Brief Overview:
Interim moratorium under (amended) Section 96 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has retroactive application. The benefit of interim moratorium would no longer be available to personal guarantors even where personal insolvency applications were pending as on the effective date of the amendment i.e., 26th May 2026.
Technical Details:
Whether the interim moratorium under Section 96 of the IBC would be applicable to a personal guarantor of a corporate debtor against whom personal insolvency proceedings had been filed prior to the notification of IBC Amendment Act, 2026?
Yes. The Bombay High Court (“Court”) held that:
1) The IBC Amendment Act, 2026 provides that the interim moratorium under Section 96 shall not apply where an insolvency resolution process is initiated against a personal guarantor to a corporate debtor. Although an amendment, the language of the provision specifically refers to situations “where an application is filed”.
2) The expression “where an application is filed” includes applications that had already been filed and were pending as on the date of commencement of the amendment.
3) Consequently, the amended Section 96(4) applies to pending insolvency proceedings, effectively operating prospectively on facts that had arisen prior to its enactment but continue to subsist.
4) The amendment applies to both creditor-initiated and debtor-initiated insolvency proceedings.
Takeaways:
The IBC Amendment Act, 2026 read with the clarification by the Court gives an impetus to creditors who may pursue parallel proceedings until the personal insolvency application is admitted because the interim moratorium would no longer operate as an automatic bar.
For further details, please see:
Tata Capital Financial Services Limited v. Neel Motors LLP & Ors.pdf
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