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Informist, Wednesday, Sept. 23, 2026

 

NEW DELHI – The Insolvency and Bankruptcy Board of India has said that the interim moratorium of personal guarantors is no longer available after May 26, the date on which the amendment was brought into force. This means that litigations can be filed against personal guarantors until insolvency is admitted against them by the National Company Law Tribunal and lenders can also pursue recovery against them in different forums such as Debt Recovery Tribunals.

 

The insolvency board issued a circular regarding this to insolvency professionals. Its circular came after the Bombay High Court and Delhi High Court have said that the amendment made for ending the interim moratorium was retroactive, even though the amendment did not expressly state so. If that be so, then the import, purport and impact of such retroactive legislation would amount to "quasi retroactivity" and would be applicable to pending applications, said the high courts.

 

The issue has its genesis from the Insolvency and Bankruptcy Code, 2016, which before amendment, allowed interim moratorium to personal guarantors upon the filing of an insolvency application. This was exploited by unscrupulous borrowers. Many personal guarantors to corporate debtors had invoked this provision not with the intent of genuine insolvency resolution but as a tactical move to delay recovery or security enforcement actions initiated by secured creditors under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

 

The interim moratorium would stay all legal actions against the personal guarantor concerning any debt. It prevented creditors from initiating any new proceedings against the debtor. This interim moratorium remained in effect until the insolvency application was admitted or rejected.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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