid night license, then the claim can be denied. 

Maintenance is another big reason. If any scheduled inspection is skipped by any aircraft or uses a non-certified part then a ‘material non-disclosure clause’ is invoked by the insurer and then refuses to pay.   

The international aspect makes the private aviation dispute more complex. For any Indian-origin victim, if his plane is registered in tax havens and insured by Bermuda, London or Singapore underwriters, this means spending a huge sum of money just to fight over jurisdiction even before the actual claim is heard.  

Insurers play a long game. They are well aware that families are grieving and they can accept a fraction of the actual payout. That is why private aviation insurance disputes are not just about policy language, but about timing, strategy and sheer endurance. Those who go unprepared often end up with far less than what was promised by the insurers.  

Product liability and defective aircraft claims

When a private plane crashes and there’s no clear evidence of pilot error or maintenance issues, focus shifts to the aircraft manufacturer and the possibility of a product defect. This opens the door to one of the most technical, expensive, and complicated types of litigation, i.e., aviation product liability.

On paper, the principle is simple. If a design flaw or manufacturing defect played a role in the crash, the manufacturer (or component supplier) can be held liable. In practice, proving that link is anything but simple. 

Modern business jets are not built by a single company but by vast networks of suppliers scattered across multiple countries. 

Tracing a fault in an altimeter, a hydraulic system, or a flight control module often requires access to proprietary data that manufacturers are reluctant to release without a court order.

Aircraft manufacturers routinely deploy forum non conveniens arguments, attempting to shift cases to jurisdictions with weaker product liability laws. Many contracts include limitations of liability or mandatory arbitration clauses buried deep in delivery agreements.

Plaintiffs who succeed usually do so in the US (particularly in states like California or Texas) or EU courts, which apply strict liability doctrines. However, securing jurisdiction in those courts often hinges on the aircraft’s point of manufacture or sale, not its crash location. 

Regulatory investigations: how DGCA, AAIB, and global bodies respond

The sequence feels almost predictable when a private plane crashes. Rescue operations are finished by the first responders. Then the investigators reach the crash site.    

But does this guarantee accountability or timely investigation? 

Absolutely not. Private aviation in India operates under a weaker system. Investigation is often delayed, and reports are not transparent. The process in commercial aviation is completely different. Strict rules are to be followed by the agencies and protocols are time-tested. Reports prepared are detailed and transparent and this leads to strong safety measures.    

Framework in India

India has two main authorities on paper:

Directorate General of Civil Aviation (DGCA)

DGCA oversees licensing, registration of aircraft and certification of airworthiness.

Aircraft Accident Investigation Bureau (AAIB)

AAIB comes into play when a plane crash occurs. This is responsible for investigating these crashes.  

For private planes, jurisdictional overlaps and limited resources weaken the effect of these bodies. Specifically, if this aircraft is operating in India but is foreign-registered.  

The problem here is that, even after a thorough investigation on the technical side, the findings are not admissible in the court. This makes the road to justice harder for the victim’s family. 

The puzzle of insurance

Let’s see the case of New India Assurance Co. Ltd. vs. Janus Aviation Pvt. Ltd. (2024). The insurer’s appeal to wiggle out of the liability was rejected by the Bombay High Court. This case highlighted a pattern: to deny claims, insurers often rely on technical interpretations of the policy language, while the operators and families are left tangled in litigation. These disputes aren’t just about the contracts, but they go to the heart of the possibility of the existence of any remedy at all.

Cases that tell the story

Learjet 45 VT-DBL, Mumbai (2023)

Amid heavy rainfall, a Learjet 45 aircraft veered off the runway at Mumbai airport, leaving eight on-board people injured. The preliminary investigation held by AAIB pointed out the gaps in the qualifications of the crew and operational compliance. Even in high-end private aviation, the lapses in oversight cannot be isolated but systematic.   

Cessna 152, Faizabad (2018)   

A Cessna 152 aircraft, VT-PTD, was involved in a forced landing on the Saryu river bed in Faizabad. This incident revealed just how fragile safety systems can be at smaller operators and academics.   

What is the common thread in these cases?

It is the lack of uniform, enforceable standards that match those applicable to commercial planes. 

Transparency matters

AAIB does not reveal the report at a transparent level, with proper clarity and is often delayed. This is very different from the US National Transportation Safety Board (NTSB) or Australia’s ATSB.  

