Bombay High Court
GODREJ FINANCE LIMITEDversusASHOK RAJKUMAR GUPTA AND ORS
- Decided
- Disposal
- Disposed Off
Holding
Section 96(4) of the Insolvency and Bankruptcy Code, as amended effective 26 May 2026, operates retroactively and applies to pending insolvency proceedings.
Summary
The Bombay High Court examined whether the amendment inserting sub‑section (4) into Section 96 of the Insolvency and Bankruptcy Code, 2016 – which bars the interim moratorium for applications against personal guarantors – operates retroactively on pending insolvency proceedings. After extensive analysis of statutory interpretation rules, Supreme Court precedents and the legislative intent to curb misuse of the moratorium, the Court held that the amendment applies retroactively to applications filed before 26 May 2026. Consequently, the interim moratorium ceased to operate in pending cases, and the Court allowed the writ petitions of various banks, quashing restraining orders and directing the execution of possession orders. The Court also set aside orders that had improperly relied on the moratorium and granted reliefs to the petitioning banks.
Issues considered
- The amendment to Section 96(4) of the IBC – does it apply prospectively or retroactively?
- Whether the interim moratorium under Section 96 is a vested right that can be taken away by amendment.
- Interpretation of the phrase ‘is filed’ in the amended provision.
- Effect of the amendment on pending insolvency applications filed under Sections 94/95.
Legislation cited
Subjects
- Insolvency and Bankruptcy Code
- Section 96
- Interim moratorium
- Retroactive amendment
- Personal guarantor
- Statutory interpretation
- Vested rights
- Writ petition
- Misuse of moratorium
Judgment
Final_WP2819&group_26.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2819 OF 2026
Indian Bank … Petitioner
Vs.
Shabbir Abbas Patel and others … Respondents
WITH
WRIT PETITION (L) NO. 22742 OF 2026
RBL Bank Limited … Petitioner
Vs.
State of Maharashtra and others … Respondents
WITH
WRIT PETITION (L) NO. 24045 OF 2026
RBL Bank Limited … Petitioner
Vs.
State of Maharashtra and others … Respondents
AND
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 3374 OF 2026
Godrej Finance Limited … Petitioner
Vs.
Ashok Rajkumar Gupta and others … Respondents
WITH
WRIT PETITION NO. 7805 OF 2026
Asset Reconstruction Co. India Limited and others… Petitioner
Vs.
Veer Gurjar Aluminium Industries Pvt. Ltd. & ors. … Respondents
WITH
WRIT PETITION NO. 7587 OF 2026
Apna Sahakari Bank Limited and another … Petitioners
Vs.
M/s. Image Industries Pvt. Ltd. and others … Respondents
WITH
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WRIT PETITION NO. 7600 OF 2026
Apna Sahakari Bank Limited and another … Petitioners
Vs.
M/s. Gandharv Farms and Resorts Pvt. Ltd. & ors. … Respondents
WITH
WRIT PETITION NO. 7598 OF 2026
Apna Sahakari Bank Limited and another … Petitioners
Vs.
M/s. Warna Industries Limited and others … Respondents
---
Mr. Amir Arsiwala a/w Mr. Ahmed Padela i/b The Law Point for Petitioner in
WP/2819/2026.
Mr. Mayur Khandeparkar a/w Ms. Kruti Bhavsar, Ms. Angel Pandey, Mr.
Abhishek Pandey and Mr.Aniruth Purushothaman for Respondent No. 1 to 3 in
WP/2819/2026.
Mr. Charles D'Souza a/w Mr. Archit Virmani, Ms. Pragati Gothi, Ms. Richa
Shukla, Mr. Atul Gupta, and Mr. Rupak Sawangikar i/b Archit Virmani for
Petitioner in WP/3374/2026.
Mr. Rohit Agarwal a/w Ms. Kruti Bhavsar, Mr. Abhishek Pandey and Ms. Angel
Pandey for Respondent Nos.1 to 4 in WP/3374/2026.
Mr. Rohaan Cama a/w Mr. Charles D'Souza, Mr. Rupak Sawangikar, Ms. Pragati
G. and Ms. Somya Tripathi i/b T N Tripathi & Co. for Petitioner in
WP/7805/2026.
Mr. Harish Adwant (through V.C.) for Respondents in WP/7805/ 2026.
Mr. Charles D'Souza a/w Ms. Pragati Gothi, Mr. Nikhil Rajani, Ms. Mrunalini
Deshpande and Ms. Arya Chougule i/b M/s. V. Deshpande & Co. for Petitioner in
WP/7587/2026, WP/7598/2026 & WP/7600/ 2026.
Mr. Viraj Parekh a/w Mr. Shamant Satiya, Ms. Shubhra Swami, Mr. Priyansh R.
Jain and Mr. Punit Agarwwal for Respondent Nos. 2 to 4 in WP/7587/2026 and
Respondent No.2 in WP/7598/2026.
Mr. Shamant Satiya a/w Mr. Priyansh R. Jain and Mr.Punit Agarwwal for
Respondent No.2 in WP/7600/2026.
Mr. Shadab S. Jan a/w Ms. Sabeena Mahadik, Mr. Pankaj Uttaradhi and Mr.
Bhargav Samant for Petitioner in WPL/22742/2026 and for Petitioner in
WPL/24045/2026.
Mrs. Anupamaa Pawar, AGP for Respondent No.1-State in WPL/ 22742/2026.
Mr. Anirudh Hariani a/w Ms. Kruti Bhavsar, Mr. Abhishek Pandey and Ms. Angel
Pandey for Respondent No.2 in WPL/22742/2026.
Mr. Prashant Kamble, AGP for Respondent No.1-State in WPL/ 24045/2026.
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Ms. Kruti Bhavsar a/w Mr. Abhishek Pandey and Ms. Angel Pandey for
Respondent No.2 in WPL/24045/2026.
CORAM : MANISH PITALE &
SHREERAM V. SHIRSAT, JJ.
Reserved on : AUGUST 14, 2026
Pronounced on: SEPTEMBER 18, 2026
JUDGEMENT : (Per Justice Manish Pitale)
. The question that arises for consideration in these writ petitions is
as to whether sub-section (4) of Section 96 of the Insolvency and
Bankruptcy Code 2016 (IBC) introduced by way of amendment with
effect from 26.05.2026 operates retroactively? In other words, whether
Section 96(4) of the IBC, stating that the said provision shall not apply
where an application is filed under Sections 94 or 95 thereof for
initiating an insolvency resolution process in respect of a personal
guarantor to a corporate debtor, applies to such applications already filed
and pending or that it would apply only to applications filed after the
aforesaid sub-section (4) is added by way of amendment to Section 96 of
the IBC.
2. The parties in support of the proposition that the amendment
applies retroactively emphasize that the amendment was brought about
to address the mischief of rampant misuse of the interim moratorium
under Section 96 of the IBC triggered upon filing of applications under
Sections 94 and 95 thereof. The parties resisting such an interpretation
insist that sub-section (4) of Section 96 of the IBC introduced by way of
amendment with effect from 26.05.2026 applies prospectively i.e. to
applications filed under Sections 94 and 95 of the IBC after the
amendment has come into force.
3. Although a learned Single Judge of this Court in a recent
judgement and order dated 24.07.2026 passed in Commercial
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Arbitration Petition No.620 of 2021 (Tata Capital Financial Services
Limited Vs. Neel Motors LLP and others) has taken a view that the said
amendment is retroactive in operation, elaborate submissions have been
made by learned counsel for the rival parties in these writ petitions,
relying upon the said judgement on the one hand, while on the other
hand, an endeavor is sought to be made to demonstrate that the view
could be said to be erroneous. The learned counsel for the parties have
made submissions on the said question of law in the context of the
respective factual matrix of each writ petition. Therefore, in this
judgement in Part-I, the question of law is being discussed and decided
and thereafter, in Part-II, the facts pertaining to individual writ petitions
are considered to dispose of the writ petitions in the light of the findings
on the question of law and application of the findings to the facts of each
case.
4. The submissions of the counsel are being referred hereinbelow on
the aforesaid question of law. While dealing with individual writ
petitions, the factual submissions would be referred, so as to dispose of
the writ petitions, inter alia, in the light of findings rendered on the
aforesaid question of law.
PART-I
SUBMISSIONS ON THE QUESTION FOR CONSIDERATION
5. Mr. Cama, learned counsel appearing for the petitioner in Writ
Petition No.7805 of 2026 submitted as follows:-
(a) Sub-section (4) to Section 96 of the IBC was introduced by
way of the Insolvency and Bankruptcy Code (Amendment)
Act, 2026 and by Notification issued by the Central
Government, it was made effective from 26.05.2026. It was
specifically submitted that the said provision introduced by
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way of amendment operates retroactively, meaning thereby
that it applies prospectively from the date of the
Notification but it must apply to pending proceedings. On
this basis, it was contended that interim moratorium under
Section 96 of the IBC, even in respect of pending
proceedings shall cease to operate with effect from
26.05.2026.
(b) Much emphasis was placed on the words ‘is filed’ used in
sub-section (4) to Section 96 introduced by way of
amendment. It was submitted that the said words indicate
that all applications filed under Section 96, including those
pending, would be covered under the said provision
introduced by way of amendment. Hence, the interim
moratorium operating under Section 96 in pending
applications would also cease to operate with effect from
26.05.2026. It was submitted that the introduction of sub-
section (4) in Section 96 of the IBC was essentially
remedial in nature as the Legislature clearly desired to
address the mischief of misuse of the interim moratorium
under Section 96 of the IBC. By relying upon judgements
of the Supreme Court in the cases of Board of Control for
Cricket in India (BCCI) Vs. Kochi Cricket Private Limited
and others, (2018) 6 SCC 287 and M. Rajendran and
others Vs. KPK Oils and Protiens India Private Limited
and others, (2026) 3 SCC 505, it was submitted that the
said amendment clearly applied retroactively to pending
proceedings also.
(c) It was submitted that the operation of the interim
moratorium was not a ‘vested right’ in the debtor, and
therefore, the aforesaid amendment ought to apply even to
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pending proceedings. Reliance was placed on judgements
of the Supreme Court in the cases of Ellora Paper Mills
Limited Vs. State of M.P., (2022) 3 SCC 1; TRF Limited Vs.
Energo Engg. Projects Limited, (2017) 8 SCC 377 and
Perkins Eastman Architects DPC Vs. HSCC (India)
Limited, (2020) 20 SCC 760, to contend that similar
amendments clarifying the legal position introduced in the
Arbitration and Conciliation Act, 1996 were applied
retroactively even to pending proceedings.
(d) By placing reliance on the judgments in the cases of
Vineeta Sharma Vs. Rakesh Sharma, (2020) 9 SCC 1 and
Securities and Exchange Board of India (SEBI) Vs.
Rajkumar Nagpal, (2023) 8 SCC 274, the concept of
‘retroactive operation’ was elaborated and it was submitted
that the interim moratorium ceased to operate upon the
aforesaid amendment coming into operation with effect
from 26.05.2026. In this context, reliance was also placed
on the said recent judgement of a learned Single Judge of
this Court in the case of Tata Capital Financial Services
Limited Vs. Neel Motors LLP and others (supra).
(e) The learned counsel for the petitioner made elaborate
submissions on the mischief sought to be addressed by
Legislature by introducing sub-section (4) to Section 96 of
the IBC. In this context, reference was made to the report
of the Select Committee on the IBC (Amendment) Bill
2025 presented to the Lok Sabha. By referring to the
relevant portions of the said report, particularly the
recommendations made therein, it was submitted that the
whole purpose of introducing the amendment was to
address the mischief of misuse of interim moratorium under
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Section 96 of the IBC by unscrupulous debtors, which had
resulted in frustrating the object of the IBC. It was
submitted that when the purpose of introducing the
amendment was to cure such a mischief, not applying the
same to pending proceedings would be a travesty.
(f) The learned counsel for the petitioner addressed the
submissions made on behalf of the contesting respondents.
It was submitted that the reliance placed on judgement in
the case of Garikapatti Veeraya Vs. N. Subbiah Choudhury,
(1957) 1 SCC 180 was wholly misplaced because the said
case concerned the question of a vested right of appeal
being taken away. In the present case, the contesting
respondent could not claim a vested right of interim
moratorium and therefore, it was submitted that the
question of law ought to be answered in favour of the
petitioner by holding that the amendment applies
retroactively.
6. On the other hand, Mr. Adwant, learned counsel appearing on
behalf of the contesting respondent in the said petition submitted as
follows:-
(a) Literal rule of interpretation has to be applied as it is the
elementary rule of construction / interpretation of statutes.
Applying the same to Section 96(4) of the IBC introduced
with effect from 26.05.2026 shows that such amendment
applies prospectively to applications filed under Section 96.
The amendment cannot apply to pending proceedings. It
was submitted that such literal rule of interpretation was
recognized even in the Mimansa Rules of Interpretation
referred to by the Supreme Court in the case of B.
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Premanand Vs. Mohan Koikal, (2011) 4 SCC 266. The
learned counsel also referred to other commentaries on the
concept of literal interpretation.
(b) Much emphasis was placed on the words ‘shall not apply
where an application is filed’ used in sub-section (4) of
Section 96 of the IBC introduced by way of amendment, to
contend that such words indicate only prospective
application on and from the date, the amendment came into
operation. In this context, the learned counsel for the
contesting respondent referred to Sections 18, 23, 31 and
68 of the IBC, to contend that the Legislature had
specifically spelt out and clarified wherever the amendment
was to operate retrospectively or to pending proceedings.
