The Insolvency and Bankruptcy Board of India, by Circular No. IBBI/II/106/2026 dated 21 September 2026, confirmed to all registered insolvency professionals that the interim moratorium under Sections 96 and 124 of the Insolvency and Bankruptcy Code, 2016 no longer applies to personal guarantors to corporate debtors, with effect from 26 May 2026, citing recent Bombay and Delhi High Court rulings on the point.
Background
Sections 95 to 100 of the Insolvency and Bankruptcy Code, 2016 govern the insolvency resolution process for personal guarantors to corporate debtors, and Section 96(1) historically provided that an interim moratorium commences on the date an application under Section 94 or Section 95 is filed, automatically staying certain legal proceedings against the guarantor during the interim period. Section 124 contains a parallel provision for the bankruptcy process that can follow. This interim moratorium had, in practice, become a significant procedural shield for personal guarantors, who could use the automatic stay to delay creditor action regardless of the merits of the underlying claim.
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 inserted a new sub-section (4) into both Section 96 and Section 124, providing that the interim moratorium does not apply in respect of a personal guarantor to a corporate debtor, with effect from 26 May 2026. Following the amendment's commencement, a question arose as to how the change should be applied to applications that were filed, or already under adjudication, before 26 May 2026 — specifically, whether the interim moratorium continued to protect such pending applications or ceased to apply to them once the amendment took effect.
Two High Courts addressed this question. The Bombay High Court, in Tata Capital Financial Services Limited v. Neel Motors LLP and others (Commercial Arbitration Petition No. 620 of 2021, judgment dated 24 July 2026), held that reading the statutory language as covering applications already filed and pending under adjudication would not give the amendment retrospective effect, but rather prospective effect from the date the provision took effect — meaning an application for initiating an insolvency resolution process against a personal guarantor would fall outside Section 96(1)'s interim-moratorium protection from 26 May 2026 onward, regardless of when the underlying application was filed. The Delhi High Court reached a consistent position in IDBI Trusteeship Services Ltd. v. Manish Jain and Ors. (CS(COMM) 800/2025, judgment dated 19 August 2026).
Key provisions
IBBI's circular records the following, addressed to all registered insolvency professionals, insolvency professional entities and insolvency professional agencies:
Statutory basis: the Insolvency and Bankruptcy Code (Amendment) Act, 2026 inserted sub-section (4) into Sections 96 and 124 of the Code, providing that the interim moratorium shall not apply to a personal guarantor to a corporate debtor, effective 26 May 2026.
Bombay High Court position: in Tata Capital Financial Services Limited v. Neel Motors LLP and others, the interim moratorium ceased to operate from 26 May 2026 in respect of applications filed under Section 95, including applications already under adjudication as of that date, and any such application is not barred by the interim moratorium.
Delhi High Court position: a consistent ruling was made in a matter involving IDBI Trusteeship Services Ltd., addressing similar questions on cessation of the interim moratorium for personal guarantors.
Operative direction to insolvency professionals: the circular directs insolvency professionals, insolvency professional entities and insolvency professional agencies to proceed on the basis that personal guarantors no longer enjoy interim moratorium protection from 26 May 2026, including in matters that predate that date.
Implications for practitioners
The circular removes a source of genuine procedural uncertainty that had been building since the 2026 Amendment Act's commencement — creditors and insolvency professionals handling personal-guarantor matters filed before 26 May 2026 now have express IBBI guidance, anchored in two High Court rulings, that those matters are not shielded by the interim moratorium regardless of their filing date. Insolvency professionals currently treating a pre-26-May-2026 application as stayed by the interim moratorium should revisit that position immediately in light of this circular and take steps consistent with the moratorium no longer applying, including resuming or permitting continuation of proceedings that had been held in abeyance on the assumption of an automatic stay.
For creditors, particularly financial creditors such as banks and NBFCs who commonly rely on personal guarantees as security, the confirmed cessation removes what had functioned as a reliable delay tactic for guarantors resisting recovery action. Recovery and litigation teams should reassess the pipeline of personal-guarantor matters that had been treated as stayed, since claims that appeared dormant under the interim moratorium may now be immediately actionable, and limitation or other timing considerations tied to renewed activity should be recalculated from 26 May 2026 rather than from the original filing date of a pending application.
For personal guarantors and their counsel, the loss of the interim moratorium as a procedural shield shifts the practical battleground toward the merits of the underlying guarantee and the substantive defences available under Sections 96 through 100 of the Code, rather than reliance on timing-based stays. Counsel advising guarantors in matters that were filed before 26 May 2026 and had relied on the interim moratorium should prepare for those matters to proceed on their merits without further delay, and should reassess litigation strategy accordingly rather than continuing to treat the interim-moratorium period as available.
Finally, the circular is a useful illustration of how IBBI uses circulars to propagate judicial clarification of a recent statutory amendment across the insolvency-professional community without itself purporting to interpret the statute independently of the courts — practitioners should treat this circular as confirmatory guidance resting on the cited High Court rulings, and should monitor whether either ruling is challenged further, since a reversal at a higher forum would require IBBI to revisit this guidance.
Frequently Asked Questions
From when did the interim moratorium stop applying to personal guarantors of corporate debtors?
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 inserted sub-section (4) into Sections 96 and 124 of the Insolvency and Bankruptcy Code, 2016, providing that the interim moratorium does not apply to a personal guarantor to a corporate debtor, with effect from 26 May 2026. IBBI's 21 September 2026 circular confirms this position, citing Bombay and Delhi High Court rulings on the point.
Does the cessation of interim moratorium apply to applications filed before 26 May 2026?
According to IBBI's circular, the Bombay High Court's reasoning in Tata Capital Financial Services Limited v. Neel Motors LLP and others treats the cessation as applying prospectively from 26 May 2026 to applications under Section 96, including applications that were already filed and pending under adjudication as of that date - meaning creditors' applications already in process were not barred by the interim moratorium once the amendment took effect.
Who does IBBI's 21 September 2026 circular apply to?
The circular is addressed to all registered insolvency professionals, all recognised insolvency professional entities, and all registered insolvency professional agencies, directing them to proceed on the basis that the interim moratorium under Sections 96 and 124 of the Insolvency and Bankruptcy Code no longer protects personal guarantors to corporate debtors from 26 May 2026 onward.