Beechcraft B-200 King Air, Essendon, Australia (2017)  

This was one interesting case in which an Indian-origin executive was killed. Australia’s ATSB not only identified the pilot’s error but also issued a public safety bulletin, recognised contributing and non-contributing factors and published the report transparently. It later even played a role in resolving civil and insurance claims.     

The victim’s family in India faces bureaucratic roadblocks when trying to access the data of the black box, maintenance records or interim findings. Even when they use their Right to Information (RTI), key documents are denied on the pretext of national security, or if accepted, then they are shared in redacted form.  

What do recent patterns in private plane crashes reveal?

Every private plane crash is a human tragedy. But if we look into the bigger picture, patterns begin to emerge. And these patterns expose the operational lapses and deep legal blind spots. These plain crashes are not some random events.

Taking the example of a crash of Wagner chief Yevgeny Prigozhin’s Embraer Legacy 600 in 2023. The headlines were dominated because of the political angle, but something different was noticed by the aviation lawyers. A complete lack of transparency around the history of the maintenance of the jet, crew vetting and basic security protocols. Much information was kept secret from the public by private ownership.   

Another case was a Cessna citation in Virginia in 2023. This plane flew on autopilot and ran out of fuel midair. It crashed and killed all the passengers on board, including a senior executive’s child.   

Initial theories pointed to cabin depressurisation. But the investigation revealed that the confidentiality clause between the servicing firm and the plane owner blocked access to critical data. The families had to fight just to access the evidence that explained their loss, before they could even think of compensation.    

Three patterns stand out across these incidents:

• Being registered under shell companies or trusts helps protect privacy and avoid taxes. But this makes it hard to set liability and ownership.
• Maintenance, operations and crew training are often spread across multiple firms. Now, when something goes wrong, deciding accountability gets complicated, which further complicates the litigation.  
• Insurers often use technical language to delay and deny payouts. 

These patterns show that the problem is not just negligence, but also the systematic gaps. The baseline of accountability is missing. 

Ending note

Private aviation may provide freedom and luxury, but the legal aftermath after a crash tells a different story. Ownership is the major issue because it is often hidden behind offshore trusts. Contracts and waivers bury the liabilities. And, insurers try harder to deny payouts to the victim’s family. 

Where in commercial aviation the process is quite transparent and provides statutory protections, families of the victims of private plane crashes are left to go through long battles for compensation.

Hence, reform is overdue. Extension of liability rules like the Montreal Convention to private aviation, enforcement of mandatory insurance with real audits, putting limitations on unfair waivers and putting accident reports transparently are the bare minimum.   

The law must not fall when a private plane falls. Only commercial aviation must not have the privilege of accountability and oversight.  

FAQs

What is the first legal step that families should take after a private plane crash?

After a crash, the families should get in touch with an experienced aviation lawyer. This should ideally be in every jurisdiction, including where it was registered, insured or operated. Preservation of evidence is also important, the chain of custody is maintained, and official accident reports are obtained without delay. 

Can a foreign company be sued in India?

Yes, but it can be quite complicated because legal notices may need to be served and claims filed in the foreign jurisdiction where the company is registered. It’s usually better to start parallel proceedings in India to secure interim relief.

Can a private plane crash trigger criminal liability?

Criminal liability in a private plane crash is a rare scenario. Unless gross negligence, unauthorised maintenance, or falsified documents are proved by the investigator, no case crosses the threshold of criminal charges.

Do private plane passengers have any consumer rights?

No, the private plane passenger does not qualify as a ‘consumer’ under the  Consumer Protection Act 2019 until they pay for their ticket directly. But, as an alternative, families may pursue remedies under tort or contract laws.

References:

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This article is written by Ramanuj Mukherjee, CEO, LawSikho.

Getting started

Despite being home to the headquarters of the Animal Welfare Board of India (AWBI) in Ballabgarh, Haryana, it is facing a serious animal welfare funding crisis. Things may look good on paper, but the ground reality is different. 

Among the 22 districts of the state, most of the Societies for the Prevention of Cruelty to Animals (SPCAs) are either not functional or do not even exist. This is a violation of the Supreme Court’s judgment, which was issued back in 2008 and later in 2015.             

We are forced to think now that if animal welfare is not a priority in Haryana, a state with fiscal strength and national significance, then what message is it sending about our collective responsibility of protecting animals? 

For over two decades, the mandated laws have not been put into effect 

India has one of the most detailed frameworks for animal welfare. The state government is required to fund and maintain the SPCAs as the Prevention of Cruelty to Animals Act 1960 and the Rules of 2001 mandate. Every state is required to set up district SPCAs within six months of the notification, as given under Rule 3, which Haryana has failed to follow for the last 23 years. The states must provide adequate land, infrastructure, a veterinary doctor and operational funding for each SPCA, as stated under Rule 4. 