(c) By placing reliance on the jugement of the Supreme Court
in the case of Vijaya Kumari Vs. Union of India, (2026) 2
SCC 96, it was submitted that classification of a Statute as
either substantive or procedural would not determine
whether it operated prospectively, retrospectively or
retroactively. It was submitted that even if the contention
raised on behalf of the petitioner that the interim
moratorium under Section 96 of the IBC was procedural in
nature was to be accepted for the sake of argument, the
same cannot be a determinative factor to hold in favour of
the petitioner.
(d) Reliance was placed on judgement of the Supreme Court in
the case of Rakesh Bhanot Vs. Gurdas Agro Private
Limited, (2025) 6 SCC 781, to emphasize upon the critical
importance of interim moratorium under Section 96 of the
IBC, which provides an opportunity to the debtor to
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reorganize financial affairs without immediate threat of
creditor’s actions. On this basis, it was submitted that such
a critical protection could not be taken away by
introduction of the said amendment and addition of sub-
section (4) to Section 96 of the IBC. Reliance was also
placed on a judgement of the Division Bench of Calcutta
High Court in the case of Ambootia Tea Exports Pvt. Ltd.
and others Vs. Sri Rani Sati Abasan Pvt. Ltd., 2026 SCC
OnLine Cal 10219, to contend that the aforesaid
amendment was not applied by the Calcutta High Court to a
pending suit. On this basis, it was submitted that the
question of law deserves to be answered by holding that the
aforesaid amendment applies prospectively and that, it
cannot apply to pending proceedings.
7. Mr. Arsiwala, learned counsel appearing for the petitioner in Writ
Petition No.2819 of 2026 submitted as follows:-
(a) It was submitted that the observations and
recommendations made by the Select Committee of the
Parliament on the IBC (Amendment) Bill 2025 clearly
addressed the rampant misuse of interim moratorium under
Section 96 of the IBC. It was recorded in the said report
that various stakeholders, including members of the
National Company Law Tribunal (NCLT) had indicated
that appropriate amendment was necessary so that
unscrupulous debtors were prevented from misusing the
provisions of Sections 94, 95 and 96 of the IBC, to frustrate
legitimate actions undertaken by the creditors. In this
context, the learned counsel for the petitioner referred to
the Mischief Rule of Interpretation. It was submitted that
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the aforesaid amendment ought to be interpreted in a
manner that took forward the object of addressing the
aforesaid mischief. Applying the said Rule, it was
submitted that the amendment must apply to pending
proceedings also, thereby demonstrating that Section 96(4)
ought to operate retroactively.
(b) In this context, it was submitted that even this Court in its
judgement and order dated 18.03.2026 passed in Writ
Petition (L) No.5157 of 2026 (Rozina Firoz Hajiani and
others Vs. Union of India and others), had taken judicial
notice of the rampant misuse of interim moratorium under
Section 96 of the IBC. It was submitted that when the
Legislature had responded by introducing the said
amendment, the object of the same ought not to be
frustrated by holding that while it would apply to
applications filed under Sections 94 and 95 on and from
26.05.2026, the same would not apply to pending
applications. This would frustrate the very object of
introduction of the amendment.
(c) It was submitted that the interim moratorium triggered
under Section 96 of the IBC is purely procedural in nature
and it is only for the period till the resolution professional
submits report under Section 99 thereof. A distinction was
sought to be made between such interim moratorium and
the moratorium introduced under Section 101 of the IBC.
On this basis, it was submitted that there was no question of
there being any ‘vested right’ towards interim moratorium
under Section 96 of the IBC.
(d) In this regard, reference was also made to judgement of the
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Supreme Court in the case of Dilip B. Jiwrajka Vs. Union
of India, (2024) 5 SCC 435, to contend that till the stage of
Section 100 of the IBC pertaining to admission of an
application is reached, no judicial determination takes
place. On this basis, it was reiterated that the amendment in
the present case introduced in sub-section (4) of Section 96
of the IBC is clearly procedural in nature and hence, it must
operate retroactively. In order to emphasize the said aspect,
reliance was placed on judgements of the Supreme Court in
the cases of Shanti Conductors Private Limited Vs. Assam
Electricity Board, (2019) 19 SCC 529; Trimbak Damodhar
Raipurkar Vs. Assaram Hiraman Patil, 1961 SCC OnLine
SC 397; Dilip Vs. Mohd. Azizul Haq and another, (2000) 3
SCC 607; State Bank’s Staff Union (Madras Circle) Vs.
Union of India, (2005) 7 SCC 584; and J. S. Yadav Vs.
State of Uttar Pradesh, (2011) 6 SCC 570.
(e) It was submitted that the contesting respondent is not
justified in relying on Section 6 of the General Clauses Act,
1897 because in the present case, we are not concerned
with repealing of an Act. It was sought to be emphasized
that mere filing of a petition under Sections 94 and / or 95
of the IBC, does not constitute a ‘completed transaction’
and hence, introduction of the amendment must apply to
such applications that are filed and pending. In this regard,
reliance was placed on judgement of the Supreme Court in
the case of Manish Kumar Vs. Union of India, (2021) 5
SCC 1. Thereupon, the learned counsel for the petitioners
relied upon various provisions of the IBC, to contend that
wherever the Legislature indicated prospective operation of
an amendment, it was expressly provided.
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(f) It was submitted that Section 96(1)(b)(ii) of the IBC would
not oust the jurisdiction of the competent court or a
tribunal, but, it merely creates a bar, procedural in nature,
which has been removed by way of amendment, which
needs to be applied even to pending applications in the
interest of justice. Thereupon, the learned counsel for the
petitioner proceeded to distinguish the judgements upon
which reliance was placed on behalf of the contesting
respondents.
8. On the other hand, Mr. Khandeparkar, learned counsel appearing
for the contesting respondents in the said writ petition, while opposing
the contentions of the petitioner, submitted as follows :
(a) It was submitted that the sub-section (4) of Section 96
introduced by way of the said amendment in the IBC w.e.f.
26.05.2026 cannot apply retrospectively. It was submitted
that the interim moratorium operating in favour of the said
respondents was an immunity or a shield, which would be
taken away if the said provision, added by way of
amendment, is applied even retroactively. It was
emphasized that such immunity or shield was a substantive
right or at least an existing right, which could not be taken
away by the amendment.
(b) It was submitted that as per settled law, a statute is prima
facie prospective in nature, unless it is expressly or by
necessary implication having retrospective operation. In the
present case, a plain reading of sub-section (4) of Section
96 of the IBC, introduced by way of the said amendment,
does not indicate that it can apply to pending applications
filed under Sections 94 or 95 of the IBC. The said provision
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would apply only to applications filed on and after
26.05.2026 i.e. the date on which the amendment came into
effect.
(c) It was submitted that if it is held otherwise, the effect
would be detrimental to all the parties, including the
petitioner, as the benefit of extension of limitation under
Section 179(3) of the IBC would be taken away. It was
submitted that therefore, such an existing right or benefit
for the creditor would also be adversely affected, which
cannot be countenanced and this further demonstrates the
error on the part of the petitioner in insisting that the said
amendment should apply retroactively.
(d) It was further submitted that sub-section (4) of Section 96
of the IBC introduced by way of amendment, creates a sub-
class within a class, as it applies only to debts of personal
guarantors to a corporate debtor as opposed to the pre-
amendment situation, when the interim moratorium applied
to all debts. If it is applied retrospectively or retroactively,
Section 96(4) of the IBC would be rendered susceptible to
challenge as being violative of Article 14 of the
Constitution of India.
(e) It was submitted that the said amendment cannot be said to
be clarificatory or declaratory in nature. It was submitted
that since an existing right was being taken away, it ought
to apply only prospectively.
(f) It was submitted that prior to IBC being enacted and
coming into force, the existing statutes operating in the
field were Presidency-Town Insolvency Act, 1909 and
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Provincial Insolvency Act, 1920. Even though IBC came
into force, proceedings under the said existing statutes
continued and Sections 96 to 100 of the IBC were
specifically held not to operate retroactively. In this
context, reliance was placed on judgements of the Supreme
Court in the cases of State Bank of India vs. V.
Ramakrishnan & Anr., (2018) 17 SCC 394 and Dilip B.
Jiwrajka Vs. Union of India (supra).
(g) It was submitted that a comparison of the language used in
Section 14 of the IBC, as compared to Section 96 thereof,
would show that the contentions raised on behalf of the
petitioner, while claiming that the amendment operates
retroactively, cannot be sustained and therefore, the said
contentions deserve to be rejected.
9. In Writ Petition No. 7587 of 2026, 7598 of 2026 and 7600 of
2026, Mr. D’Souza, learned counsel appearing for the petitioner-bank
submitted as follows :
(a) It was submitted that the amending Act had to be
considered in the light of the statement of objects and
reasons and the notes on clauses concerning the bill
introduced in the year 2025, which ultimately led to the
aforesaid amendment introducing sub-section (4) in Section
96 of the IBC w.e.f. 26.05.2026. It was submitted that a
proper reading of the objects and reasons for the very
enactment of the IBC and the aforesaid statement of objects
and reasons for introducing the latest amendment, would
show that the said amendment in Section 96 of the IBC has
to be read retroactively and it must be applied to pending
proceedings also and that holding otherwise would defeat
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the very purpose of the amendment.
(b) Much emphasis was placed on the misuse of the interim
moratorium triggered under Section 96 of the IBC, upon
filing of applications under Sections 94 and 95 thereof. It
was submitted that the stakeholders concerning the
dynamic working of the IBC had repeatedly reported such
rampant misuse by debtors of the said interim moratorium.
This included the members of the NCLT and other such
adjudicatory bodies. The Constitutional Courts, including
this Court, took note of the mischief and indicated that
chronic defaulters were misusing the said provision, which
frustrated the very object of enactment of the IBC and it
also frustrated the steps taken by creditors legitimately for
recovery of their dues.
(c) In this regard, reliance was placed on recent judgment and
order of this Court in the case of Rozina Firoz Hajiani Vs.
Union of India and others (supra), as also Bank of Baroda
vs. Union of India & Anr., 2024 SCC OnLine Bom 3964
and Kapole Advertising Agency & Ors. vs. Standard
Chartered Bank & Ors., 2026 SCC OnLine Bom 2673.
(d) Reliance was also placed on the reports of the Insolvency
Law Committee of February 2020 and the Select
Committee, that ultimately led to introduction of sub-
section (4) in Section 96 of the IBC. It was submitted that
all these reports indicated an urgent requirement of
addressing the aforesaid mischief in an appropriate manner,
thereby demonstrating that failure to apply the said
amendment to pending proceedings/ applications would
defeat the very purpose of the amendment.
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(e) Reliance was placed on Mischief Rule / Heydon’s Rule to
contend that since the amendment was aimed at striking at
such a mischief, there was no reason not to apply it to
pending proceedings as mischief perpetuated in the pending
proceedings, would continue to operate while applications
filed after 26.05.2026 would not be susceptible to such
mischief. It was submitted that failing to apply the
amendment retroactively to pending proceedings would
defeat the purpose of attacking the mischief, thereby
indicating the fallacy in the contentions raised on behalf of
the respondents. In this regard, reliance was placed on
judgment of the Supreme Court in the case of Bengal
Immunity Company Limited vs. State of Bihar & Ors.,
(1955) 1 SCC 763 and judgment of this Court in the case of
Purushottam Govindrao Bhagwat vs. State of Maharashtra
& Ors., 2011 SCC OnLine Bom 1847.
(f) Reference was made to the judgments of the Supreme
Court in the cases of Hitendra Vishnu Thakur & Ors. vs.
State of Maharashtra & Ors., (1994) 4 SCC 602 and M.
Rajendran and others Vs. KPK Oils and Protiens India
Private Limited and others (supra), to explain the
concept of retroactive operation of a particular provision of
law. It was submitted that even if this amendment was held
to be procedural in nature, since it did not create any new
liability or take away a vested right, it could certainly apply
retroactively.
(g) Reliance was placed on judgement of the Supreme Court in
the case of Zile Singh vs. State of Haryana & Ors., (2004) 8
SCC 1, wherein it was held that the presumption against
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retroactivity can be refuted by necessary implication in a
case where the new law is specifically made to cure an
acknowledged evil.
(h) It was further submitted that in the case of Chaman Singh
& Anr. vs. Srimathi Jaikaur, (1969) 2 SCC 429 when a
statute is curative in nature, it can operate retroactively.
Reliance is also placed on judgment of the Supreme Court
in the case of Manish Kumar vs. Union of India & Anr.,
(2021) 5 SCC 1, to contend that declaratory, clarificatory
or curative statutes involve an aspect of public interest,
which require a legislature to remove defects and clarify
aspects that have created doubt. In such situations, the
amendment can apply to pending proceedings. In this
regard, reliance was also placed on the judgments of the
Supreme Court in the cases of Commissioner of Income Tax
I, Ahmedabad vs. Gold Coin Health Food Private Limited,
(2008) 9 SCC 622 and Commissioner of Income Tax
(Central)-I, New Delhi vs. Vatika Township Private
Limited, (2015) 1 SCC 1.
(i) It was further submitted that the respondents in the said
petitions had not litigated in good faith and they had
suppressed the initiation of proceedings under Sections 94
and 95 of the IBC, only to divulge the same at the fag end
of the proceedings, thereby indicating the mischief.
Reliance was placed on the judgment of the Supreme Court
in the case of Celier LLP vs. Sumati Prasad Bafna & Ors.,
2024 SCC OnLine SC 3727, to contend that litigation
must be conducted by the parties in good faith and no party
can be permitted to abuse the process of law.
