The term Moratorium is not defined under the IBC, 2016. The oxford dictionary defines moratorium as “a legal authorization to debtors to postpone payment”.

Cambridge dictionary also defines it as “a stopping of an activity for an agreed amount of time”.

As per Section 3 (8) of the Insolvency and Bankruptcy Code 2016, ‘corporate debtor’ means a corporate person who owes a debt to any person. The Code provides for the initiation of CIRP in respect of such corporate debtor in case of any default committed by it.

The moratorium under the Insolvency and Bankruptcy Code, 2016 refers to a period wherein no judicial proceedings for recovery, interest, sale or transfer of assets, enforcement of security, or termination of essential contracts can be instituted or continued against the Corporate Debtor. Under Section 13(1)(a) of the code, the adjudicating authority is required to impose a moratorium for matters referred to in Section 14.


The purpose that is indicating by the concept moratorium is keeping the corporate debtor’s assets together during the IRP. It ensures the continuance of the company as a going concern. On the other hand, creditors take a view on the resolution of default and moratorium on initiation and continuation of legal proceedings including debt enforcement action. The process ensures a stand-still period. During which creditors cannot resort to individual enforcement action which may frustrate the object of the CIRP.  When a corporate debtor opts for CIRP, after the confirmation of the petition filed against the organization. After that CIRP announces the moratorium. By which all the pending cases against the insolvent organization before any court have stayed.


Section 14(1) (a)[1] of the code is wide enough to complete the bar for the institution or continuation of suits or any legal proceedings against a corporate debtor on the declaration of moratorium by the adjudicating authority.

Delhi High Court interpreted terms “proceedings” “including” and “against the corporate debtor” under Section 14. In the case of Power Grid Corporation of India vs. Jyoti Structures Ltd. Court observed that:

  • ‘proceedings’ u/s 14(1)(a) does not include all proceedings;
  • The term ‘proceeding’ only restrict6ed to the debt recovery action against assets of the corporate debtors;
  • Use of ‘against the corporate debtor’ intends to have restrictive meaning and applicability;
  • The term ‘including’ is clarificatory of the scope and ambit of the term ‘proceedings’.

The court also added that for the applicability of Section 14 of IBC, 2016 one has to see the nature of proceedings and see if such proceedings are against the corporate debtor or in its favor. Section 14 does not apply to the proceedings which are for the benefit of the corporate debtor. Stay of proceedings against an award in favor of the corporate debtor would rather be stalking the debtor’s effort to recover its money. Hence, would not fall in the embargo of Section 14(1)(a) of the code.

It is to be noted that Moratorium will not affect any suit or case under Article 32 pending before the Hon’ble SC, where an order is passed under Article 136 or the power of the High Court under Article 226.

Clause 2 of Section 14 states that the supply of essential goods and services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during the moratorium period.


During the operation moratorium under Section 14 of the Insolvency and Bankruptcy Code 2016:

  1. The Assessing Officer can initiate/ continue with the assessment proceedings;
  2. To initiate/ continue with the assessment proceedings, leave of the Tribunal is not necessary to;
  3. On finalization of assessment proceedings, a refund will get paid to the assesses/ Corporate Debtor;
  4. On finalization of assessment proceedings, demand if any shall not be enforced.

In the case of Suresh Chand Garg Vs. Aditya Birla Finance Ltd., NCLT held that the moratorium only extends to the assets of the Corporate Debtor. A personal and individual asset of a Director is not the subject matter of the CIRP.


By the above discussion, we can analyze that judiciary is working for both, creditors as well as debtors. A moratorium is a step towards the debtors and giving them an opportunity by staying on the suit/proceedings.


[1] (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree, or order in any court of law, tribunal, arbitration panel, or other authority;


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