2026 (3) TMI 1645 - AT - IBC

Interim moratorium under the Insolvency Code bars fresh Section 95 proceedings and cannot be cured by later withdrawal of the prior application.

An interim moratorium under Section 96 begins on the filing of a Section 95 application and bars fresh creditor proceedings in respect of the same debt. A ... Applications under Section 95 sub-section (1) - Maintainability of subsequent insolvency application against personal guarantor - failed to answer statutory notice, including invocation of guarantees, despite having been given ample opportunities - Proceedings initiated during subsisting moratorium - Whether due to withdrawal of Section 95 application by Canara Bank, the prohibition which triggered due to interim moratorium shall come to an end. Interim moratorium - Subsequent section 95 application - Non est proceedings - HELD THAT: - The Appellate Tribunal held that, once an earlier application under section 95 had been filed, the interim moratorium under section 96 commenced from the date of that application and continued until the earlier application was withdrawn. During that statutory moratorium, creditors were barred from initiating legal proceedings in respect of any debt. Applying the principle recognised in Union Bank of India vs. P.K. Balasubramanian [2023 (3) TMI 1333 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI], Indian Bank vs. T Prabhakar [2025 (5) TMI 2003 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI] and Alchemist Asset Reconstruction Company Ltd. vs. M/s. Hotel Gaudavan Pvt. Ltd. & Ors. [2017 (12) TMI 1107 - SUPREME COURT], the Tribunal held that proceedings initiated in breach of such moratorium are non est from inception. The respondent's reliance on authorities dealing with the effect of withdrawal of civil suits was rejected as insufficient to validate a proceeding which was void when instituted. The later withdrawal of the earlier section 95 application only brought the moratorium to an end prospectively; it did not retrospectively legalise the respondent's application filed during the currency of that moratorium. The Adjudicating Authority therefore erred in admitting the application without giving effect to the statutory consequence of the subsisting interim moratorium. [Paras 22, 23, 24] The admission order was unsustainable; the section 95 applications filed during the subsisting interim moratorium were dismissed, with liberty to the financial creditor to file fresh applications in accordance with law. Final Conclusion: The appeals were allowed. The orders admitting the section 95 applications were set aside and those applications were dismissed, while reserving liberty to the financial creditor to institute fresh applications after cessation of the earlier interim moratorium. Issues: Whether a Section 95 application filed by a financial creditor during the subsistence of an interim moratorium triggered by an earlier Section 95 application remained non-maintainable even after the earlier application was later withdrawn.Analysis: Interim moratorium under Section 96 commences on the date of filing of an application under Section 95 and stays pending proceedings while prohibiting initiation of fresh proceedings by creditors in respect of the same debt. The earlier application filed by another creditor had already triggered interim moratorium when the subsequent Section 95 applications were filed. The later withdrawal of the earlier application ended the moratorium prospectively, but it did not cure the legal defect attaching to proceedings instituted during the currency of the moratorium. An application initiated in breach of the statutory bar was non est when filed and could not be validated retrospectively by the later withdrawal of the prior proceeding.Conclusion: The subsequent Section 95 applications were not maintainable and the admission orders could not stand. The issue was decided in favour of the appellants.