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(j) It was submitted that the attempt on the part of the
respondents in these writ petitions to demonstrate that
introduction of sub-section (4) to Section 96 of the IBC was
prospective, by comparing amendments to other provisions,
was not of much use to take their case forward. It was
submitted that the effect of applying the said amendment
prospectively would create an anomalous situation where
the mischief perpetrated in applications in pending
proceedings, at the time when the amendment was
introduced, would continue unabated. This would frustrate
the very object of introduction of the said amendment. On
the basis of the said submissions, it was asserted that the
said amendment must apply to pending proceedings also
and hence, it ought to be held as retroactive in nature.
10. On the other hand, Mr. Parekh, learned counsel appearing for the
contesting respondents in the aforesaid three writ petitions, along with
Mr. Satiya, learned counsel, submitted as follows :
(a) The learned counsel asserted that sub-section (4)
introduced by way of amendment in Section 96 of the IBC,
must operate prospectively on and from 26.05.2026 and
that it cannot apply to pending applications and
proceedings. By placing reliance on judgment of the
Supreme Court in the case of Commissioner of Income
Tax (Central)-I, New Delhi vs. Vatika Township Private
Limited (supra), it was submitted that certain principles
emerged from the same. Much emphasis was placed on the
conclusion rendered in the said judgment that every human
being is entitled to arrange his affairs by relying on the
existing law and such a person should not find that his
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plans have been retrospectively upset. It was emphasized
that the aforesaid amendment cannot be permitted to apply
retrospectively or retroactively, as it would have the effect
of taking away the protection of interim moratorium. It was
also submitted that while interpreting the said amendment,
it would be appropriate to compare the language of sub-
section (4) added to Section 96 of the IBC, with the
language of provisions in the same statue that are indicated
to operate retrospectively.
(b) It was submitted that the IBC has been amended repeatedly
in the past decade and a perusal of the amendments
introduced from time to time and the language used in the
amended provisions, can be a guide for understanding as to
whether the subject amendment in the present case can be
said to operate retroactively or retrospectively.
(c) The learned counsel for the contesting respondents in the
said writ petitions, then referred to a number of provisions
of the IBC introduced by way of amendment from time to
time and clubbed them in four categories. Firstly, the
provisions introduced by way of amendment, wherein the
phrase ‘it is hereby clarified’ was used making it clear that
the amendment was clarificatory/declaratory and hence,
retrospective. Secondly, reference was made to those
provisions introduced by way of amendment that changed
the existing law and which expressly stated that the same
would operate retrospectively. Thirdly, reference was made
to provisions added by way of amendment, which replaced
existing provisions. In such new provisions added after
deletion of the existing provisions, explanations were
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appended to make them operate retrospectively.
Fourthly, those provisions added by way of amendment
wherein while notifying the amendment, it was clarified
that such provisions would come into effect from an
anterior date.
(d) It was emphasized that the amendment in the present case
introducing sub-section (4) in Section 96 of the IBC, does
not fall in any of the aforementioned four categories and it
is silent about retroactive or retrospective operation. In this
situation, it was insisted that the said provision introduced
by way of amendment, must apply prospectively.
(e) Much emphasis was also placed on fact that the words used
in Section 96(4) of the IBC added by way of amendment
were ‘is filed’, which is in simple present tense. It was
submitted that the learned Single Judge of this Court in the
recent judgment and order passed in the case of Tata
Capital Financial Services Limited Vs. Neel Motors
LLP and others (supra) has placed much emphasis on the
said words, while holding that the amendment would apply
to pending proceedings also. It was submitted that the fact
that the said words were used in simple present tense was
ignored by the learned Single Judge. If words such as ‘has
been filed’ i.e. in present perfect tense, were to be used, the
interpretation could have been different. But, in the light of
the simple tense being used in the amended provision, there
can be no doubt that it must operate prospectively.
(f) It was submitted that the interim moratorium being a
substantive right, vested in guarantors from the date of
filing of petitions under Sections 94 and 95 of the IBC,
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applying the amendment retroactively, cannot be permitted.
In order to emphasize upon the purpose and significance of
interim moratorium under Section 96 of the IBC, reliance
was placed on judgment of the Supreme Court in the case
of Dilip B. Jiwrajka Vs. Union of India (supra).
(g) It was submitted that the mischief rule, upon which the
petitioner heavily relied, has its own limitation and that in
any case, it cannot override the plain language of the
statute. It was further submitted that all debtors could not
be painted with the same brush and that wherever mischief
was found, as in the case of Rozina Firoz Hajiani Vs.
Union of India and others (supra), the Court would
certainly be entitled to exercise its power to deal with the
mischief. Hence, the Mischief Rule/Heydon’s Rule cannot
be applied in these cases.
(h) It was submitted that in any case, the distinction sought to
be made between substantive rights and procedural rights is
irrelevant for the present case. It was submitted that if the
principles laid down by the Supreme Court in the case of
Hitendra Vishnu Thakur & Ors. vs. State of
Maharashtra & Ors. (supra) and Vineeta Sharma vs.
Rakesh Sharma & Ors. (supra) are applied in the correct
prospective, it would lead to only one conclusion and that
is prospective application of the said amendment.
(i) The learned counsel for the said respondents proceeded to
distinguish the judgments relied upon by the petitioners and
submitted that this Court ought to reject the submissions
made on behalf of the petitioners.
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11. In Writ Petition (L) No. 24045 of 2026, Mr. Shadab Jan, learned
counsel appearing for the petitioner submitted as follows:
(a) He adopted the contentions raised by the learned counsel
for the petitioners in other writ petitions. He added that the
protection of interim moratorium under Section 96 of the
IBC could never be given exalted status of a vested right,
so as to be immune from the operation of the said
amendment. At best, it could be said to be an existing right
and in this regard, reliance was placed on the judgment of
the Supreme Court in the case of Trimbak Damodhar
Raipurkar Vs. Assaram Hiraman Patil (supra).
(b) It was submitted that the interim moratorium under Section
96 of the IBC was only for the period till the stage of
Section 100 of the IBC was reached. In such a situation, it
cannot be said that once such an interim moratorium
commenced, the beneficiary thereof had a vested right.
(c) It was submitted that the effect of the amendment from
26.05.2026 on the pending proceedings was only that the
interim moratorium ceased to exist and if there had been
any breach of the interim moratorium till 26.05.2026, it
could still be remedied. But, going forward the said interim
moratorium would no longer be available and this would be
in consonance with the very object of introduction of the
said amendment.
12. Ms. Bhavsar, learned counsel appearing for respondent No.2 in
the said writ petition submitted as follows:-
(a) It was submitted that as per settled law, there is always a
presumption against retrospective/retroactive operation of
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statute or an amendment whenever a vested or a
substantive right is impaired. By referring to the judgments
of the Supreme Court in the case of Hitendra Vishnu
Thakur & Ors. vs. State of Maharashtra & Ors. (supra),
M. Rajendran and others Vs. KPK Oils and Proteins
India Private Limited and others (supra) and
Commissioner of Income Tax (Central)-I, New Delhi vs.
Vatika Township Private Limited (supra), it was
submitted that the interim moratorium operating in favour
of the respondents, which is a substantive protection,
cannot be taken away and that the amendment must apply
only to applications/proceedings initiated after 26.05.2026.
(b) It was submitted that the very nature of protection in the
form of interim moratorium introduced in the pre-
amendment scenario under Section 96 of the IBC, was
immediate and vested in the beneficiary. The moment an
application or proceeding was filed under Section 94 or 95
of the IBC, even without any adjudicatory step, the interim
moratorium was triggered, thereby indicating that such a
substantive protection cannot be taken away by applying
the amendment retrospectively or retroactively.
(c) It was submitted that the automatic interim moratorium that
stood triggered in the pre-amendment scenario was not an
incomplete transaction still under way as indicated by the
Supreme Court in the case of Securities and Exchange
Board of India vs. Rajkumar Nagpal & Ors., 2022 SCC
OnLine SC 1119. The protection of the interim
moratorium stood vested in the said respondent and it could
not be said to be in the process of completion, for the
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reason that it continues to be a shield until the moratorium
under Section 101 of the IBC is triggered. If the
interpretation sought to be placed by the petitioners is
accepted, such a significant substantive protection in the
form of interim moratorium will stand destroyed instantly,
which could not be permitted.
(d) The learned counsel further submitted that the opinion of
the learned Single Judge in the case of Tata Capital
Financial Services Limited Vs. Neel Motors LLP and
others (supra), holding the said amendment as having
retroactive operation, failed to apply the doctrine of vested
rights recognized by the Supreme Court in the case of
Garikapatti Veeraya Vs. N. Subbiah Choudhury
(supra). It was further submitted that the principles laid
down in SEBI Vs. Rajkumar Nagpal (supra) were also
applied in an erroneous manner and relevant judgments of
the Supreme Court were not applied while interpreting the
effect of the said amendment on pending proceedings. On
this basis, it was submitted that the contentions raised on
behalf of the petitioners in this regard deserve to be
rejected.
13. In Writ Petition (Lodging) No. 22742 of 2026, Mr. Shadab Jan,
learned counsel appearing for the petitioner reiterated his submissions
recorded hereinabove in Writ Petition (Lodging) No. 24045 of 2026. He
submitted that the amendment has to be applied retroactively even to
proceedings pending on the date on which the amendment came into
effect i.e. 26.05.2026.
14. On the other hand, Mr. Haryani, learned counsel appearing for
respondent No.2 in the said writ petition submitted as follows:-
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(a) By placing reliance on judgments of the Supreme Court in
the cases of Keshavan Madhava Menon vs. State of
Bombay, AIR 1951 SC 128, Govind Das & Ors. vs.
Income Tax Officer & Anr., (1976) 1 SCC 906, State of
Punjab & Ors. vs. Bhajan Kaur & Ors., (2008) 12 SCC
112 and Commissioner of Income Tax (Central)-I, New
Delhi vs. Vatika Township Private Limited (supra), it
was submitted that a statute has to be read as prospective
unless the contrary is expressed or arises by necessary
intendment. It was submitted that a bare reading of sub-
section (4) of Section 96 of the IBC introduced by way of
amendment, would show that it is absolutely silent as
regards the retrospective/ retroactive operation and
therefore, the presumption that it operates prospectively,
must be given its proper effect.
(b) It was submitted that applying the amendment to the
pending proceedings would suddenly take away the
protection of the interim moratorium despite the fact that
such an interim moratorium is an accrued right in itself.
Such abrupt taking away of the accrued right would defeat
the very purpose of the interim moratorium, which operates
till the Section 100 / 101 of the IBC is reached. By
referring to the judgment of this Court in the case of
Kapole Advertising Agency & Ors. vs. Standard
Chartered Bank & Ors. (supra), it was submitted that the
interim moratorium under Section 96 of the IBC
commences by operation of law and hence, its effect
cannot be ignored or denuded by applying the amendment
to pending proceedings, wherein such interim moratorium
was already triggered.
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(c) Reliance was placed on judgments of the Supreme Court in
the cases of Hitendra Vishnu Thakur & Ors. vs. State of
Maharashtra & Ors. (supra) and Shyam Sunder & Ors.
vs. Ram Kumar & Anr., (2001) 8 SCC 24, to contend that
when that a procedural amendment takes away or impairs a
right that is already accrued, it would not apply
retrospectively or retroactively. It was submitted that in the
IBC itself wherever the legislature intended that the
amendment was to apply to pending proceedings, it was
expressly so stated. Since, the subject amendment does not
expressly indicate that it applies to pending proceedings,
the contentions raised on behalf of the petitioners must be
rejected.
(d) It was submitted that the remedial character of an
amendment, which is supposed to address a mischief
cannot enlarge its application to even pending proceedings,
unless the amendment itself expressly provides for the
same.
(e) It was submitted that reliance placed on behalf of the
petitioners on the judgment in the case of Vineeta Sharma
vs. Rakesh Sharma & Ors. (supra) is misplaced because in
the said case, the amendment did not divest any accrued
rights. The amendment being beneficiary in nature was
applied retroactively and therefore, the petitioners are not
justified in relying upon the said judgment. Thereupon, the
learned counsel proceeded to distinguish the judgements
upon which the petitioners placed reliance, in order to
contend that the said contentions deserve to be rejected.
15. In Writ Petition No. 3374 of 2026, Mr. D'Souza, learned counsel
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for the petitioner, reiterated his submissions recorded hereinabove on the
issue of retroactive applicability of the said amendment. He further made
submissions on the factual matrix of the case.
16. Mr. Agarwal, learned counsel appearing for the contesting
respondents in the said writ petition, adopted the contentions raised by
the learned counsel for the respondents in the connected writ petitions,
to contend that the amendment cannot apply to pending proceedings and
that the protection of the interim moratorium ought to continue. The
learned counsel then proceeded to make submissions on the factual
matrix of the said writ petition, which shall be referred to and dealt with
when Writ Petition No.3374 of 2026 is considered hereinbelow.
CONSIDERATION / ANALYSIS OF SUBMISSIONS & FINDINGS
17. In the light of the aforesaid submissions advanced on behalf of the
rival parties, we find that the debate really is on the question as to
whether the introduction of sub-section (4) in Section 96 of the IBC by
way of the said amendment operates prospectively or retroactively. It is
asserted by the creditors in these petitions that the amendment should
operate retroactively. Therefore, the concept of ‘retroactive' application
of the amendment comes into focus.
