Moratorium under the Insolvency and Bankruptcy Code, 2016 is a statutory prohibition on the institution or continuation of legal proceedings, recovery actions, enforcement of security interests, and transfer of assets against a corporate debtor during the Corporate Insolvency Resolution Process. Under Indian law, the moratorium is declared under Section 14 of the IBC, 2016, upon admission of an insolvency application by the NCLT.
Legal definition
Section 14(1) of the Insolvency and Bankruptcy Code, 2016 provides:
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 judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of 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;
(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.
Section 14(2) provides that the supply of essential goods or services to the corporate debtor shall not be terminated or suspended or interrupted during the moratorium period.
The moratorium continues from the insolvency commencement date until a resolution plan is approved under Section 31(1) or a liquidation order is passed under Section 33.
How courts have interpreted this term
P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (2021) 6 SCC 258
The Supreme Court held that the moratorium under Section 14 extends to proceedings under Section 138 of the Negotiable Instruments Act, 1881 (dishonour of cheque) against the corporate debtor. The Court reasoned that Section 138 proceedings are in the nature of recovery proceedings and their continuation during the moratorium would defeat the purpose of the Code. However, proceedings against the directors or officers in their personal capacity are not covered by the moratorium.
Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan Pvt. Ltd. (2018) 16 SCC 94
The Supreme Court clarified that the moratorium under Section 14 is wide enough to cover proceedings under the SARFAESI Act, 2002. Any action to enforce a security interest, including possession notices and sale proceedings under SARFAESI, must be stayed during the moratorium period.
Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657
The Supreme Court held that the moratorium binds all stakeholders, including the Central and State Governments and local authorities. The Court further held that once a resolution plan is approved, all claims not part of the resolution plan stand extinguished, and the moratorium ceases with the approval of the plan.
Why this matters
The moratorium is the most powerful protective mechanism in the Indian insolvency framework. It creates a "calm period" during which the corporate debtor's assets are preserved from fragmentation by individual creditors, allowing the resolution professional and the committee of creditors to explore rescue options without the pressure of ongoing recovery actions. Without the moratorium, individual creditors could race to enforce their claims, depleting the debtor's assets and undermining any prospect of resolution as a going concern.
For practitioners, understanding what falls within and outside the scope of the moratorium is critical. The moratorium covers all suits, proceedings, enforcement actions, and asset transfers relating to the corporate debtor. However, it does not extend to criminal proceedings against the directors or management of the corporate debtor, proceedings by regulatory authorities (such as SEBI or RBI) in their regulatory capacity, or actions against personal guarantors of the corporate debtor (who are subject to a separate process under the Code).
A frequently litigated issue is whether the moratorium applies to government authorities seeking to recover tax dues or demanding possession of property. The Supreme Court has consistently held that the moratorium applies to all claims against the corporate debtor, including government claims, emphasising that the IBC takes precedence over other statutes in the event of conflict.
Related terms
Broader process:
Key participants:
- NCLT (National Company Law Tribunal)
- Committee of Creditors (CoC)
- Resolution Professional
- Financial Creditor
Frequently asked questions
Does the moratorium apply to criminal proceedings?
The moratorium under Section 14 does not apply to criminal proceedings against the directors or management of the corporate debtor. However, it does apply to proceedings under Section 138 of the Negotiable Instruments Act against the corporate debtor itself, as held by the Supreme Court in P. Mohanraj v. Shah Brothers Ispat (2021).
Can a landlord evict the corporate debtor during the moratorium?
No. Section 14(1)(d) prohibits the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. This protection ensures that the corporate debtor can continue operating from its premises during the resolution process.
How long does the moratorium last?
The moratorium begins on the insolvency commencement date (when the NCLT admits the application) and ends when a resolution plan is approved under Section 31(1) or a liquidation order is passed under Section 33. The CIRP must be completed within 330 days, setting an effective outer limit for the moratorium.
Can essential services be cut off during the moratorium?
No. Section 14(2) expressly prohibits the termination, suspension, or interruption of essential goods or services to the corporate debtor during the moratorium period. This ensures that the corporate debtor can continue its operations as a going concern during the resolution process.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.