Section 96 of the Insolvency and Bankruptcy Code creates an...

Section 96 of the Insolvency and Bankruptcy Code creates an interim moratorium from the filing of an application under Sections 94 or 95 until admission, staying pending debt proceedings and barring fresh legal action on the debt during that period. A money recovery suit filed while that embargo operated was therefore barred by law and liable to rejection under Order VII Rule 11(d). The later insertion of Section 96(4) did not cure an earlier filing, and lack of knowledge of the insolvency proceedings was immaterial because the bar operated by statute. The plaint could not be split against some defendants on a joint and several liability theory once the statutory prohibition applied.

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