18. The concept of ‘retroactive' application of a statute on an
amendment as opposed to 'retrospective' application thereof has engaged
the attention of Courts for a considerable period of time. For instance, in
the case of Dilip Vs. Mohd. Azizul Haq and another (supra), the
question was as to whether an amendment introduced in the relevant
statute concerning definition of a particular expression would apply to
pending proceedings, in that case, in the form of an appeal. One of the
contentions raised therein was that applying the amendment at the stage
of the appeal would amount to retrospective application thereof when
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the amendment did not expressly provide so. The Supreme Court
negatived the said contention by taking recourse to the concept of
‘retroactive' operation of the amendment. It was held that although the
said provision added by way of amendment was prospective in force, it
was retroactive in operation. It was held that the amendment came on the
Statute book on the date on which the appeal, being continuation of the
suit, was pending and therefore, it was found to be applicable to the
pending proceeding from the date, the amendment became effective.
19. In the case of State Bank’s Staff Union (Madras Circle) Vs.
Union of India (supra), the Supreme Court discussed the concept of
‘retroactive' application of an amendment. In the said judgement, it was
observed as follows:-
“21. In Advanced Law Lexicon by P. Ramanath Aiyar (3rd
Edn., 2005) the expressions “retroactive” and “retrospective”
have been defined as follows at p. 4124, Vol. 4:
“Retroactive.—Acting backward; affecting what is past.
(Of a statute, ruling, etc.) extending in scope or effect to
matters that have occurred in the past. — Also termed
retrospective. (Black's Law Dictionary, 7th Edn., 1999)
‘ “Retroactivity” is a term often used by lawyers but
rarely defined. On analysis it soon becomes apparent,
moreover, that it is used to cover at least two distinct concepts.
The first, which may be called “true retroactivity”, consists in
the application of a new rule of law to an act or transaction
which was completed before the rule was promulgated. The
second concept, which will be referred to as “quasi-
retroactivity”, occurs when a new rule of law is applied to an
act or transaction in the process of completion…. The
foundation of these concepts is the distinction between
completed and pending transactions….’ T.C. Hartley,
Foundations of European Community Law, p. 129 (1981).
* * *
Retrospective.—Looking back; contemplating what is
past.
Having operation from a past time.
‘Retrospective’ is somewhat ambiguous and that good
deal of confusion has been caused by the fact that it is used in
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more senses than one. In general, however, the courts regard as
retrospective any statute which operates on cases or facts
coming into existence before its commencement in the sense
that it affects, even if for the future only, the character or
consequences of transactions previously entered into or of
other past conduct. Thus, a statute is not retrospective merely
because it affects existing rights; nor is it retrospective merely
because a part of the requisite for its action is drawn from a
time antecedent to its passing.” (Vol. 44, Halsbury's Laws of
England, 4th Edn., p. 570, para 921.)”
20. In the case of Vineeta Sharma Vs. Rakesh Sharma (supra), the
Supreme Court, while considering amendment to Section 6 of the Hindu
Succession Act, held as follows:-
“60. The amended provisions of Section 6(1) provide that on
and from the commencement of the Amendment Act, the
daughter is conferred the right. Section 6(1)(a) makes daughter
by birth a coparcener “in her own right” and “in the same
manner as the son”. Section 6(1)(a) contains the concept of the
unobstructed heritage of Mitakshara coparcenary, which is by
virtue of birth. Section 6(1)(b) confers the same rights in the
coparcenary property “as she would have had if she had been a
son”. The conferral of right is by birth, and the rights are given
in the same manner with incidents of coparcenary as that of a
son and she is treated as a coparcener in the same manner with
the same rights as if she had been a son at the time of birth.
Though the rights can be claimed, w.e.f. 9-9-2005, the
provisions are of retroactive application; they confer benefits
based on the antecedent event, and the Mitakshara coparcenary
law shall be deemed to include a reference to a daughter as a
coparcener. At the same time, the legislature has provided
savings by adding a proviso that any disposition or alienation, if
there be any testamentary disposition of the property or
partition which has taken place before 20-12-2004, the date on
which the Bill was presented in the Rajya Sabha, shall not be
invalidated.
61. The prospective statute operates from the date of its
enactment conferring new rights. The retrospective statute
operates backwards and takes away or impairs vested rights
acquired under existing laws. A retroactive statute is the one
that does not operate retrospectively. It operates in futuro.
However, its operation is based upon the character or status that
arose earlier. Characteristic or event which happened in the past
or requisites which had been drawn from antecedent events.
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Under the amended Section 6, since the right is given by birth,
that is, an antecedent event, and the provisions operate
concerning claiming rights on and from the date of the
Amendment Act.”
21. Thereafter, in the case of SEBI Vs. Rajkumar Nagpal (supra),
while considering the applicability of a Circular issued by the Board to
pending cases, the Supreme Court held as follows:-
“99. We are of the opinion that the SEBI Circular has
retroactive application. In Principles of Statutory Interpretation
by Justice G.P. Singh (14th Edn., 2016 at p. 583), it is stated
that:
“The rule against retrospective construction is not
applicable to a statute merely because “a part of the
requisites for its action is drawn from a time antecedent to its
passing”. If that were not so, every statute will be presumed
to apply only to persons born and things which come into
existence after its operation and the rule may well result in
virtual nullification of most of the statutes.”
(emphasis supplied)
100. In Vineeta Sharma v. Rakesh Sharma [Vineeta Sharma v.
Rakesh Sharma, (2020) 9 SCC 1 : (2021) 1 SCC (Civ) 119] this
Court described the nature of prospective, retrospective, and
retroactive laws : (SCC p. 53, para 61)
“61. The prospective statute operates from the date of
its enactment conferring new rights. The retrospective statute
operates backwards and takes away or impairs vested rights
acquired under existing laws. A retroactive statute is the one
that does not operate retrospectively. It operates in futuro.
However, its operation is based upon the character or status
that arose earlier. Characteristic or event which happened in
the past or requisites which had been drawn from antecedent
events.”
101. The terms “retrospective” and “retroactive” are often
used interchangeably. However, their meanings are distinct.
This Court succinctly appreciated the difference between these
concepts in State Bank's Staff Union (Madras Circle) v. Union
of India [State Bank's Staff Union (Madras Circle) v. Union of
India, (2005) 7 SCC 584 : 2005 SCC (L&S) 994] :
“ “Retroactivity” is a term often used by lawyers but
rarely defined. On analysis it soon becomes apparent,
moreover, that it is used to cover at least two distinct
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concepts. The first, which may be called “true retroactivity”,
consists in the application of a new rule of law to an act or
transaction which was completed before the rule was
promulgated. The second concept, which will be referred to
as “quasi-retroactivity”, occurs when a new rule of law is
applied to an act or transaction in the process of
completion….The foundation of these concepts is the
distinction between completed and pending transactions….”
[T.C. Hartley, The Foundations of European Community
Law 129 (1981).]
102. Many decisions of this Court define “retroactivity” to
mean laws which destroy or impair vested rights. In real terms,
this is the definition of “retrospectivity” or “true retroactivity”.
“Quasi-retroactivity” or simply “retroactivity” on the other
hand is a law which is applicable to an act or transaction that is
still underway. Such an act or transaction has not been
completed and is in the process of completion. Retroactive laws
also apply where the status or character of a thing or situation
arose prior to the passage of the law. Merely because a law
operates on certain circumstances which are antecedent to its
passing does not mean that it is retrospective.”
22. The Supreme Court recently in the case of M. Rajendran and
others Vs. KPK Oils and Proteins India Private Limited and others
(supra), while discussing the principles concerning retrospective
applications of legislation, made an observation even with regard to
retroactive operation. The relevant portion reads as follows:-
“192. We may summarize the principles on retrospective
application of legislations as under:
(i) Presumption against retrospectivity is not applicable
to enactments which merely affect procedure or change the
forum or are declaratory;
(ii) Retroactive/retrospective operation can be implicit in
a provision construed in the context where it occurs;
(iii) Given the context, a provision can be held to apply
to cause of action after such provision comes into force, even
though the claim on which the action may be based may be of
an anterior date;
(iv) A remedial statute applies to pending proceedings
and such application may not be taken to be retrospective if
application is to be in future with reference to a pending cause
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of action; and
(v) The SARFAESI Act is a remedial statute intended to
deal with problem of pre-existing loan transactions which need
speedy recovery.”
23. It is relevant to note that the learned Single Judge of this Court, in
the recent judgement in the case of Tata Capital Financial Services
Limited Vs. Neel Motors LLP and others (supra), relied upon the said
judgement of the Supreme Court in the case of SEBI Vs. Rajkumar
Nagpal (supra). Thereupon, it was held that the amendment to Section
96 of the IBC adding sub-section (4) therein has prospective application,
but to facts existing as on the date of introduction of sub-section (4) by
way of amendment. On this basis, it was held that the interim
moratorium operating in pending proceedings ceased to operate with
effect from 26.05.2026 i.e. the date on which the amendment came into
operation.
24. It is relevant to note that the said judgement and order of the
learned Single Judge of this Court was followed by the learned Single
Judge of the Delhi High Court in the case of IDBI Trusteeship Services
Limited Vs. Manish Jain and others [order dated 19.08.2026 passed in
CS (Comm) 800 of 2025].
25. The learned counsel for the creditors in these petitions have relied
upon the aforementioned judgements to claim that the principle of
retroactive application clearly applies to the aforesaid amendment to the
IBC, whereby sub-section (4) was added to Section 96 thereof. One of
the limbs of the arguments in support of the said contention is that, the
amendment is merely procedural in nature and it does not affect any
substantive right. It is asserted that a 'vested right' is not affected by
operation of the said amendment and applying the same even to pending
proceedings. As to what could be said to be a procedural amendment and
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when is a right found to be a 'vested right' are questions that are central
to the analysis of the rival submissions in this context.
26. In the case of J. S. Yadav Vs. State of U.P. (supra), the Supreme
Court considered the effect of the word 'vest' or 'vested'. In that context,
it was observed as follows:-
“20. “17. The word ‘vested’ is defined in Black's Law
Dictionary (6th Edn.) at p. 1563, as:
‘Vested; fixed; accrued; settled; absolute; complete.
Having the character or given the rights of absolute ownership;
not contingent; not subject to be defeated by a condition
precedent.’
Rights are ‘vested’ when right to enjoyment, present or
prospective, has become property of some particular person or
persons as present interest; mere expectancy of future benefits,
or contingent interest in property founded on anticipated
continuance of existing laws, does not constitute vested rights.
In Webster's Comprehensive Dictionary (International
Edn.) at p. 1397, ‘vested’ is defined as:
‘[L]aw held by a tenure subject to no contingency;
complete; established by law as a permanent right; vested
interests.’ ”
21. The word “vest” is normally used where an immediate
fixed right in present or future enjoyment in respect of a
property is created. With the long usage the said word “vest”
has also acquired a meaning as “an absolute or indefeasible
right”. It had a “legitimate” or “settled expectation” to obtain
right to enjoy the property, etc. Such “settled expectation” can
be rendered impossible of fulfilment due to change in law by
the legislature. Besides this, such a “settled expectation” or the
so-called “vested right” cannot be countenanced against public
interest and convenience which are sought to be served by
amendment of the law. (Vide Howrah Municipal Corpn. v.
Ganges Rope Co. Ltd. [(2004) 1 SCC 663] )”
27. In the said judgement, a reference was made to the earlier
judgement of the Supreme Court in the case of Howrah Municipal
Corporation and others Vs. Ganges Rope Co. Ltd., (2004) 1 SCC 663,
wherein the Supreme Court had considered the concept of 'vested right'
and the meaning of the word 'vest'. In that context, it was observed that
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with long usage, the word 'vest' has also acquired a meaning as 'an
absolute or indefeasible right'. It is to be kept in mind that having noted
the said meaning of the concept 'vested right', in the above-quoted
portion of the judgement of the Supreme Court in the case of J. S.
Yadav Vs. State of Uttar Pradesh (supra), it was laid down that such a
vested right cannot be countenanced against public interest and
convenience, which are sought to be served by amendment of the law.
According to us, this is a crucial observation in the facts and
circumstances of the present case.
28. In the case of BCCI Vs. Kochi Cricket Private Limited (supra),
the Supreme Court considered the concept of 'vested right' while
construing the effect of an amendment to Section 36 of the Arbitration
and Conciliation Act, 1996 (Arbitration Act). As a consequence of the
amendment, mere filing of an application under Section 34 of the
Arbitration Act to challenge an arbitral award would not result in
rendering the award unforceable, unless the Court granted stay of the
operation of the arbitral award. It was contended on behalf of the parties
whose proceedings already filed to challenge arbitral awards were
pending that the said amendment would not apply to them as their vested
right would be taken away. The Supreme Court declined to accept the
said contention and while doing so, held as follows:-
“60. This brings us to the manner of enforcement of a decree
under CPC. A decree is enforced under CPC only through the
execution process (see Order 21 of the Code of Civil
Procedure). Also, Section 36(3), as amended, refers to the
provisions of the Code of Civil Procedure for grant of stay of a
money decree. This, in turn, has reference to Order 41 Rule 5
of the Code of Civil Procedure, which appears under the
Chapter heading, “Stay of Proceedings and of Execution”. This
being so, it is clear that Section 36 refers to the execution of an
award as if it were a decree, attracting the provisions of Order
21 and Order 41 Rule 5 of the Code of Civil Procedure and
would, therefore, be a provision dealing with the execution of
arbitral awards. This being the case, we need to refer to some
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judgments in order to determine whether execution proceedings
and proceedings akin thereto give rise to vested rights, and
whether they are substantive in nature.
