Interim moratorium under the Insolvency Code can stay pending cheque dishonour proceedings in a personal insolvency case.

Filing a personal insolvency application under Section 94 of the Insolvency and Bankruptcy Code triggers an interim moratorium under Section 96 in respect of all debts. The Punjab & Haryana High Court held that the phrase "any legal action or proceedings pending in respect of any debt" is broad enough to cover a pending complaint under Section 138 of the Negotiable Instruments Act, even where the cheque was issued in a personal capacity and the complaint is not linked to the corporate debtor's liability. The absence of any express exclusion in the Code supported this reading, so the Section 138 proceedings remained stayed until the Adjudicating Authority decided the Section 94 application.

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Issues: Whether the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 applies to a pending complaint under Section 138 of the Negotiable Instruments Act, 1881, when the debtor has filed an application under Section 94 of the Insolvency and Bankruptcy Code, 2016 as a personal guarantor to a corporate debtor.

Analysis: The relevant provisions of the Code show that Part III applies to individuals and partnership firms, that a debtor may apply under Section 94 to initiate an insolvency resolution process, and that upon filing of such application, Section 96 creates an interim moratorium in relation to all debts. The Court held that the expression "any legal action or proceedings pending in respect of any debt" is wide enough to include a complaint under Section 138 of the Negotiable Instruments Act, 1881. It further held that the absence of any express exclusion for such a debt in Section 79(15)(e), and the generic meaning of "debt" in the Code, support the application of the interim moratorium even where the cheque was issued in a personal capacity and the complaint is not connected with the corporate debtor's liability.

Conclusion: The interim moratorium under Section 96 applies to the pending Section 138 proceedings, and those proceedings remain stayed until the Adjudicating Authority decides the application under Section 94 read with Sections 100 and 101 of the Insolvency and Bankruptcy Code, 2016.

Ratio Decidendi: A Section 94 application by a debtor triggers an interim moratorium under Section 96 that stays all pending legal proceedings in respect of any debt, including a prosecution under Section 138 of the Negotiable Instruments Act, 1881.

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