But a recent PIL filed by the Sehjeevi trust showed that the state is still lagging in providing humane living conditions to animals. The Punjab and Haryana Court issued interim directives to the UT administration to provide clean water, adequate diet, medical facilities and ventilated space in an SPCA facility in Ripur Kalan, Chandigarh. This condition persisted even after the Animal Welfare Board of India (AWBI) inspection in 2020.        

There have been several instances in which the Supreme Court has stepped in to reinforce these obligations. There was a landmark case of Geeta Seshmani vs. Union of India (2008) in which it was directed by the Court to constitute a State Animal Welfare Board within three months. Next was the case of Gauri Maulekhi vs. Union of India (2015), in which it was ordered to establish the district SPCAs within four weeks. 

This responsibility is echoed by the Constitution itself, through provisions on environmental and wildlife protection (Article 48A ), and compassion for animals (Article 51A(g)).   

What about the right to life? Do animals have this right?

Yes, they do. The Right to Life of Article 21 was extended to animals by the Apex Court in the case of Animal Welfare Board of India vs. A. Nagarjuna (2014), calling it the “Magna Carta of animal rights jurisprudence”.

Yet Haryana continues to lag. 

Haryana’s budget and animal welfare: where’s the money for SPCAs?

While the state proudly shows its expenditure on agriculture and allied activities, there is no specific funding for SPCAs. 

On paper, records show that there was an increase of 24% in the funding of agriculture and allied activities. It was ₹6052 crore in the previous year and ₹7525 crore in 2024-25. Sounds great, right? Under this budget, there was no separate budget for animal welfare. Because of no clear details, it is difficult to check how much of the fund, if any, is going for SPCAs, or if it is getting absorbed into broader veterinary and livestock services. 

At the national level, meanwhile, the AWBI offers six grant categories to SPCAs:

• Covering day-to-day operational expenses 
• Rescue cattle grants
• Grants for the shelter house
• Program funding for animal birth control
• Grants for ambulance
• Grants for natural calamity    

But what is the snag here? The SPACs need to be recognised by the AWBI to access these funds. This new recognition rule, which came in 2021, made the process so bureaucratic that not all SPCAs across the country have successfully managed to qualify. This keeps many SPCAs deprived of the financial support.

In its annual plan, the Department of Animal Husbandry and Dairying (DAHD) list a scheme called “Grant-in-aid to societies for prevention of cruelty to animals”. Unfortunately, the disbursement figures remain a mystery. In the same way, the Zila Parishad’s district-level funding records are not available on how much has been used effectively.

What is the result? Just a system with different funding frameworks, but not transparency.   

Ground reality exposes critical infrastructure collapse

Acting on a petition filed by the MowgliAid Animal Welfare Society, the P&H High Court identified 15 districts where SPCAs were not established or were non-functional. This looks like a collapsed ground reality.     

Chandigarh’s SPCA handles overflow cases from surrounding regions. Between January to September 2021, a total of 6383 animal deaths were recorded as per RTI data. This is a stark reminder of what happens when the system fails.

For a fully functional SPCA, the estimated requirements are:

• For land acquisition, ₹1-5 crore.
• For infrastructure development, ₹2-3 crore.
• For operations, ₹50-75 lakhs annually 
• For vehicles and equipment, ₹15-25 lakhs   

The numbers get staggering when scaled up to 22 districts, for the initial setup, ₹100-176 crores and ₹11-16.5 crores annually to keep things running.    

The total estimated requirement for establishing functional SPCAs across all 22 districts stands at Rs 110-176 crore for initial setup plus Rs 11-16.5 crore annually for operations.

Multiple funding sources exist, but remain unutilized

No shortage of funding channels is there in Haryana for SPCAs. Yet no fund is directed by the Animal Husbandry Department, even after an increased budget. However, at the central level, the AWBI does provide grants under different categories, that too online. But the mandatory re-registration process of 2021 has made it difficult for the SPCAs to access it. 

Then there is Corporate Social Responsibility (CSR) funding. Animal welfare is explicitly recognised as eligible for CSR funding under Schedule VII of the Companies Act 2013. This also remains unexplored for the infrastructure of SPCAs, however.  

Hosting the headquarters of ABWI has also delivered no real benefit for district-level SPCAs.  