61. In Lalji Raja and Sons v. Firm Hansraj Nathuram [Lalji
Raja and Sons v. Firm Hansraj Nathuram, (1971) 1 SCC 721] ,
this Court was concerned with a judgment-debtor's right to
resist execution of a decree. Section 20(1)(b) of the Code of
Civil Procedure (Amendment) Act, 1951 was extended to
Madhya Bharat and other areas, as a result of which the
judgment-debtor's right to resist execution of a decree was
protected. In this context, this Court held that the Amendment
Act, 1951 made decrees, which could have been executed only
by courts in British India, executable in the whole of India.
Stating that the change made was one relating to procedure
only, this Court held: (SCC p. 728, paras 15-16)
“15. This provisions undoubtedly protects the
rights acquired and privileges accrued under the
law repealed by the Amending Act. Therefore the
question for decision is whether the non-
executability of the decree in the Morena Court
under the law in force in Madhya Bharat before the
extension of “the Code” can be said to be a right
accrued under the repealed law. We do not think
that even by straining the language of the provision
it can be said that the non-executability of a decree
within a particular territory can be considered as a
privilege. Therefore the only question that we have
to consider is whether it can be considered as a
“right accrued” within the meaning of Section
20(1)(b) of the Code of Civil Procedure
(Amendment) Act, 1950. In the first place, in order
to get the benefit of that provision, the non-
executability of the decree must be a right and
secondly it must be a right that had accrued from
the provisions of the repealed law. It is contended
on behalf of the judgment-debtors that when the
decree was passed, they had a right to resist the
execution of the decree in Madhya Bharat in view
of the provisions of the Indian Code of Civil
Procedure (as adapted) which was in force in the
Madhya Bharat at that time and the same is a
vested right. It was further urged on their behalf
that that right was preserved by Section 20(1)(b) of
the Code of Civil Procedure (Amendment) Act,
1950. It is difficult to consider the non-
executability of the decree in Madhya Bharat as a
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vested right of the judgment-debtors. The non-
executability in question pertains to the jurisdiction
of certain courts and not to the rights of the
judgment-debtors. Further the relevant provisions
of the Civil Procedure Code in force in Madhya
Bharat did not confer the right claimed by the
judgment-debtors. All that has happened in view of
the extension of “the Code” to the whole of India in
1951 is that the decrees which could have been
executed only by courts in British India are now
made executable in the whole of India. The change
made is one relating to procedure and jurisdiction.
Even before “the Code” was extended to Madhya
Bharat the decree in question could have been
executed either against the person of the judgment-
debtors if they had happened to come to British
India or against any of their properties situated in
British India. The execution of the decree within
the State of Madhya Bharat was not permissible
because the arm of “the Code” did not reach
Madhya Bharat. It was the invalidity of the order
transferring the decree to the Morena Court that
stood in the way of the decree-holders in executing
their decree in that court on the earlier occasion and
not because of any vested rights of the judgment-
debtors. Even if the judgment-debtors had not
objected to the execution of the decree, the same
could not have been executed by the court at
Morena on the previous occasion as that court was
not properly seized of the execution proceedings.
By the extension of “the Code” to Madhya Bharat,
want of jurisdiction on the part of the Morena
Court was remedied and that court is now made
competent to execute the decree.
16. That a provision to preserve the right
accrued under a repealed Act “was not intended to
preserve the abstract rights conferred by the
repealed Act…. It only applies to specific rights
given to an individual upon happening of one or the
other of the events specified in statute”—see Lord
Atkin's observations in Hamilton Gell v. White
[Hamilton Gell v. White, (1922) 2 KB 422 (CA)] .
The mere right, existing at the date of repealing
statute, to take advantage of provisions of the
statute repealed is not a “right accrued” within the
meaning of the usual saving clause—see Abbott v.
Minister for Lands [Abbott v. Minister for Lands,
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1895 AC 425 (PC)] and Ogden Industries Pty. Ltd.
v. Lucas [Ogden Industries Pty. Ltd. v. Lucas, 1970
AC 113 : (1969) 3 WLR 75 : (1969) 1 All ER 121
(PC)] .”
62. In Narhari Shivram Shet Narvekar v. Pannalal Umediram
[Narhari Shivram Shet Narvekar v. Pannalal Umediram,
(1976) 3 SCC 203] , this Court, following Lalji Raja [Lalji
Raja and Sons v. Firm Hansraj Nathuram, (1971) 1 SCC
721] , held as follows: (SCC p. 207, para 8)
“8. The learned counsel appearing for the appellant
however submitted that since the Code of Civil
Procedure was not applicable to Goa the decree
became inexecutable and this being a vested right
could not be taken away by the application of the
Code of Civil Procedure to Goa during the
pendency of the appeal before the Additional
Judicial Commissioner. It seems to us that the right
of the judgment-debtor to pay up the decree passed
against him cannot be said to be a vested right, nor
can the question of executability of the decree be
regarded as a substantive vested right of the
judgment-debtor. A fortiori the execution
proceedings being purely a matter of procedure it is
well settled that any change in law which is made
during the pendency of the cause would be deemed
to be retroactive in operation and the appellate
court is bound to take notice of the change in law.”
Since it is clear that execution of a decree pertains to the realm
of procedure, and that there is no substantive vested right in a
judgment-debtor to resist execution, Section 36, as substituted,
would apply even to pending Section 34 applications on the
date of commencement of the Amendment Act.
63. The matter can also be looked at from a slightly
different angle. Section 36, prior to the Amendment Act, is
only a clog on the right of the decree-holder, who cannot
execute the award in his favour, unless the conditions of this
section are met. This does not mean that there is a
corresponding right in the judgment-debtor to stay the
execution of such an award. The learned counsel on behalf of
the appellants have, however, argued that a substantive change
has been made in the award, which became an executable
decree only after the Section 34 proceedings were over, but
which is now made executable as if it was a decree with
immediate effect, and that this change would, therefore, take
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away a vested right or accrued privilege in favour of the
respondents. It has been argued, relying upon a number of
judgments, that since Section 36 is a part of the enforcement
process of awards, there is a vested right or at least a privilege
accrued in favour of the appellants in the unamended 1996 Act
applying insofar as arbitral proceedings and court proceedings
in relation thereto have commenced, prior to the
commencement of the Amendment Act. The very judgment
strongly relied upon by the Senior Counsel for the appellants,
namely, Garikapati Veeraya [Garikapati Veeraya v. N. Subbiah
Choudhry, 1957 SCR 488 : AIR 1957 SC 540] , itself states in
Proposition (v) at p. 515, that the vested right of appeal can be
taken away only by a subsequent enactment, if it so provides
specifically or by necessary intendment and not otherwise. We
have already held that Section 26 does specifically provide that
the court proceedings in relation to arbitral proceedings, being
independent from arbitral proceedings, would not be viewed as
a continuation of arbitral proceedings, but would be viewed
separately. This being the case, it is unnecessary to refer to the
judgments such as Union of India v. A.L. Rallia Ram [Union of
India v. A.L. Rallia Ram, (1964) 3 SCR 164 : AIR 1963 SC
1685] and NBCC Ltd. v. J.G. Engg. (P) Ltd. [NBCC Ltd. v.
J.G. Engg. (P) Ltd., (2010) 2 SCC 385 : (2010) 1 SCC (Civ)
416] , which state that a Section 34 proceeding is a supervisory
and not an appellate proceeding. Snehadeep Structures (P) Ltd.
v. Maharashtra Small-Scale Industries Development Corpn.
Ltd. [Snehadeep Structures (P) Ltd. v. Maharashtra Small-
Scale Industries Development Corpn. Ltd., (2010) 3 SCC 34 :
(2010) 1 SCC (Civ) 603] , SCC at pp. 47-49, which was cited
for the purpose of stating that a Section 34 proceeding could be
regarded as an “appeal” within the meaning of Section 7 of the
Interest on Delayed Payments to Small-Scale and Ancillary
Industrial Undertakings Act, 1993, is obviously distinguishable
on the ground that it pertains to the said expression appearing
in a beneficial enactment, whose object would be defeated if
the word “appeal” did not include a Section 34 application. …”
29. The aforesaid position of law has to be kept in mind while
referring to the relevant provisions of the IBC to understand as to
whether interim moratorium under Section 96 of the IBC can be said to
be a vested right in favour of the parties, who are claiming that the
amendment in this case must necessarily apply prospectively. It is
contended that the triggering of the interim moratorium under Section 96
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of the IBC amounts to a vested right in the beneficiaries to such an
interim moratorium, and therefore, the effect of sub-section (4) of
Section 96 introduced by way of amendment must be prospective.
Section 96 is found in Chapter III of Part III of the IBC. It is to be noted
that Part III of the IBC pertains to ‘Insolvency Resolution and
Bankruptcy for Individuals and Partnership Firms’ and Chapter III
thereof pertains to the ‘Insolvency Resolution Process’. Sections 94 to
120 are found in Chapter III of Part III of the IBC. Section 94 pertains to
application by debtor to initiate insolvency resolution process while
Section 95 pertains to an application by a creditor to initiate the
insolvency resolution process. Upon such applications filed under
Sections 94 and / or 95 of the IBC, as per Section 96 thereof, interim
moratorium is triggered.
30. As per Section 99 of the IBC, the resolution professional is
required to examine the application filed under Section 94 or 95 of the
IBC and to submit a report to the adjudicating authority (NCLT), either
recommending the approval or rejection of the application. Section 100
of the IBC provides that the adjudicating authority shall within 14 days
from the date of submission of the report under Section 99 thereof pass
an order, either admitting or rejecting the application referred to in
Section 94 or 95, as the case may be. It is crucial to note that upon the
application being admitted by the adjudicatory authority under Section
100 of the IBC, a moratorium commences under Section 101 thereof for
a period of 180 days. It is crucial to note that if the application filed
under Section 94 or 95 of the IBC is rejected by the adjudicating
authority under Section 100(4) thereof, on the basis of the report
submitted by the resolution professional that the application was made
with the intention to defraud creditors, the order of the adjudicating
authority under Section 100(1) of the IBC shall record that the creditor is
entitled to file for a bankruptcy order under Chapter IV. Section 121 of
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the IBC, under Chapter IV pertaining to Bankruptcy Order for
Individuals and Partnership Firms, in sub-section (1) thereof
specifically provides that an application for bankruptcy of a debtor can
be filed by the creditor, inter alia, where such an order has been passed
by the adjudicating authority under Section 100(4). Thus, if the
adjudicating authority admits an application under Section 94 or 95 of
the IBC upon the report submitted by the resolution professional,
moratorium under Section 101 thereof is triggered and further process
for insolvency resolution is undertaken under Section 102 and
subsequent provisions. On the other hand, if the adjudicating authority
passes an order under Section 100(4) of the IBC rejecting the application
filed under Section 94 or 95 thereof, the process for bankruptcy can be
initiated by the creditor under Chapter IV.
31. The said scheme under Chapters III and IV of the IBC clearly
indicates that the process between Section 94 / 95 of the IBC and
Section 100 thereof is purely procedural in nature and the substantive
step for insolvency resolution of individuals and partnership firms is
initiated only when the adjudicating authority passes an order under
Section 100(1), admitting the application under Section 94 or 95 of the
IBC. Consequently, there is a qualitative difference between the interim
moratorium triggered under Section 96 of the IBC and the moratorium
triggered under Section 101 when the procedure initiated under Section
94 or 95 of the IBC culminates under Section 100 thereof. Once this
aspect is appreciated, it comes to light that the aforesaid amendment,
whereby sub-section (4) has been added to Section 96 of the IBC,
necessarily concerns a procedural limb under Chapter III and therefore,
it cannot be said that introduction of the amendment and applying it to
pending proceedings would amount to retrospective application of the
same as a 'vested right' is taken away. It must also be appreciated that
during the interim moratorium under Section 96 of the IBC, the
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restrictions are only on the creditors, but upon the moratorium triggered
under Section 101 thereof, restrictions on transfers and alienation of
assets are imposed on the debtors also. All the relevant stakeholders in
such an insolvency process highlighted that due to this, the interim
moratorium under Section 96 of IBC had become the number one
mechanism for siphoning of crores of rupees by the debtors.
32. It cannot be said that interim moratorium under Section 96 of the
IBC is an absolute or indefeasible right. It is necessarily a transitory
arrangement, during the period when the insolvency professional is in
the process of preparing a report under Section 99 of the IBC, to place
the same for consideration before the adjudicating authority. The journey
of the application under Section 94 or 95 of the IBC towards its
culmination in the form of the same being either admitted or rejected by
the adjudicating authority under Section 100 of the IBC, upon
consideration of the report submitted by the resolution professional
under Section 99 thereof, is purely procedural in nature and there is no
question of the interim moratorium under Section 96 giving rise to a
'vested right' in the debtors.
33. Once the aforesaid aspect of the matter is appreciated in the
correct perspective, the ratio of the aforementioned judgement of the
Supreme Court in the case of BCCI Vs. Kochi Cricket Private
Limited and others (supra), applies with full force. As a matter of fact,
the other aforementioned judgements, clarifying the concept of
retroactive amendment of a statute, also apply, thereby demonstrating
that the creditors in these cases, are justified in contending that although
the amendment adding sub-section 4 to Section 96 of the IBC applies
from the date it was brought into force with effect from 26.05.2026, it
does apply even to the proceedings/applications filed under Sections 94
and 95 of the IBC and pending on the said date.
