Interim moratorium under insolvency law bars fresh debt suits, including composite plaints, and can trigger rejection of the plaint.

Institution of a suit during the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code is described as legally barred because the moratorium begins on filing an application under Sections 94 or 95 and continues until its admission or rejection. During that period, proceedings in respect of any debt are stayed and creditors cannot initiate fresh proceedings. The note explains that the expression "debt" is not confined to a particular debtor category for this embargo, and that the statutory bar applies automatically once insolvency proceedings are triggered. It also states that a composite plaint cannot be split defendant-wise to avoid the bar, attracting rejection under Order VII Rule 11(d) CPC and invalidating a decree founded on such suit.

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Issues: Whether the suit, instituted during the operation of the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016, was barred by law and liable to be rejected under Order VII Rule 11(d) of the Code of Civil Procedure, 1908.

Analysis: The interim moratorium under Section 96 commences on the filing of an application under Sections 94 or 95 and continues until admission or rejection of that application. During that period, legal action or proceedings in respect of any debt are stayed and creditors are prohibited from initiating fresh proceedings. The Court held that the expression "debt" in Section 96 is not confined to any particular category of debtor for the purpose of the embargo, and that the statutory bar operates by force of law once the relevant insolvency proceedings are in motion. Since the suit was filed when the interim moratorium was operating, the Court held that the suit could not validly be instituted or received for adjudication. The argument that the plaint could be dissected among different defendants was rejected, as the suit was one composite plaint and the embargo attached to the institution itself.

Conclusion: The suit was barred by Section 96(1)(b)(ii) of the Insolvency and Bankruptcy Code, 2016 and was liable to be dealt with under Order VII Rule 11(d) of the Code of Civil Procedure, 1908; the decree based on such suit could not be sustained.

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