District administrations theoretically can allocate funds through local bodies, but coordination failures between the Animal Husbandry Department, Municipal Corporations, Police, and Urban Local Bodies prevent effective resource mobilisation.

Tamil Nadu emerges as the model while other states struggle

Tamil Nadu is leading the way when it comes to animal welfare funding. Through its ‘Vallalar Palluyir Kappagangal‘ scheme, Tamil Nadu is the first state in India that have a dedicated animal welfare budget, which is of ₹20 crore. 

Some five NGOs have received an amount of ₹88,05,000 under this scheme. This covers food, medical expenses, ambulances, infrastructure and Animal Birth Control surgeries. What stands out is that Tamil Nadu shows a political commitment with a clear, dedicated budget, transparent process and top leadership.    

Now, comparing this with other states with larger economies like Kerala, Karnataka and Maharashtra, there is no dedicated budget for animal welfare. In fact, when Gauri Maulekhi filed an RTI, it was revealed that not even a single state in India had a fully functioning animal welfare board in 2019. Also, it was only in November 2019 that Karnataka established its animal welfare board.

This systemic failure across states creates an opportunity for Haryana to lead by example, especially given its fiscal capacity and AWBI headquarters advantage.

Court interventions highlight systemic administrative failure

The judiciary has repeatedly intervened to address Haryana’s animal welfare failures. The Supreme Court’s 2008 order in Geeta Seshmani vs. Union of India gave states three months to establish State Animal Welfare Boards and district SPCAs – a deadline Haryana violated by 16 years. The 2015 order in Gauri Maulekhi vs. Union of India provided just four weeks for compliance, yet violations continue nine years later. In a fresh contempt contention in 2020, highlighted continued non-compliance across states.

In the landmark Karnail Singh vs. State of Haryana (2024) case, the High Court observed that “animal rights transcend a private settlement between human parties,” establishing judicial recognition of rights that administrative systems systematically violate.

Department structure exists, but lacks implementation capacity

Haryana’s Department of Animal Husbandry & Dairying, headquartered at Pashudhan Bhawan in Panchkula, oversees animal welfare through the State Animal Welfare Board established in April 2018. Grant application procedures exist through the Saral Haryana portal (saralharyana.gov.in), but SPCA funding applications face bottlenecks. 

The two-stage disbursement mechanism creates cash flow challenges, while extensive documentation requirements burden small organisations. Missing meeting records, insufficient staff allocation, and absent operational budgets characterise the State Animal Welfare Board’s dysfunction.

Why implementation keeps failing: seven big roadblocks

With existing funds on paper, there are seven biggest stumbling blocks that happen to make SPCAs run in the maze of challenges:

Bureaucratic delays 

This stems from AWBI’s 2021 re-registration mandate requiring dual certification. With this, there are processing delays of 4-6 months. 

Budget underutilization 

When allocated fund is not spent because of a procedural bottleneck, that is budget underutilization. 

Mismanagement and corruption 

The systematic corruption has repeatedly been flagged by the activists of Delhi-NCR. From illegal breeding rackets running at the Delhi-Haryana border to mysteriously recorded “zero deaths” sterilisation surgeries. 

Capacity gaps 

There is a lack of properly trained AWBI-recognised personnel. There is a lack of proper facilities as well.    

Lack of infrastructure 

The basic allocation of land is missing. Animal ambulance, sterilisation equipment and even autoclaves are insufficient. 

Failures of coordination 

Multiple agencies, like animal husbandry, municipal corporation, police and local bodies, have their own roles. But because of poor communication and overlapping jurisdiction, nothing moves smoothly.

Political apathy 

From directing the set-ups for feeding spots to nudging RWAs to form for welfare board, it often requires the High Court to step in and get the work done. 

Civil society fills gaps while highlighting needs

Looking at the successful models of animal welfare, what do we get? SPCAs of Haryana would not have to struggle the way they are struggling. Taking People for Animals (PFA) as an example, across the countries, with twenty-six hospitals, 165 units, and sixty mobile units, PFA has built a functional infrastructure. Their goal of establishing centres in about 600 Indian districts shows the requirement scale in Haryana.    

Funding is not the issue; it is the system. International systems like Open Philanthropy provided two years of support funding, which amounted to $120,000. It also provided cage-free farm initiatives, which amounted to $200,000. The AWBI was pushed by PETA India’s advocacy to issue an advisory ensuring sufficient funds were provided for community animal feeding. This shows that the work gets done when pressure is applied.

There is a big gap in data around how much funding SPCAs actually need. 

Financial assistance schemes exist, but lack transparency

The AWBI has a whole set of grant schemes that can be applied for through online mode.   