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34. At this stage, it would be appropriate to consider the contentions
raised on behalf of the respondents/beneficiaries of the interim
moratorium, with regard to the nature of such moratorium. But, before
considering the same, it would be appropriate to reproduce Section 96 of
the IBC as it stands today, post-amendment.
“96. Interim-moratorium.
(1) When an application is filed under section 94 or
section 95-
(a) an interim-moratorium shall commence on the
date of the application in relation to all the debts and
shall cease to have effect on the date of admission of
such application; and
(b) during the interim-moratorium period—
(i) any legal action or proceeding pending in
respect of any debt shall be deemed to have
been stayed; and
(ii) the creditors of the debtor shall not initiate
any legal action or proceedings in respect of
any debt.
(2) Where the application has been made in relation
to a firm, the interim-moratorium under sub-section
(1) shall operate against all the partners of the firm as
on the date of the application.
(3) The provisions of sub-section (1) shall not apply
to such transactions as may be notified by the Central
Government in consultation with any financial sector
regulator.
(4) The provisions of this section shall not apply
where an application is filed for initiating an
insolvency resolution process in respect of a
personal guarantor to a corporate debtor.
(emphasis supplied)”
35. This Court has supplied emphasis to sub-section 4 of Section 96
of the IBC quoted hereinabove, as it was added by way of amendment
with effect from 26.05.2026. In the case of Dilip B. Jiwrajka Vs. Union
of India (supra), the Supreme Court held that the purpose of interim
moratorium under Section 96 of the IBC, was protective in nature. In
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these cases, it is contended by the beneficiaries of such interim
moratorium that they have a vested right in continuation thereof. But, in
the light of the discussion hereinabove, since the whole process between
Sections 94 to 99 of the IBC has been found to be procedural in nature,
which is yet to reach completion, we are of the opinion that the
beneficiaries of the interim moratorium cannot claim any vested right.
We are unable to accept the contention that such parties have a vested
right in such a procedural realm, of not being proceeded against in
accordance with law or that there is a corresponding duty upon the
creditors not to proceed against them. As held in the case of BCCI Vs.
Kochi Cricket Private Limited and others (supra), the amendment has
merely removed a clog on the right of the creditors to proceed in
accordance with law. The debtors do not have a right to stay of such
proceedings.
36. Moreover, consideration of the rival submissions cannot be
divorced from the whole purpose for which the aforesaid amendment
had to be introduced. The purpose for which the amendment was
introduced can be gathered from the material that triggered the
legislature to introduce sub-section 4 in Section 96 of the IBC. In this
context, the petitioners/creditors are justified in referring to and relying
upon the relevant portion of the report of the Select Committee on the
IBC (Amendment) Bill, 2025. The aforesaid Bill ultimately culminated
into the amending Act. The relevant portion of the said report of the
Select Committee reads as follows:
“47.3. Reasons/Justification given by the Ministry for the
proposed provisions:
The interim moratorium under section 96 provides
that upon the filing of an application, all legal
actions or proceedings pending in respect of the
concerned debt shall remain stayed, and creditors
shall not initiate any legal action or proceeding in
respect of such debt.
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The Adjudicating Authority (AA) has, on occasion,
expressed concerns regarding the misuse of
initiation of the individual insolvency resolution
process by personal guarantors to take advantage
of the interim moratorium. Clause 47 therefore
seeks to insert a new sub-section (4) to section 96
of the Code to provide that provisions of section
96 of the Code will not apply where an application
to initiate an insolvency resolution process in
respect of a personal guarantor to a corporate
debtor is filed by a creditor or the debtor itself.
47.4 Important Views / Suggestions given by Experts /
Stakeholders:
Some of the important suggestions of the
stakeholders in this regard are furnished below:
(i) Consider providing an interim moratorium on
disposal of assets by the debtor. The report of
the Insolvency Law Committee of February
2020 recommended that Section 96 and 124
should be amended to include a stay on
actions relating to disposition of assets by the
debtor.
(ii) Removal of this amendment may be
considered. The proposed amendments make
the provision of interim moratorium non
applicable in cases of personal guarantor to a
corporate debtor which provides for
protection to the personal guarantor from
legal actions of the creditors. However, such
interim protection is critical to the resolution
process. Some of the other important issues
that have arisen in practice have not been
addressed i.e. no thresholds for admission to
insolvency process have been specified, no
specific guidelines for MSME guarantors etc.
(iii) The Bill seeks to introduce a new sub-section
excluding application of interim moratorium
in respect of personal guarantor to a CD.
Non-application of interim moratorium might
encourage the personal guarantor to dispose
of their assets to the detriment of creditors.
Non-application of interim moratorium might
encourage the PG to dispose of assets to the
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detriment of creditors. To prevent such
wrongful disposal of assets by PG, provisions
for moratorium may be introduced to prohibit
alienation of assets by the guarantors post
filing of the application.
47.5 Examination by the Committee:
47.5.1 The Ministry in their written replies to the
corresponding suggestions above have
submitted as under:
(i) The interim moratorium under
section 96 provides that upon the
filing of an application, all legal
actions or proceedings pending in
respect of the concerned debt shall
remain stayed, and creditors shall not
initiate any legal action or
proceeding in respect of such debt.
Concerns have been expressed
regarding the misuse of initiation of
the individual insolvency resolution
process (IIRP)by PGs to take
advantage of the interim moratorium.
To remove any perverse incentives to
initiate IIRP, the proposed
amendment seeks to dispense with
the concept of interim moratorium
for the insolvency of PG to CD.
Hence, the provision in the
Insolvency and Bankruptcy Code
(Amendment) Bill, 2025 may be
retained without any change.
(ii) Additionally, Part III currently
applies to personal guarantors, who
may or may not be MSMEs. Hence,
the provision in the Insolvency and
Bankruptcy Code (Amendment) Bill,
2025 may be retained without any
change.
(iii) It is clarified that the proposed
Amendment Bill restricts the interim
moratorium protection for personal
guarantors, thereby creating a level
playing field for PGs and their
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creditors to seek appropriate
remedies outside the IBC before the
insolvency resolution or bankruptcy
process is initiated. Hence, no
changes to the Insolvency and
Bankruptcy Code (Amendment) Bill,
2025 are required.
47.5.2 Regarding the issue of removal of Interim
moratorium, the secretary, Ministry of
Corporate Affairs stated as under during the
deposition before the Committee:
"This concerns individual insolvency,
personal guarantees, etc. They
recommend reconsidering the
removal of interim moratorium
protection for personal guarantors
during insolvency and bankruptcy
processes. They also suggest
allowing automatic commencement
of the bankruptcy process without a
three-month gap after completion of
the CIRP or liquidation proceedings.
They further propose extending
provisions similar to Section 66
regarding fraudulent or wrongful
trading to personal insolvency. Our
position is that removing the interim
moratorium for personal guarantors
is intended primarily to prevent
misuse. Currently, when recovery
proceedings begin against a personal
guarantor, the guarantor rushes to file
an application before the NCLT,
triggering the interim moratorium
immediately. This provision has been
subject to misuse, hence our proposal
to remove it. Under statutes such as
SARFAES/ and through multiple
Supreme Court judgments, it is very
clear that the creditor is not required
to exhaust remedies against the
borrower first. The law treats the
borrower and guarantor on the same
footing once default occurs. That
means, once there is a default, the
law applies equally to the borrower
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as well as to the guarantor. It is
pointed out in the SARFAESI Act,
there is no moratorium."
47.5.3. Elaborating further on the issue, Chairperson,
IBBI stated as under during oral evidence:
‘NCLT members have repeatedly
flagged this issue. In fact, in our
colloquiums, they cite it as the
number one mechanism through
which thousands of crores are being
siphoned off. Therefore, this
amendment is one of the most'
crucial for plugging a major
loophole in the IBC.’
47.6 Observations / Recommendations of the
Committee:
The Committee note that Clause 47 seeks to
amend Section 96 to exclude personal
guarantors to corporate debtors from the scope
of the interim moratorium. The Committee
observe that this amendment is aimed at
addressing a persistent concern flagged by the
Adjudicating Authority and insolvency
practitioners namely, the misuse of interim
moratorium by personal guarantors who file
applications solely to obstruct or delay
legitimate recovery proceedings, a major
loophole confirmed by NCLT members to be
responsible for significant value erosion. The
Committee, having considered detail
submissions of the Ministry and IBBI,
underscore that removing this unnecessary
pre-admission shield is essential. The
Committee observe that the law, consistent
with SARFAESI Act and Supreme Cour
judgements, treats the borrower and the
guarantor on the same footing upon default,
and the proposed amendment does not deprive
personal guarantors of the right to seek
insolvency resolution or bankruptcy under Part
Ill of the Code. In view of the above, and
recognising the need to curb strategic filings
and strengthen the integrity of the insolvency
process, the Committee find the proposed
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amendment under Clause 47 to be appropriate
and recommend its acceptance in its present
form.”
37. The above-quoted portion of the said report demonstrates that
various stakeholders concerned with dynamic application and operation
of the IBC, raised serious concerns about gross misuse of the interim
moratorium triggered by filing of applications under Sections 94 or 95 of
the IBC. It was found that corporate debtors were taking advantage of
triggering of such interim moratorium, by misusing the provisions of
Sections 94 or 95 of the IBC, for initiation of individual insolvency
resolution process under Part III of the IBC.
38. The members of the adjudicating authority i.e. NCLT repeatedly
flagged the said serious concerns and while adducing oral evidence
before the Select Committee, the Chairperson of the Insolvency and
Bankruptcy Board of India (IBBI) constituted under the IBC, stated that
in number of cases, the colloquiums organized by the IBBI were cited,
showing that the number one mechanism for siphoning of thousands of
crores, was the aforesaid misuse of Sections 94 or 95 of the IBC, leading
to triggering of interim moratorium under Section 96 thereof. The report
strongly recommended the amendment to curb such strategic filings and
mischievous misuse of Sections 94 and 95 of the IBC, so as to
strengthen the integrity of the insolvency process.
39. We also find substance in reliance placed on statement of objects
and reasons for enactment of IBC itself, inter alia emphasizing upon
completion of insolvency resolution of individuals in a time-bound
manner, for maximization of value of assets of such persons. We also
find that in the statement of objects and reasons for bringing about such
amendment, including introduction of sub-section 4 in Section 96 of the
IBC with effect from 26.05.2026, it was recorded that the amendments
were necessary for clarifying the original intent of provisions. Also, to
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incorporate novel concepts, the statement of objects and reasons
recorded that the IBC being an economic legislation, requires periodic
updates to align with changing market needs and ‘lessons learnt from
practical experience’.
40. We are of the opinion that the aforesaid material, particularly the
report of the Select Committee brought to our notice, clearly indicates
that the very purpose of bringing about the amendment for adding sub-
section 4 to Section 96 of the IBC, was to address the mischief of
rampant and deliberate misuse of the interim moratorium triggered under
Section 96 of the IBC, merely by filing of applications under Sections 95
and/or 96 of the IBC.
41. As a matter of fact, judicial notice of such gross misuse was also
taken by the Courts. It was found that the route of filing applications
under Sections 94 and/or 95 of the IBC, was being taken, not with the
purpose of triggering the procedure for examination of applications and
preparation of report by the resolution professional, for the applications
to be considered for admission or rejection by the adjudicating authority,
but only with the sole intention of triggering and enjoying interim
moratorium under Section 96 of the IBC. It was found that the
applications under Section 94 and 95 were being indiscriminately filed,
certain papers being collected and eventually thrown into the Registry of
the NCLT, to claim that the moment such applications were filed, interim
moratorium was triggered under Section 96 of the IBC. It came to notice
that creditors had started adopting this path at stages, when the creditors
were on the verge of completion of lawful methods undertaken for
realization of their dues.
42. In the case of Bank of Baroda vs. Union of India and another,
2024 SCC OnLine Bom 3964, this Court found that such applications
filed under Sections 94 and/or 95 of the IBC were being filed and simply
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kept pending at the stage of scrutiny or defects, without any effort being
made to process the same. As a consequence, it was claimed that interim
moratorium had been triggered and no further steps could be taken by
the creditors, till the time such applications remained pending with the
NCLT. In the said judgement, upon taking note of such conduct and the
consequent harassment suffered by the creditors, this Court held that the
interim moratorium under Section 96 of the IBC, would stand triggered
only upon registration of such applications filed under Sections 94
and/or 95 of the IBC. This Court laid down timelines for processing of
such applications, stating that if the applicants failed to remove defects,
consequential orders would be passed, which would have to be
challenged by way of appeals provided under the relevant Rules and
only upon the applications being duly registered, would the interim
moratorium stand triggered under Section 96 of the IBC.
43. In the case of Kapole Advertising Agency & Ors. vs. Standard
Chartered Bank & Ors. (supra), this Court also found that specific
Standard Operating Procedure (SOP) framed by the NCLT, was not
being followed, as a consequence of which the creditors were facing
difficulties. In that light, this Court directed the Registry of NCLT to
ensure that the directions contained in the judgement and order of this
Court, in the case of Bank of Baroda vs. Union of India and another
(supra) and the SOP framed by the NCLT itself, were scrupulously
followed without exception, so that misuse of aforesaid provisions of the
IBC, was discouraged.
44. In the case of Rozina Firoz Hajiani and others Vs. Union of
India and others (supra), this Court was at pains to record the rampant
misuse of Sections 94 to 96 of the IBC, to the detriment of the creditors
and to the benefit of chronic defaulters. The relevant portions of the said
judgement read as follows:
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“. A disturbing trend is noticed by this writ Court as to the
manner in which chronic defaulters are taking resort to the
provisions of the Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as ‘the IBC’ for short) to frustrate
secured creditors and auction purchasers from proceeding, in
accordance with law, under the provisions of the Securitisation
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (hereinafter referred to as ‘the
Securitisation Act’ for short).
