Interim moratorium under insolvency law does not stop wilful defaulter proceedings, which may continue in parallel.

Section 96 interim moratorium under the Insolvency and Bankruptcy Code does not bar wilful defaulter proceedings. The moratorium is directed at debts and legal action against the debtor, while wilful defaulter proceedings are collateral measures aimed at credit information, lender caution, and prevention of fraud and public loss, not debt recovery. Because the two regimes serve different purposes, a bank may pursue wilful defaulter proceedings alongside insolvency proceedings under the Code.

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Issues: Whether the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 bars continuation of wilful defaulter proceedings and whether such proceedings can go on parallelly with insolvency proceedings under the Code.

Analysis: The moratorium under Section 14 operates for the benefit of the corporate debtor and is directed against the corporate debtor's assets and proceedings. By contrast, Section 96 operates in relation to debts and stays legal action or proceedings in respect of any debt against the debtor. The two provisions serve different purposes in distinct parts of the Code. Wilful defaulter proceedings are not recovery proceedings; they are meant to disseminate credit information, caution lenders, and prevent further fraud and loss of public money. On that footing, such proceedings are collateral to debt recovery and are not interdicted by the interim moratorium under Section 96. Parallel recourse by the bank under the wilful defaulter guidelines and under the insolvency framework is permissible because the two proceedings pursue different ends.

Conclusion: The interim moratorium under Section 96 does not stay wilful defaulter proceedings, and their continuation alongside insolvency proceedings is valid.

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