Moratorium In Insolvency And Bankruptcy Code: A Dilemma

The Insolvency and Bankruptcy Code (Code) still remains the crucial legislation wherein the industry as well as the law fraternity is still anticipating clarifications on the numerous issues. The moot question of the secured creditors which is repeatedly being posed is whether after the introduction of the Code the security of personal or corporate guarantee is still available as a preferred security for the secured creditors against the Company, against which the Corporate Insolvency Resolution Process (CIRP) has been initiated under the Code.

The aforesaid matter was earlier dealt by the Mumbai bench of NCLT in the case of and Schweitzer Systemic India Private Limited v Phoenix ARC. The bench while examining the aspect of Moratorium under section 14 of Code held that the 'Moratorium' has no application on the properties beyond the ownership of Corporate Debtor. The opinion and conclusion of the bench was based upon the language used in section 14 (1) (c) of the code