Moratorium under insolvency law bars preferential repayment to one financial creditor during CIRP and protects equal treatment.

During CIRP, once moratorium is declared, the corporate debtor cannot repay one financial creditor in preference to other financial creditors. The insolvency framework is intended to preserve the debtor's assets, maintain a calm period, and keep the company as a going concern. Section 14(1) bars transfer or alienation of assets, legal rights, or beneficial interests during moratorium, and cash in hand or bank balances are treated as liquid assets. Preferential payment to one creditor would therefore be a prohibited transfer, and distribution of cash flows among secured creditors must be worked out within the resolution process.

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Issues: Whether, after commencement of corporate insolvency resolution process and declaration of moratorium, the corporate debtor can repay the debt of one financial creditor in preference to other financial creditors.

Analysis: The object of the insolvency framework is to preserve the assets of the corporate debtor during the resolution period and to maintain a calm period so that the corporate debtor may continue as a going concern. Section 14(1) prohibits transfer or alienation of the corporate debtor's assets, legal rights or beneficial interests during moratorium. Cash in hand and bank balances are liquid assets, and any preferential payment to one creditor during CIRP would amount to a prohibited transfer. The admitted claim of the applicant did not alter the effect of moratorium, and the proposed distribution of cash flows among secured creditors was to be worked out under the resolution process.

Conclusion: Repayment of one financial creditor in preference to others during CIRP after invocation of moratorium is not permissible. The issue is answered against the applicant.

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