Moratorium Under Insolvency And Bankruptcy Code, 2016 - Impact On Pending Proceeding

Moratorium as per the Oxford dictionary means "A Legal authorization to debtors to postpone payment".

The moratorium in terms of Insolvency and Bankruptcy Code, 2016 ('IBC') means a period wherein no judicial proceedings for recovery, enforcement of security interest, sale or transfer of assets, or termination of essential contracts can be instituted or continued against the Corporate Debtor.  This raises an interesting question on the issue of the applicability of the Moratorium to the proceedings under Section 138 of the Negotiable Instruments Act, 1891 (NI Act).

The IBC which received the presidential assent on 28.05.2016 is enacted by the parliament with an objective to consolidate and amend the laws relating to reorganization and insolvency resolution of Corporate Persons, Partnership Firms and Individuals. As per IBC, a Petition for Insolvency against the Corporate Debtor can be triggered by Financial Creditor, Operational Creditor or by Corporate Debtor