The Delhi High Court has held that the moratorium under Section 101 of the Insolvency and Bankruptcy Code (IBC) in a Personal Insolvency Resolution Process (PIRP) is strictly time-bound and self-operative, ceasing automatically upon expiry of 180 days or upon an order on the repayment plan whichever is earlier.
Justice Harish Vaidyanathan Shankar was dealing with enforcement proceedings initiated against a personal guarantor, where the judgment debtors sought a stay on the ground that the repayment plan was still pending consideration before the National Company Law Tribunal (NCLT).
Rejecting this contention, the Court held that such a submission runs contrary to the plain statutory scheme, which contemplates two distinct and independent triggers for cessation of the moratorium. The use of the expression “whichever is earlier”, the Court observed, makes it clear that even in the absence of any decision on the repayment plan, the moratorium comes to an end upon expiry of 180 days, leaving no scope for continuation beyond the prescribed period.
The Court noted that, unlike the Corporate Insolvency Resolution Process under Section 14 of the IBC where the moratorium continues till completion of the process, the framework governing personal insolvency adopts a materially distinct and limited approach, with no provision for extension.
Emphasising the nature of the statutory embargo, the Court held that the moratorium under Section 101 is temporary and protective in character, intended only to preserve the debtor’s estate during the pendency of the resolution process. Once the moratorium ceases, the bar on initiation or continuation of proceedings is lifted, and creditors are restored to their ordinary remedies in law.
In the present case, since more than 180 days had elapsed from the date of admission of the insolvency application and no order had been passed on the repayment plan, the Court held that the matter squarely fell within the first contingency under Section 101. Consequently, there was no legal impediment to continuation of enforcement proceedings.
The Court also rejected the attempt by the judgment debtors to invoke the second contingency cessation upon approval of the repayment plan at a stage beyond the statutory timeline, holding that such an interpretation would defeat the legislative intent and render the provision otiose.
Allowing the application, the Court directed attachment of multiple properties belonging to the judgment debtor (excluding one specified asset). For the purpose of effecting sale, Senior Advocate Kamal Nijhawan was appointed as Court Receiver, with directions to complete the process within six months and a fixed remuneration of ₹10 lakh.
Appearances:
For Decree Holder: Through: Mr. Sidhant Kumar, Ms. Anushka Shah & Ms. Ekssha Kashyap, Advs
For Judgment Debtors: Mr. Malak Bhatt, Ms. Neeha Nagpal, Ms. Sukanya Joshi & Mr. Saahil Bahety, Advs. for JD-1.
