Invocation Of Corporate Guarantee During Moratorium - Analysis

To punish the defaulters, India had numerous Acts in place like the Indian Contract Act,1872, the Recovery of Debts Due to Banks and Financial Institution Act 1993, the Securitizations and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The Government supplanted the existing insolvency laws with the Insolvency & Bankruptcy Code, 2016, which takes care of the existing defaulters in a time constrained manner. The provisions of the Code are applicable to companies, limited liability entities, firms and individuals (i.e. all entities other than financial service providers).

One of the most significant features of the Code is the grant of moratorium, during which creditors' actions is be stayed. The moratorium is not automatic and is granted by the Adjudicating Authority u/s 14 of the Code. The Invocation of Corporate Guarantee during Moratorium remains a big question