2. In a number of such matters, it is found that the
borrowers/ guarantors act as fence sitters and do not take any
steps when the secured creditors proceed under Section 13(2)
of the Securitisation Act and take further consequential steps,
till the culmination of the process and auction purchasers
coming into the picture. At the stage when the auction sale has
been conducted and the auction purchaser has come into the
picture, in a few instances, even after the sale certificate is
issued, when physical possession of the secured asset is about
to be handed over to the auction purchaser, the original
borrowers/guarantors initiate collusive proceedings under
Section 94 or Section 95 of the IBC, claiming triggering of
moratorium under Section 96 thereof, the moment such
proceedings are filed before the National Company Law
Tribunal (NCLT). As a consequence, all steps taken under the
provisions of the Securitisation Act, suddenly come to a
standstill and such borrowers/guarantors, who are defaulters,
wear a cloak of immunity under the garb of moratorium
triggered under Section 96 of the IBC. In such a situation, the
secured creditor and/or the auction purchaser are required to
approach the NCLT and thereafter, the proceedings reach the
National Company Law Appellate Tribunal (NCLAT) and then
the Supreme Court, till which time the auction purchaser is
completely frustrated, despite having parted with consideration
in terms of the bid amount.
3. The manner in which such borrowers/guarantors and
chronic defaulters are using the provisions of the IBC, shows
that the objects of the both the IBC as well as the Securitisation
Act are frustrated. This has the tendency of adversely affecting
the economy, financial health and business environment in the
country. In such situations, the writ Court cannot remain a mute
spectator, when misuse of legal provisions demonstrates failure
of justice. The present petition, although it arises from an
interim order of the Debts Recovery Tribunal-I, Mumbai
(DRT), is one such example of gross facts manifesting the
attitude and approach adopted by the respondent Nos.3 to 7 i.e.
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the borrowers and guarantors to ensure that the legal process is
frustrated.
xxx xxx xxx
24. The object of the IBC is to ensure that insolvency
resolution of corporate persons and individuals is undertaken in
a time bound manner for maximization of value of assets of
such persons, to promote entrepreneurship, availability of credit
and balance the interest of all stake holders. The IBC
emphasizes upon an effective legal framework for the timely
resolution of insolvency and bankruptcy, so that an opportunity
is made available for revival of the debtor to support
development of credit markets and to encourage
entrepreneurship, with liquidation being the last resort. The
whole purpose of enactment of IBC is for improving the ease of
doing business, facilitating more investments, leading to higher
economic growth and development in the country.
25. We find that the manner in which the defaulting
borrowers and guarantors have been taking recourse to the
provisions of the IBC, particularly Sections 94, 95 and 96
thereof, shows that such strategies are frustrating the very
object of the IBC, apart from paralyzing the whole process of
lawful steps taken by secured creditors in respect of secured
assets under the provisions of the Securitisation Act. As noted
hereinabove, chronic defaulters of loan and financial facilities,
when facing the heat of proceedings initiated by secured
creditors reaching culmination, scamper to file proceedings
under Sections 94 and 95 of the IBC in a collusive manner, so
as to claim that the moment such proceedings are initiated,
moratorium is triggered under Section 96 thereof, as a result of
which further lawful proceedings are stayed. The filing of such
proceedings under the IBC is only with the object of frustrating
the legal process and it has nothing to do with the object with
which the IBC was enacted.”
45. Thus, judicial notice was taken of the manner in which
applications under Sections 94 and/or 95 of the IBC were being filed,
not with the intention and purpose for which Chapter III Part III of the
IBC, was enacted, but with the sole intention of somehow seeking
benefit of interim moratorium triggered under Section 96 of the IBC.
The ‘mischief’ was noticed by the legislature as well as the judiciary. On
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the judicial side, within the limits of exercise of power and
interpretation, judgements and orders were passed, to mitigate the
mischievous nature of such proceedings. But beyond a point, the
solution lay at the door of the legislature. In the backdrop of such
mischief being perpetrated, which operated against the very object of
enactment of IBC, the legislature finally stepped in and brought about
the aforesaid amendment, by adding sub-section 4 to Section 96 of the
IBC with effect from 26.05.2026. In this backdrop, the Mischief Rule or
Heydon’s Rule of interpretation of statutes, assumes great significance.
46. In the case of Bengal Immunity Company Limited vs. State of
Bihar & Ors. (supra), the Heydon case was cited with approval. The
relevant portion of the said judgement reads as follows:
“20. In Bengal Immunity Co. Ltd. v. State of Bihar,
Heydon case was cited with approval. Their Lordships
have said: (SCR pp. 632-33)
“It is a sound rule of construction of a statute
firmly established in England as far back as 1584
when Heydon case was decided that—
‘… for the sure and true interpretation of all
statutes in general (be they penal or
beneficial, restrictive or enlarging of the
common law) four things are to be discerned
and considered—
1st. What was the common law before the
making of the Act.
2nd. What was the mischief and defect for
which the common law did not provide.
3rd. What remedy Parliament hath resolved
and appointed to cure the disease of the
Commonwealth, and
4th. The true reason of the remedy; and then
the office of all the judges is always to make
such construction as shall suppress the
mischief, and advance the remedy, and to
suppress subtle inventions and evasions for
continuance of the mischief, and pro privato
commodo, and to add force and life to the
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cure and remedy, according to the true intent
of the makers of the Act, pro bono publico.’ ”
47. It is crucial that the resolve of the legislature for remedying the
mischief is given its full effect, so that the mischief is suppressed and the
remedy is advanced. The Courts must interpret such amendments to add
life and force to the cure and remedy, rather than adopting an
interpretation that fails to take forward the cure and remedy in its true
spirit. The said Mischief Rule/Heydon’s Rule has been applied
consistently in our legal system and hence, it is an accepted Rule of
interpretation. We find that the said Rule applies in the facts of the
present case, to advance the proposition that sub-section 4 to Section 96
of the IBC introduced by way of amendment, must apply retroactively to
pending proceedings also. This would advance the cure and remedy of
addressing the mischief and it would not be appropriate to apply the
same only prospectively, in the context of applications filed on or after
26.05.2026.
48. In this context, an attempt was made on behalf of the parties in
these cases, advancing the proposition that the amendment ought to be
applied prospectively, to claim that the applications filed bona fide,
under Sections 94 or 95 of the IBC for insolvency resolution of personal
guarantors to a corporate debtor, should not be adversely affected and
painted in the same brush as mischievously initiated applications. We are
of the opinion that when the legislature has acted, specifically taking
note of the rampant mischief and misuse of the said provisions and
larger and considerable public interest is involved in bringing about the
said amendment, it ought to be applied in such a manner that it takes
forward the dominant intention and purpose of the amendment.
49. The parties whose proceedings are still pending, cannot claim that
the amendment should not apply and in the process, call upon the Courts
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to go into the question as to whether such applications for insolvency
process of personal guarantors to secured creditors, have been filed
mischievously or not. As noted hereinabove, in the context of the
procedural nature of the mechanism between Sections 94 to 99 of the
IBC, such parties cannot claim a vested’right to such interim moratorium
under Section 96 of the IBC.
50. It is relevant to note here that the Supreme Court, in the cases of
Ellora Paper Mills Limited Vs. State of M.P. (supra); TRF Limited
Vs. Energo Engg. Projects Limited (supra) and Perkins Eastman
Architects DPC Vs. HSCC (India) Limited (supra), repeatedly held
that the amended Section 12(5) of the Arbitration Act, concerning the
eligibility of the arbitrators, applied to pending proceedings also. This
concerned the question of unilateral appointment of arbitrators/arbitral
tribunal by a party, that vitiated the arbitration proceedings itself.
51. As a matter of fact, the proceedings wherein arbitral awards were
already rendered, were also found amenable to the effect of the
amendment and such awards, were also set aside under Section 34 of the
Arbitration Act, on the ground that the arbitrator/arbitral tribunal was
unilaterally appointed by one of the parties. In other words, not only was
the amendment made applicable to situations where the arbitral
proceedings were pending, but also where the arbitral awards had been
passed. This was obviously to remedy or cure the mischief of unilateral
appointment of arbitrator/arbitral tribunal, which gave rise to serious
concerns of bias and lack of objectivity. The said approach is required to
be adopted in the facts and circumstances of the present cases also.
52. In the case of Shanti Conductors Private Limited Vs. Assam
Electricity Board (supra), it was held that the subject provisions would
apply to supplies made by suppliers after the provisions came into effect,
although the supplies were pursuant to agreements executed prior to the
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provisions being brought into force. The Supreme Court applied the
concept of retroactive operation in the said case also.
53. At this stage, it would be appropriate to deal with the contention
that the aforesaid amendment ought to be applied prospectively from
26.05.2026. It was claimed on behalf of the respondents that a bare
reading of sub-section 4 to Section 95 of the IBC, added by way of
amendment, shows that the words used therein on a literal interpretation,
indicate that it must apply prospectively. It was claimed that the words
‘is filed’ used in the said provision being in simple present tense,
demonstrate that it cannot operate retrospectively.
54. We find that the contentions raised by the creditors/petitioners in
these petitions, concern retroactive operation of amendment and hence,
the said contention that literal reading would show that the amendment
cannot apply retrospectively, is without any substance. The said
submission made on the basis that use of the words ‘is filed’ must
necessarily mean that the amendment can only apply prospectively, is
found to be without any substance. There is nothing to indicate that use
of the words in sub-section 4 of Section 96 of the IBC, would
necessarily mean that it would apply to the applications to be filed in
future. If that was the case, the legislature would have used words such
as ‘to be filed’ or other such similar phrases. In our opinion, a proper and
even literal reading of the said provision added by way of amendment, in
the backdrop in which it has been inserted, clearly demonstrates that the
words ‘is filed’ necessarily include applications / proceedings under
Sections 94 or 95 of the IBC, that were pending on the date on which the
amendment was brought into effect. Hence, we do not find any
substance in reliance placed on behalf of the respondents on the
judgment in the case of B. Premanand Vs. Mohan Koikal (supra).
55. It was also sought to be canvassed that the cases in which the
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Supreme Court had applied amendments retroactively were beneficial
amendments and since the amendment in the present case was taking
away the benefit of interim moratorium, the ratio of the said judgments
should not be applied. We are unable to accept the said contention, for
the reason that where the Supreme Court found the amendment to be
procedural in nature and not affecting a ‘vested right’, it was applied
retroactively, even to pending proceedings. In the light of the discussion
hereinabove and considering the approach adopted by the Supreme
Court in cases such as BCCI Vs. Kochi Cricket Private Limited and
others (supra), the said contention is rejected.
56. An elaborate exercise was carried out on behalf of some of the
respondents in these petitions by referring to various provisions of the
IBC introduced by way of amendment, to contend that comparing the
language of the provision introduced by way of amendment in these
cases i.e. sub-section (4) of Section 96 of the IBC with the provisions
referred in the arguments, the subject amendment could only be read
prospectively. In that context, four categories of such provisions of the
IBC were identified and it was claimed that since the amendment, which
is subject matter of consideration in these cases, does not fit in any of the
four categories, it must be read as operating prospectively.
57. We have considered the said four categories of provisions
introduced by way of amendment in the IBC, but we do not find any
substance in the said contention. We are unable to accept the theory of
the said respondents that since the subject amendment is neither
clarificatory nor declaratory, or because there is no proviso or
explanation in the provision itself to show that it operates retrospectively
or because an explanation is not appended to make it operate
retrospectively or because the amendment does not notify an anterior
date of its coming into effect, the subject amendment must be applied
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prospectively. We are unable to accept the said contention for the reason
that a plain reading of sub-section (4) added by way of amendment to
Section 96 of the IBC shows that it must apply retroactively. The said
elaborate exercise of categorization of provisions and comparing them
with the Section 96(4) of the IBC is based on a misconception that the
said provision is being applied retrospectively. We are of the opinion that
there is a fundamental difference between the concepts of retrospectivity
on the one hand and retroactivity on the other. Since we have come to
the conclusion that the subject amendment in these cases pertaining to
Section 96(4) of the IBC applies retroactively, the said contention raised
on behalf of the respondents deserves to be rejected. Accordingly, it is
rejected.
58. We also do not find much substance in the contentions raised on
behalf of some of the respondents in these petitions by placing reliance
on the judgment of the Supreme Court in the case of Manish Kumar vs.
Union of India & Anr. (supra). The portions of the judgment referring
to vested rights and immunities cannot inure to the benefit of the said
respondents, in the light of the discussion hereinabove, about the
transitory and procedural realm between Sections 94 and 99 of the IBC,
within which the interim moratorium operates. There is no question of
any vested right accrued in the said respondents, justifying reliance on
the said judgment. We also do not find much substance in the argument
of some of the respondents that interim moratorium is a vested right as
the beneficiaries had arranged and planned their affairs accordingly. This
is because the 'beneficiaries' of such interim moratorium, due to the
mischievous filing of applications under Sections 95 or 96 of IBC were
the debtors. This argument further indicates that such applications were
deliberately 'planned' and 'orchestrated', thereby showing that no 'vested
right' could accrue. In any case, in the said judgment, the Supreme Court
has acknowledged the fact that public interest cannot be ignored and that
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in respect of economic statutes wider latitude is always available to the
lawgiver.
