Moratorium under IBC applicable to corporate debtor, not its promoters: SC

The Supreme Court on Thursday held the moratorium under provisions of the Insolvency and Bankruptcy Code (IBC), which restrains initiation of any fresh proceedings or discontinuance of existing ones, does not protect the promoters of the stressed company, but applies only to the corporate debtor.

A bench of Justices D.Y. Chandrachud, Vikram Nath, and Hima Kohli said: "It is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act."

The apex court made this observation in a matter connected with builder-home buyers' dispute arising out of abandoning of a housing project. The bench allowed the home buyers to move against the promoters of corporate debtor, Today Homes and Infrastructure Pvt Ltd, even though a moratorium has been declared under Section 14 of the IBC.

The bench said: "We thus clarify that the petitioners would not be prevented by the moratorium under Section 14 of the IBC from initiating proceedings against the promoters of the first respondent, corporate debtor in relation to honouring the settlements reached before this Court."


Citing a judgment given by the top court earlier, the bench noted that for the period of moratorium, since no Sections 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Sections 141(1) and (2) of the Negotiable Instruments Act.

The bench clarified that the moratorium was only in relation to the corporate debtor and not in respect of the directors/management of the corporate debtor, against whom proceedings could continue.

"Since the moratorium declared in respect of the first respondent corporate debtor continues to operate under Section 14 of the IBC, no new proceedings can be undertaken or pending ones continued against the corporate debtor."


A group of home buyers of group housing project, Canary Greens in Sector 73 of Gurugram (Haryana), were aggrieved when the builder abandoned the project. The builder offered certain settlement terms, which were rejected by them. Proceedings were initiated against the firm before the NCLT under Section 9 of the IBC by an operational creditor. The corporate insolvency resolution process was initiated and a moratorium was declared under Section 14 of the IBC - IANS