Chapter II Corporate Insolvency Resolution Process
Section 14. Moratorium.
(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: –
- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;
- (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;
- (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);
- (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
1[Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period;]
(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
2[(2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.]
3[(3) The provisions of sub-section (1) shall not apply to —
- 4[(a) such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;]
- (b) a surety in a contract of guarantee to a corporate debtor.]
(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.
CASE LAWS
1. Security Interest does not include a performance bank guarantee and it is not covered by Sec 14 of the Code.
2. Any amount deposited by any person in the account of CD cannot be appropriated by the bank towards its own dues, during the moratorium period.
3. Once the moratorium is over no further embargo on other proceedings and suits to continue.
4. Profit Petroleum is covered under Section 14 of the code.
5. Moratorium will not affect proceedings pending under Article 32 of the Constitution or orders passed under Article 136 of the Constitution.
6. During the moratorium period, a guarantee cannot be invoked.
7. Sec 14 of the code will prevail over sec 28A of the SEBI Act, 1992 and SEBI cannot recover any amount including any penalty from the CD.
8. All the proceedings pending before any court shall halt once the moratorium period started.
9. Moratorium shall be declared for prohibiting any action to recover or enforce any security interest created by the CD in respect of its property.
10. The moment CIRP application is admitted, the moratorium that comes into effect under section 14(1)(a) expressly interdicts institution or continuation of pending suits or proceedings against CD.
11. Sec 14 of the code would cover proceeding under sec 138 of the NIA, 1881.
1. Ins. by Act No. 1 of 2020, sec.5 (w.e.f. 28-12-2019).
2. Ins. by Act No. 1 of 2020, sec.5 (w.e.f. 28-12-2019).
3. Subs. by Act No. 26 of 2018, sec. 10 (w.e.f. 6-6-2018). Before its substitution, it stood as under: –
“(3) The provisions of sub-section (1) shall not apply to such transaction as may be notified by the Central Government in consultation with any financial sector regulator.”
4. Subs. by Act No. 1 of 2020, sec.5 (w.e.f. 28-12-2019). Before substitution, it stood as “such transaction as may be notified by the Central Government in consultation with any financial regulator;”.