• Operational expenses(maintenance, medicines, rescue operations, and establishment charges) are covered by regular grants
• The Rehabilitation operation is supported by the rescue cattle grants. 
• Infrastructure development is provided by the shelter grants. 
• Disaster relief is provided by the natural calamity grants. 
• The Animal birth control programme funds sterilisation and vaccination initiatives. 
• Ambulance Grants provides emergency response services. 

It is not that easy to access these is not that easy. Funds always get released in two instalments, but that too after a proper, satisfactory inspection. There is a requirement to go through a complex recognition process, and the ABWI board must scrutinise the application.

Haryana’s Saral Portal theoretically streamlines applications through Digital India-compliant faceless, paperless, cashless systems. Yet practical implementation faces hurdles.

Recommendations demand immediate systematic reform

Evidence-based analysis points to clear, actionable recommendations for Haryana. Immediate requirements (0-6 months) include allocating Rs 10-15 crore dedicated animal welfare budget following Tamil Nadu’s model, establishing a functional State Animal Welfare Board with proper staffing and annual allocation, completing Punjab & Haryana High Court compliance for 15 identified districts, and filing comprehensive RTI applications for current spending audits. The state should leverage its AWBI headquarters advantage to establish model district SPCAs and create transparent online funding tracking systems.

Medium-term initiatives (6-18 months) should focus on completing land allocation for all 22 districts, recruiting required veterinary staff to fill vacancies, establishing district-wise helplines and ambulance services, and developing public-private partnerships with CSR funding targeting budget needs. Infrastructure development requires Rs 110-176 crore one-time investment plus Rs 11-16.5 crore annual operations, with priority allocation to Animal Birth Control programs, rescue and rehabilitation, infrastructure, staff and operations, and emergency response.

Talking about the long-term change, say like 2-5 years, then Haryana needs to think big. With big, it is meant that funding for animal welfare must become a legislative mandate, linking it with the plans of disaster response, setting up regional specialised treatment centres, and establishing a strong monitoring system with quarterly reviews and audits by the CAG.    

The aim for per capita spending can be at least higher than Tamil Nadu. Because honestly, Haryana has better capacity.

Money alone won’t do everything. A clear political will is required, and a proper separation of the animal welfare budget from the livestock budget. Pairing up with local NGOs would also work, and most importantly, transparency. This is what accountability is.

Looking forward

The Funding crisis in Haryana SPCAs is a clear case of government failure. There are several shortcomings despite having a strong framework. Even hosting the AWBI headquarters does not work. There are still sixty-eight per cent of the districts that have non-functioning SPCAs. There continues to be a massive shortage of veterinary staff and a lack of allocated funds.     

Haryana does not need to reinvent the wheel. There are already existing examples of proven models that are functioning fully for animal welfare. What does Haryana need to do now?

It needs to draw from these examples and proper funding for its SPCAs. Only with the right commitment, Haryana can fill the existing gaps and create an actual working animal welfare system.

Frequently asked questions (FAQs)

1. Are SPCAs’ services restricted to stay animals?

Not really, SPCAs are for every type of animal cruelty, whether it be the domestic pet or farm animals, or working animals like donkeys and horses. This list also includes those animals that are used for trade or entertainment. 

2. How does the lack of SPCAs affect public health?

It is very direct. When animals go untreated for various injuries, or there is no animal population control, and a lack of vaccination drive, this increases the risk of rabies and other diseases, and this affects the human population directly. 

3. What legal power do SPCAs have?

SPCAs get their legal powers from the Prevention of Cruelty to Animals Act. They can inspect the facilities, rescue the animals and also initiate a legal proceeding against the wrongdoers.

References

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This article is written by Adv. Sohan Varghese Francis, Corporate & Civil lawyer and Founder of Juris Summit, a global legal consultancy helping startups, founders and businesses navigate complex laws with confidence. He holds 4+ years of experience in domestic practice and international collaborations. He specialises in structuring businesses, drafting airtight contracts, and ensuring cross-border compliance.   

To begin with

When we talk about corporate insolvency, the importance is generally given to large financial institutions as well as to the banks, whereas the small creditors are often neglected. The small creditors generally include vendors, suppliers or any service providers who at one time have significantly contributed to the operations and the growth of the business.

The Insolvency and Bankruptcy Code, 2016 (IBC), introduced creditor-driven insolvency resolution, aiming for faster resolutions and value maximisation. Yet in practice, it has created a clear disparity. Financial creditors enjoy priority, and operational creditors, especially the small ones, are left with little to nothing in resolution plans.

