Summary: This blog delineates the contours of interim moratorium under Section 96 of the IBC. It explores the provision’s interaction with the SARFAESI Act, 2002, its application to co-owned properties, the 2026 amendment to Section 96, and potential future legislative changes.
Introduction
The Insolvency and Bankruptcy Code, 2016 (“IBC”), introduced a comprehensive framework for resolving insolvency and bankruptcy of corporations, individuals and partnership firms. Part III of the IBC, which governs the insolvency resolution process for individuals and partnership firms, came into effect on December 1, 2019. Under Section 94, a debtor may apply to the National Company Law Tribunal (“NCLT”) for initiation of insolvency resolution, either personally or through a resolution professional. Under Section 95, a creditor, independently or jointly with others, may apply against an individual or partnership firm. On filing of such application, an interim moratorium under Section 96 of the IBC commences on the date of application in relation to all debts, and remains in effect until its admission. During this period, all pending legal actions concerning all debts are stayed, and no new actions or proceedings related to any debt may be initiated. Further, where the application concerns a firm, the interim moratorium extends to all its partners as on the date of application.
Judicial interpretation of the scope of interim moratorium: Supreme Court
In State Bank of India v. V. Ramakrishnan and Anr.[1], the Supreme Court distinguished interim moratorium from Section 14 moratorium, holding that Section 14 does not apply to personal guarantors, unlike Sections 96 and 101. The Interim Moratorium, a distinct protection under Part III of the IBC, was held to stay all pending or prospective proceedings relating to a personal guarantor’s debt, attaching to “the debt, not the debtor”. This makes it wider in scope than Section 14, which applies only to the debts of corporate debtors.
It noted that “it is evident that directors, who are in charge of the companies, provide personal guarantees in the overwhelming majority of instances”. Section 14 does not apply to these guarantors, therefore, they cannot evade independent and co-extensive liability for the debt. By contrast, guarantors of firms and individuals, whether closely associated with the debtor or complete strangers, are individually liable for specific debts, which is why the moratorium under Section 101 attaches to “the debt, not the debtor”.
Similarly, in Dilip B. Jiwrajka v. Union of India and Ors.[2], while upholding the constitutional validity of Sections 95–100, the Court reiterated that interim moratorium operates “in respect of any debt”, not the debtor. It is triggered on filing of an application under Section 94 or 95 and ceases on admission under Section 100. Unlike Section 14, which restrains proceedings “against the corporate debtor” only after the adjudicating authority’s order, Section 96 is essentially a protective, restraining action against the debt itself.
In Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth and Ors[3],the Court considered whether the interim moratorium extends to penalties imposed on a personal guarantor under the Consumer Protection Act, 2019. It held that individual insolvency proceedings are primarily intended to restructure personal debts and provide relief to the debtor. Extending a blanket stay on regulatory penalties would defeat consumer protection objectives and be contrary to public policy. The IBC is intended to resolve financial distress, not nullify statutory liabilities.
Interpretation of the term “Filing” Under Section 96
Different judicial forums have interpreted when an application is considered “filed” under Section 96, thereby determining when the interim moratorium takes effect.
View of the National Company Law Appellate Tribunal (“NCLAT”)
Krishan Kumar Basia v. State Bank of India [4] (“Krishan Kumar Basia”)
The NCLAT held that an electronically-registered application is considered “filed”, regardless of whether the NCLT registry has numbered it. Filing cannot be made contingent on numbering as it would create uncertainty related to filing date. This date is important because statutory consequences, including the interim moratorium that takes effect immediately upon filing, depend on it. Numbering serves a separate administrative purpose and is not equivalent to filing under the Rules. Filing is thus complete upon presentation to the Registry, irrespective of subsequent numbering.
Sangita Arora v. IFCI Limited and Ors.[5] (“Sangita Arora”)
The NCLAT held that it was bound by Krishan Kumar Basia and was not persuaded by the Kerala High Court’s view in Jeny Thankachan v. Union of India and Ors. (set out hereinafter), which failed to consider Krishan Kumar Basia.
Kerala High Court’s View
Jeny Thankachan v. Union of India and Others [6]
According to the Kerala High Court, an interim moratorium applies only when an application is defect-free, satisfies all procedural requirements, and is numbered by the adjudicating authority. Mere uploading of an application under Section 96 does not constitute filing it.
Protective orders during interim moratorium
While the interim moratorium restrains initiation or continuation of legal action against the personal debtor, it offers no protection against alienation of the guarantor’s personal property. Accordingly, in IDBI Trusteeship Services Ltd. v. Binder Pal Mittal (“IDBI”), NCLT Chandigarh granted relief to the creditor by restraining the personal guarantor from transferring, encumbering, alienating, or disposing of any assets or beneficial interest during the pendency of the Section 95 proceedings and until next hearing, thus protecting the creditor’s interest during the pendency of the proceedings and the interim moratorium.
Interaction of interim moratorium with proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”)
A critical question is whether the commencement of interim moratorium under Section 96 stays proceedings under the SARFAESI Act, which provides mechanisms under Sections 9 and 14 for enforcing security interests, including the sale of mortgaged property. Below are the views of various forums:
In Sanjay Dhingra v. IDBI Bank Limited and Ors.[7], the Delhi High Court held that interim moratorium covers all debts of a personal guarantor, including mortgaged property under SARFAESI proceedings. Relying on Section 238 of the IBC, the Court barred IDBI Bank from taking further action, beyond the physical possession obtained before the interim moratorium and restrained it from selling the property. It distinguished the Kerala High Court’s ruling in Jeny Thankachan as pertaining to the Section 14 moratorium, not the interim moratorium.
