IBC, 2016

Moratorium under Coporate Insolvency Resolution Process : Relief to Corporate Debtors

Pragya Lalwani

Learned Author in this article discusses the effect and applicability of moratorium, granted by the Adjudicating Authority on insolvency commencement date that lasts with the completion of insolvency resolution process for a corporate.

1. Introduction

The Insolvency and Bankruptcy Code, 2016(Code, in short) is a welcome move that imbibes not only the time bound insolvency process or liquidation but also some of the useful attributes of Insolvency and Bankruptcy legislation prevalent in other countries viz., moratorium period during insolvency resolution process, suspension of on-going legal actions or proceedings, etc. In general, moratorium means a temporary prohibition of an activity.

Once a moratorium is imposed during any case filed under Chapter II of the Code, all avenues under other legislations in force are closed for certain period of time. From the operation of moratorium period all the actions of creditors would be stayed, debtor would be allowed to remain in possession, formulate and propose a best suited resolution plan and obtain the approval from all of the stakeholders. In other words, Code provides a necessary time period to corporate debtors to breath as no suits or legal proceedings could be instituted against the debtor including the on going actions during the moratorium period. Provisions regarding moratorium are provided under section 14 of the Code.