This gap is not only seen in the bare act and in documents, but it is also visible in the courtrooms, as well as in the resolution plans. In the most recent case of Kalyani Transco vs. Bhushan Power and Steel Ltd. (2025), this issue is in the spotlight. Although the judgment which was given has followed a proper procedure of the law but then it also gave rise to an important question, i.e., has the insolvency system of India created a group of small creditors who are recognised by law, but in practice are left behind and overlooked?

While we delve into the facts of the Kalyani Transco case, let us revisit the IBC’s structure and compare India’s approach with global standards. And to introspect whether it is time to rethink the treatment of the smallest players in the resolution process?

Operational creditors and their ordeal -the legal landscape

Under the IBC, not all creditors are treated equally. The Code institutionalised a hierarchy that rewards size and financial clout. 

Operational creditors have certain rights available under IBC to representation and rights to appeal of this Corporate Insolvency Resolution Process. They can also initiate insolvency resolution u/s 8(1). But these provisions are not used and often fail to translate into real influence in resolution. 

The Creditor Hierarchy under the IBC

When we talk about creditor hierarchy under IBC, then at the top there are the financial creditors who are usually considered as NBFCs, banks and bondholders. Under Section 30(4) of the IBC, CoC have the power they approve or reject the resolution plans, and such practices are often referred to as “commercial wisdom.”  

Service providers, employees and suppliers are generally considered operational creditors. Operational creditors can file under Section 9 but generally lack CoC representation. Under Section 24(3)(c) of IBC, operational creditors are allowed to attend the meetings if their claims together make up more than 10% of the company’s total debt.

In the Swiss Ribbons Pvt. Ltd. v. Union of India (2019), the Supreme Court observed that, discriminating between financial and operational creditors under the IBC is constitutionally valid. The Court felt that financial creditors are in a better position to assess viability and restructuring proposals. 

The Supreme Court in Jaypee Infratech Ltd. v. Axis Bank Ltd. (2020) further reaffirmed this design by recognising that operational creditors are differently placed, and therefore their exclusion from decision-making cannot be faulted as unconstitutional, provided minimum protections under Section 30(2)(b) are met.

The legal disadvantage of small creditors

Despite being stakeholders in the operations of the debtor, the small creditors are faced with:

• No voting rights on resolution plans.
• Minimal recoveries, sometimes just pennies on the rupee.
• Communications on proceedings, if any, received late.
• No representation in the CoC, unless there are exceptional circumstances.

Section 24(4) IBC clarifies that while directors, partners, and representatives of operational creditors can attend meetings of the Committee of Creditors (CoC), they do not have the right to vote. Their presence is permitted, and they can participate in discussions, but the final decisions are made by the financial creditors who hold voting rights based on their financial debts

In Essar Steel, 2019, operational creditors with the claims of ₹4,976 crore were paid just ₹214 crore, about 4.3%  as against a 92% recovery paid to secured financial creditors. The Supreme Court went on to uphold the “commercial wisdom” of the CoC, which implies that once the legal thresholds are met, the courts have no business interfering.

The Court in Essar Steel also clarified that “fair and equitable treatment” under Section 30(2)(b) does not mean equality of outcome but only that operational creditors must receive at least the liquidation value due to them under Section 53. This principle has since been repeatedly applied, including in Kalyani Transco v. Bhushan Power & Steel Ltd. (2025), where the Supreme Court reiterated that operational creditors cannot demand parity with financial creditors so long as statutory minima are met.

This raises another question: Is “commercial wisdom” fast becoming a cloak to conceal inequity? Yet, it is often small suppliers that understand how the business runs on the ground, an experience that should be leveraged.

What happened in Kalyani Transco vs. BPSL (2025)?

There was dissatisfaction among the small players in the insolvency ecosystem in 2025. Kalyani Transco Private Ltd., a minor operational creditor, filed a petition against the resolution plan that was approved for Bhushan Power and Steel Ltd.

It was a direct appeal that the Apex Court was dealing with. It was from the NCLAT’s dismissal of Kalyani Transco’s objections. It wasn’t just paperwork or procedure anymore. The judges were willing to re-examine the meaning of “fair treatment” under the IBC, especially for the operational creditors.  

A brief overview of the case

Kalyani Transco had supplied engineering components to BPSL and claimed a small operational debt. The resolution plan was approved by the CoC, which offered negligible recovery, reportedly less than 1% of the claimed amount to Kalyani Transco, while sizable payouts were made to the secured financial creditors.