Following this reasoning, NCLT Mumbai in Raghavendra Joshi and Ors. v. Indian Bank and Ors.[8](“Raghavendra Joshi”)invalidated a SARFAESI sale conducted after the interim moratorium began, holding that symbolic possession did not permit further action against the debt.
In M/s Kapole Advertising Agency v. Standard Chartered Bank and Ors.[9], the Bombay High Court set aside DRT-II Mumbai’s orders denying applications to restrain the bank from taking physical possession and stayed/ set aside the sale notice and other coercive steps taken during the interim moratorium. The Court held that interim moratorium operates from the registration date of the Section 95 petition, and SARFAESI action can resume only after it ceases. Although the court noted possible collusion between the petitioners and the third-party Section 95 applicant, and NCLT Registry lapses in following Bank of Baroda v. Union of India and Anr[10] and the NCLT’s Standard Operating Procedure dated March 19, 2025, on scrutiny/ registration of filings, it held that these irregularities could not defeat the third-party applicant’s rights, and that the interim moratorium’s commencement cannot depend on notice to the respondent bank.
In Mr. Ashok Gupta & Ors. v. Suryoday Small Finance Bank Ltd.,[11] the DRT, Pune, restrained the secured creditor from taking possession of the mortgaged property during the interim moratorium. Despite that, the secured creditor took possession of the property basis the Chief Judicial Magistrate, Pune’s, order. The DRT then passed an order directing the secured creditor to restore possession. After the order was challenged, the Bombay High Court stayed the effect and operation of the DRT’s orders.[12] Pending disposal of the writ petition before the Bombay High Court, the Supreme Court ordered that the DRT’s February 4, 2026, order remain in effect.[13]
Interplay between co-owned property and the Interim Moratorium
A nuanced issue arises when mortgaged property is jointly owned/ co-owned by a person subject to insolvency proceedings and others who are not.
In Raghavendra Joshi, the mortgaged property was co-owned by the personal guarantor and his wife, who was not subject to insolvency proceedings. Nonetheless, NCLT Mumbai held that the interim moratorium barred the sale of the jointly-owned property, interpreting Section 96 to stay proceedings “in respect of the debt”, not merely those against the debtor. The effect is that the interim moratorium appears to protect co-owned assets when they secure a debt, subject to insolvency proceedings.
Addition of Section 96(4) by IBC Amendment, 2026
IBC (Amendment) Act, 2026, introduced Section 96(4), excluding personal guarantors to corporate debtors from interim moratorium. The Bombay High Court, in Tata Capital Financial Services Limited v. Neel Motors LLP & Ors[14], clarified that the expression “where an application is filed” under Section 96(4) includes applications that have already been filed and remain pending before the adjudicating authority. Application of the amendment to such pending proceedings does not constitute retrospective operation, thereby applying it even to pending Section 95 petitions.
Potential Legislative Changes
The Insolvency Law Committee’s February 2020 report recommended replacing the term “debt” under Section 96 with “debtor” to clarify that interim moratorium applies to proceedings where the debtor’s assets could be disposed of. However, this recommendation has not been implemented, and Section 96 remains unchanged as on date.
Conclusion
Interim moratorium under Section 96 of the IBC is an important protective measure, broadly staying all legal proceedings relating to any debt of the debtor from the moment an application is filed under Section 94 or 95. Interim moratorium applies to all debts of personal guarantors or partnership firms, operating in respect of the debt rather than the debtor, distinguishing it from Section 14. There remains a judicial split on when an application is considered “filed”, with the NCLAT favouring electronic registration and the Kerala High Court requiring formal numbering by the adjudicating authority. The provisions of IBC, including the interim moratorium, override other laws, including the SARFAESI Act, preventing secured creditors from proceeding with enforcement actions during the operation of interim moratorium. Interim moratorium appears to protect jointly-owned assets when they secure debts subject to insolvency proceedings, even when co-owners are not themselves subject to such proceedings.
As this jurisprudence evolves, its scope will likely be further refined by judicial interpretation. Until then, Section 96 continues to shield personal guarantors broadly. Creditors, however, may seek protective orders from the NCLT for secured assets during this period, as was done in IDBI.
[1] (2018) 17 SCC 394.
[2] (2024) 5 SCC 435.
[3] 2025 SCC OnLine SC 493.
[4] Company Appeal (AT)(Insolvency) No. 721 of 2022.
[5] 2024 SCC OnLine NCLAT 767.
[6] 2023 SCC OnLine Ker 10748.
[7] 2024 SCC OnLine Del 4521.
[8] IA No. 2247/2023 in CP No. 575 (IB)/MB/2022.
[9] Order dated 21st April 2026 in Writ Petition No. 685 of 2026.
[10] Order dated 3rd May 2024 in Writ Petition (L) No. 34152 of 2023.
[11] Orders dated 28th January 2026 and 4th February 2026 in Securitisation Application No. 61 of 2026.
[12] Order dated 12th February 2026 in Writ Petition No. 2078 of 2026 – Suryoday Small Finance Bank Limited v. Ashok Rajkumar Gupta and Others.
[13] Order dated 5th August 2026 in SLP (C) Nos. 22378-22379 of 2026.
[14] Commercial Arbitration Petition No. 620 Of 2021
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