Kalyani Transco went to the NCLAT, arguing that the resolution plan was not fair and equitable within the purview of Section 30(2)(e) of IBC, which demands that the plan must be in compliance with legal provisions. Kalyani argued that even though the amount claimed might have been meagre, the claim needed to be respected in the process.

The Supreme Court, however, emphasised that while the IBC does not guarantee equal recovery, it does require non-discriminatory treatment. The Court highlighted that operational creditors cannot be reduced to “illusory” recoveries, even if their claims are comparatively small.

Key issues raised in the case

Was the resolution plan discriminatory?

The operational creditor alleged that the plan provided vastly disproportionate treatment between financial and operational creditors, violating the principles of equitable distribution and natural justice.

Does the “commercial wisdom” doctrine override fairness?

The CoC’s decision was shielded by the now-familiar judicial doctrine of non-interference, that courts should not question the financial wisdom of the creditors. But should this doctrine apply even when the result seems legally sound yet ethically questionable? Since the CoC’s decision was protected by the doctrine of commercial wisdom (as reaffirmed in K. Sashidhar v. Indian Overseas Bank, (2019), the question arose: Should courts step in where outcomes appear legally sound but substantively inequitable?

What is “fair and equitable” under the IBC?

The court was invited to reconsider whether procedural compliance (like giving a creditor “something”) is enough, or whether substance and fairness should guide the outcome.

What were the key findings?

The Kalyani Transco vs. BPSL (2025) decision was not a legal blockbuster, but its subtle affirmations of the status quo have deep implications. While the judgment was consistent with past rulings, it also underlined a growing discontent: that predictability in law is not always the same as fairness in justice.

Courts reaffirmed the supremacy of commercial wisdom

The tribunal reiterated that it shall not interfere in the CoC decisions, unless the plan contravenes explicit provisions of the IBC or is patently arbitrary. Thus, the Supreme Court, in essence, treated the Essar Steel judgment as the touchstone precedent. 

The Court specifically observed that the mandate of Sections 30(4) and 31 of the IBC leaves no room for judicial substitution of CoC’s decision with what the court “thinks” is a better distribution. In doing so, it directly rejected Kalyani Transco’s plea that commercial wisdom must be subjected to a fairness review beyond legality.

Procedural compliance was deemed sufficient

The NCLAT maintained that merely differential treatment of creditors cannot be legally infringing, so long as operational creditors are provided with a payment that is not less than the liquidation value and the plan adheres to Section 53.

The court refused to impose substantive fairness standards on a process that is meant to be fast, predictable, and creditor-driven. It clarified that “procedural fairness” does not extend to questioning the rationale of CoC’s distribution model so long as the minimum legal floor is met. 

It refused to recognise a substantive right of operational creditors to demand parity with financial creditors.

“Fairness” under IBC remains procedural, not moral

The Court nodded silently to one great truth in the matter: the IBC has been primarily concerned with legality rather than equity. The resolution plan might have been a technically acceptable one for BPSL, but to Kalyani Transco, it was still a legal eviction from justice.

In fact, the bench underscored that fairness must be seen in the “systemic context” of speedy resolution and revival of the corporate debtor, not in the “individualised sense” of every creditor’s satisfaction. 

The “value maximisation” logic trumps equitable distribution

The court noted that the goal of the resolution process is value maximisation, not redistribution. 

It reaffirmed that “maximisation of value of assets” under Section 30(2)(b) is the guiding star of IBC, and redistribution of value to create substantive equality was never envisaged.

In rejecting Kalyani Transco’s claims, the Court maintained that operational creditors’ remedy lies in contract law or arbitration, not in stretching insolvency principles beyond their legislative design.

Critical reflections on the Kalyani Transco ruling

Legal judgments often walk a tightrope between doctrine and justice. In Kalyani Transco vs. BPSL, the rope was steady, the doctrine held. But from where small creditors stood, it wasn’t hard to feel like they had fallen off the edge. This section unpacks the deeper implications of the ruling, not just in black-letter law, but in how the insolvency ecosystem is evolving and for whom it’s evolving, as most operational creditors are unsecured.

Legally sound, morally lopsided?

The judgment followed procedure and precedent but left small creditors like Kalyani Transco with negligible recoveries despite delivering goods or services as per the rules. 

In light of the Supreme Court’s observation in this case that the differential treatment between financial and operational creditors was not unconstitutional per se, as the legislative intent of the IBC itself was to prioritise resolution over liquidation. Yet, the absence of safeguards for small creditors raises questions about whether the constitutional principle of equality before the law is being indirectly diluted.

The commercial wisdom doctrine: efficient or evasive?

The situation was stuck in its familiar position. The Court cannot interfere with the actual decision of the CoC, but can review if the process was followed. Still, no legal requirement exists that can force the CoC to record and address the concerns of operational creditors. At best, these things are merely acknowledged on paper, and nothing more. 

And this is the actual problem. At this point, the doctrine of commercial wisdom starts looking less like wisdom and more like exclusion. 

A two-tier justice system under the IBC?

The IBC operates with a built-in hierarchy of justice:

• Tier 1: Secured financial creditors — recoveries and influence.
• Tier 2: Operational creditors — minimal returns, no say.

The Kalyani Transco ruling arguably cements this two-tier structure by reiterating that operational creditors cannot claim parity with financial creditors in distributions under a resolution plan. While this provides certainty for lenders and investors, it entrenches a systemic imbalance that leaves suppliers, employees, and MSMEs perennially vulnerable. Unless legislative amendments create a more balanced recovery framework, the IBC risks alienating precisely those stakeholders it sought to protect from the earlier regime of endless litigation and non-recovery.

Rethinking equity in resolution

After analysing the Kalyani Transco ruling and its implications, the elephant in the courtroom is clear: the IBC may be efficient, but is it equitable? 

Should the IBC introduce a minimum payout threshold?

Small creditors could be guaranteed a modest minimum recovery, similar to priority sector norms in banking.

Such a floor could be modest, say 5% or even 1% of admitted claims, but it would signal a systemic commitment to fairness and reduce litigation by aggrieved claimants.

Should small creditors be given partial voting rights?

Until now, no operational creditor has had a say in the committee unless they form 10% or more of the total debt is a rare situation. Hence, there is an inherent representation deficit.

Assigning partial or fractional voting rights according to the size of claims (let’s say a combined 10% voting weight to operational creditors) will perhaps go a long way in balancing fast and efficient resolutions with a basic sense of inclusion.

What can India learn from other countries?

To balance the scale, the legal system in many parts of the world sometimes tries subtly and sometimes directly. Starting from the UK, for instance, trade creditors are actually permitted representation through different committees. Taking another example, in the US, unsecured creditors can participate in the creditors committee, and can participate and negotiate restructuring terms. In fact, Singapore also permits representation of small creditors.

Comparing this with India, small creditors are recognised on paper. But in practice, their role is little more than symbolic. Their claims are recognised by the law, but when it comes to decision-making, they are sidelined. 

Final takeaway

In the case of Kalyani Trancso vs BPSL, the insolvency law was not changed, but they have spotlighted some important points, or we can say on some truths that everyone should know, such as that the law and the procedure are being followed, but then also the fairness is still missing. This case also shows how the gap is increasing between the strict legal procedure and the actual justice that is given under IBC.   

Now the question is whether the judgment that was given was correct and legally sound? So the answer to this question is yes, but not only that; this judgment also indirectly urges the urgent need to add corrective measures in the IBC, which is far more than the mechanical application. 

The system, which is present, gives more power to the financial creditors to make decisions, and on the other hand, the operational creditors are mostly neglected. The main question which have to be answered and focused on is whether the law only needs to focus on the efficiency part or is this high time to make things fairer for all those who do not have a voice in the process?

Frequently asked questions (FAQs)

1. Do small creditors have the right to challenge a resolution plan under the IBC?

Yes, but with limited success. Courts usually defer to the “commercial wisdom” of the CoC unless there’s a clear legal violation or fraud. 

2. Can Operational Creditors be included in the Committee of Creditors (CoC)?

No, Operational creditors cannot be included in the Committee of Creditors (CoC) under the IBC. But, if the combined dues of the operational creditors are 10% or more than that of the total debt, then they are allowed to attend the CoC meetings, but do not have any voting rights. 

3. What are the remedies available to the small creditors when they receive a negligible or zero payout? 

The small creditors should be paid at least the liquidation value, and this is also given under Section 30(2)(b) of IBC. On the other hand, if the due process is followed and all the statutory requirements are met, then the courts uphold such a resolution or plans even after the negligible payouts. 

4. Is it possible for the suppliers to refuse to deal with all those companies that are under the proceedings regarding insolvency?

Yes, the suppliers can decline or can refuse for any new transaction. However, according to  Section 14, which is related to the moratorium provision under the IBC, suppliers need to continue with the existing contracts.   

Reference

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