59. We are also unable to accept the contention raised on behalf of
some of the respondents by placing reliance on Section 179(3) of the
IBC, to contend that the creditors would suffer as the facility of
exclusion of the period of moratorium for the purposes of limitation
would not be available to them. A perusal of the aforesaid provision
shows that it starts with a non obstante clause and lays down that while
computing the period of limitation specified for any suit or application,
the period during which the moratorium was in place, shall be excluded,
but the most crucial part of the said provision is that it applies to such
suit or application filed in the name and on behalf of the debtor and not
the creditor. Therefore, there is no substance in the said contention raised
on behalf of the respondents.
60. At this stage, it would be relevant to note that Section 96(1)(b)(ii)
of the IBC provides that the creditors of the debtor shall not initiate any
legal action or proceeding in respect of any debt. Initiation of legal
action or proceeding in respect of any debt does not mean that the
creditor cannot even file a proceeding. The effect of the said provision
would be that any such proceeding would remain inchoate and
ineffective. We find that Section 96(1)(b)(ii) of the IBC cannot be read
to oust the jurisdiction of a Court or tribunal which would otherwise
have jurisdiction. It only prevents a proceeding filed to have any effect
during the interim moratorium and obviously such a proceeding if filed
cannot be labeled as void ab initio.
61. In the light of the discussion hereinabove, in the context of the
principle of retroactive operation of the amendment, we do not find any
substance in reliance placed on behalf of the respondents on judgments
in the cases of Vijaya Kumari Vs. Union of India (supra), Ambootia
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Tea Exports Pvt. Ltd. and others Vs. Sri Rani Sati Abasan Pvt. Ltd.
(supra), Commissioner of Income Tax (Central)-I, New Delhi vs.
Vatika Township Private Limited (supra), State of Maharashtra &
Ors. vs. Prism Cement Limited & Anr., (2025) 4 SCC 300, Keshavan
Madhava Menon vs. State of Bombay (supra), Govind Das & Ors.
vs. Income Tax Officer & Anr. (supra), State of Punjab & Ors. vs.
Bhajan Kaur & Ors. (supra), State of Punjab vs. Mohar Singh, (1954)
2 SCC 483, Shyam Sunder & Ors. vs. Ram Kumar & Anr. (supra),
Garikapatti Veeraya Vs. N. Subbiah Choudhury (supra) and Sree
Sankaracharya University of Sanskrit & Ors. vs. Dr. Manu & Anr.,
(2023) 19 SCC 30. We find that all these judgments discuss and lay
down principles in the context of retrospectivity, which are not
applicable to the present cases, where we are concerned with retroactive
operation of the subject amendment. In any case, in all these judgments,
it is laid down that the Court must consider the language of the subject
provision and the circumstances in which it was brought about by way
of amendment to reach a finding as to whether it should apply
prospectively or retrospectively or in a given case, retroactively. We
have applied our mind to the subject provision and we have come to the
considered conclusion that the said provision added by way of
amendment must operate retroactively and hence, not only to
applications/proceedings initiated on and from 26.05.2026, but also to
pending proceedings.
62. The whole purpose of introducing the amendment to address the
mischief noted hereinabove must be satisfied in the fullest by applying
the same to the pending proceedings also, in larger public interest. This
is quite apart from the fact that the respondents do not have a ‘vested
right’ under Section 96 of the IBC during the procedural realm between
Sections 94 to 99 thereof, and they cannot claim that the amendment
should apply only prospectively.
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63. We also do not agree with the respondents that their contentions
can be accepted by placing reliance on Section 6 of the General Clauses
Act. The present case does not concern repeal of an existing provision.
As noted hereinabove, the amendment adding sub-section (4) to Section
96 of the IBC is with the stated purpose of addressing the mischief of
rampant misuse of the said interim moratorium and therefore, the said
contention raised on behalf of the respondents also deserves to be
rejected.
CONCLUSION & ANSWER TO THE QUESTION
64. In view of the above, we answer the question framed at the outset
in this judgment by holding that sub-section (4) of Section 96 of the IBC
added by way of amendment with effect from 26.05.2026, applies
retroactively and hence, even to pending proceedings. Although it
operates from the said date in futuro, its effect is equally on proceedings
pending on the said date under Sections 94 and/or 95 of the IBC.
65. In the light of the conclusion rendered hereinabove, we are in
agreement with the findings rendered by the learned Single Judge of this
Court in the judgment in the case of Tata Capital Financial Services
Limited Vs. Neel Motors LLP and others (supra) and order of the
learned Single Judge of Delhi High Court in the case of IDBI
Trusteeship Services Limited vs. Manish Jain & Ors. (supra).
PART-II
CONSIDERATION & DISPOSAL OF WRIT PETITIONS
66. Since the aforesaid question arose in all these petitions, its effect
shall be applied to the said petitions, apart from dealing with the
individual factual matrix thereof. In that light, the writ petitions are now
taken up for consideration.
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WRIT PETITION NO. 7805 OF 2026 (A.S.)
(Assets Reconstruction Co. India Limited & Ors. vs.
Veer Gurjar Aluminum Industries Private Limited & Ors.)
67. By this petition, the petitioners (creditors) have prayed for a
clarification that filing of a petition against respondent No.2, one of the
Directors of the respondent No.1-borrower company, by one Yuvraj
Mate, under Section 95 of the IBC, does not operate as a stay to hearing
of regular appeals filed by the petitioners against the respondents before
the Debts Recovery Appellate Tribunal (DRAT), Mumbai. The
petitioners have also prayed for extension of time to conclude arguments
in the light of timeline fixed by this Court in an order dated 30.03.2026
passed in earlier writ petitions filed by these petitioners for disposal of
the appeals on or before 31.05.2026.
68. We find that the DRAT passed a common order in a pending
Appeal on 04.06.2026, referring to the said petition filed under Section
95 of the IBC before the NCLT, noting that interim moratorium had
taken effect. On that basis, it was recorded in the said order that the
appeals could not be proceeded with.
69. We find that the petition under Section 95 of the IBC was filed
against the respondent No.2 by a person claiming to be his creditor
before the NCLT on 25.05.2026, one day prior to the aforesaid
amendment taking effect from 26.05.2026. We find the said action to be
orchestrated and mischievous only to somehow take benefit of the
interim moratorium that would be triggered under Section 96 of the IBC.
The facts of the present case further fortify our view that unless the
operation of the said amendment is held to be retroactive, such
mischievous acts of borrowers in connivance with other individuals
would continue to fester, despite the said amendment brought about by
the legislature to cure such mischief.
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70. In the light of the answer to the question framed at the outset in
this petition, we hold that interim moratorium is not operating in the
present case by operation of Section 96(4) of the IBC and therefore, the
reliefs claimed in the petition can be granted. Accordingly, the writ
petition is allowed, by holding that the filing and pendency of the
petition under Section 95 of the IBC before the NCLT against
respondent No.2 by the aforementioned individuals, does not operate as
a stay on hearing on the appeals by the DRAT. Notwithstanding, the
filing of the said petition, by operation of Section 96(4) of the IBC, the
interim moratorium shall not effect the hearing of Regular Appeal
Nos.74 of 2024 and 75 of 2024 pending before the DRAT and the
Recovery Proceedings No.207 of 2024 pending before the Debts
Recovery Tribunal, Aurangabad. The DRAT, Mumbai is directed to hear
and dispose of the said appeals expeditiously and in any case, on or
before 31.10.2026. The Debts Recovery Tribunal, Aurangabad shall also
proceed further, in accordance with law.
71. Pending applications, if any, in the said writ petition, are disposed
of.
WRIT PETITION NO.2819 OF 2026 (O.S.)
(Indian Bank Vs. Shabbir Abbas Patel)
72. The petitioner bank (secured creditor) has challenged orders dated
03.10.2024 and 13.03.2026 passed by the Debts Recovery Tribunal-I,
Mumbai, whereby the petitioner bank was restrained from going ahead
with auction proceeding and the said order was subsequently continued.
A further declaration is sought regarding discontinuation of interim
moratorium under Section 96 of the IBC in the light of an order dated
18.02.2026 passed by NCLT, Mumbai, whereby the company petition
filed under Section 95 of the IBC was dismissed. The petitioner has
sought further ancillary directions for declaration that the actions of the
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petitioner bank in confirming sale in terms of auction conducted on
30.09.2024 and issuance of sale certificate and registration thereof in
favour of the auction purchaser are legal and binding. The petitioner
bank has also sought a consequential relief of directing respondent Nos.1
to 3 (borrowers / occupants of the secured asset) to handover vacant
physical possession to the petitioner bank and / or the auction purchaser.
73. At the root of the challenge to the impugned orders, is the
observation of DRT-I in the order dated 03.10.2024 restraining the
petitioner bank from proceeding further with regard to the auction
proceeding on the basis that an interim moratorium was operating under
Section 96 of the IBC. The subsequent impugned order dated 13.03.2026
simply continued the earlier direction restraining the bank. In the light of
the order dated 18.02.2026 passed by the NCLT dismissing the company
petition under Section 95 of the IBC, we find substance in the contention
of the petitioner bank that the subsequent impugned order dated
13.03.2026, continuing the restraining order dated 03.10.2024, was
unjustified. We are of the opinion that with the dismissal of the company
petition, there was no question of continuation of the interim
moratorium.
74. But, in the reply affidavit, the contesting respondent Nos.1 to 3
relied upon a subsequent fresh insolvency petition filed under Section 95
of the IBC against respondent No.1 before the NCLT. It was stated that
the same was filed on 19.02.2026 and it stood registered on 06.05.2026.
On this basis, it was contended that in terms of the law laid down by this
Court in the case of Bank of Baroda Vs. Union of India and another
(supra), from the date of registration of the said subsequent petition i.e.
06.05.2026, the interim moratorium operated and this fact should have
been brought to the notice of this Court by the petitioner.
75. We are of the opinion that in the light of the findings rendered
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hereinabove on the question of law, the interim moratorium triggered by
registration of the subsequent insolvency petition under Section 95 of
the IBC filed against respondent No.1, also ceased to operate with effect
from 26.05.2026. Therefore, the said respondents cannot claim that the
petitioner bank does not deserve reliefs as claimed in the petition.
76. We are of the opinion that the present case, on facts, further
highlights the abuse of law and the very mischief specifically addressed
by the said amendment by way of addition of sub-section (4) to Section
96 of the IBC. It is precisely to deal with and cure such mischief that the
amendment was introduced with effect from 26.05.2026. In such a
situation, to hold that the interim moratorium would continue to operate
on the subsequent petition filed under Section 95 of the IBC against
respondent No.1 on 19.02.2026, which stood registered on 06.05.2026,
would be in the teeth of the position of law clarified hereinabove and it
would be a travesty of justice to allow the said respondents to repeatedly
indulge in such mischief, which definitely needs to be cured by
application of the amendment.
77. In view of the above, Writ Petition No.2819 of 2026 is allowed in
the following terms:-
(A) Impugned orders dated 03.10.2024 and 13.03.2026 are
quashed and set aside. Hence, the restraining order issued
by DRT-I shall cease to operate.
(B) It is held that in the light of order dated 18.02.2026 passed
by the NCLT dismissing the company petition filed earlier,
interim moratorium had ceased to operate and DRT-I ought
not to have continued the restraining order in the
subsequent order dated 13.03.2026.
(C) In any case, in the light of the position of law clarified
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hereinabove, as to the effect of the amendment, adding sub-
section (4) to Section 96 of the IBC, interim moratorium
triggered by filing of subsequent petition under Section 95
thereof before the NCLT, registered on 06.05.2026, ceased
to operate with effect from 26.05.2026 i.e. the date of the
said amendment coming into effect.
(D) Consequently, the action of the petitioner bank in
confirming sale in favour of the auction purchaser as per
auction conducted on 30.09.2024, issuance of sale
certificate dated 25.02.2026, registered on 27.02.2026,
were steps validly taken as no interim moratorium could be
said to be operating in the facts and circumstances of the
present case from 26.05.2026.
(E) As a result, the Court Commissioner appointed by the order
dated 04.01.2025 of the Additional Chief Judicial
Magistrate, 19th Court, Esplanade, Mumbai is at liberty to
issue notice in accordance with law for taking possession of
the secured asset. Upon the Court Commissioner
approaching the concerned police station within whose
jurisdiction the secured asset is located, appropriate police
protection and assistance shall be provided, including
providing lady constables for taking physical possession of
the secured asset(s). The police authorities shall extend all
co-operation so that the said order of the Magistrate is
executed and the petitioner bank is put in physical
possession of the secured asset for handing it over to the
auction purchaser;
(F) Securitisation Application No.115 of 2024 shall be decided
by DRT-I, Mumbai expeditiously in accordance with law.
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WRIT PETITION NO.3374 OF 2026 (A.S.)
(Godrej Finance Limited Vs. Ashok Rajkumar Gupta & Ors.)
78. By this petition, the petitioner (secured creditor) has challenged
order dated 09.03.2026 passed by the Debts Recovery Tribunal, Pune
(DRT), whereby an application seeking restoration of possession of the
mortgaged property was allowed and the petitioner was directed to
restore possession of the subject flat to the respondents.
79. This Court by an order dated 13.03.2026, after hearing the learned
counsel for the parties, while issuing notice in the writ petition, granted
interim stay of the impugned order dated 09.03.2026. The respondents
filed Special Leave Petition (Civil) No. 21313 of 2026 before the
Supreme Court to challenge the said interim order passed in the writ
petition. On 18.06.2026, the Supreme Court issued notice in the Special
Leave Petition and granted stay of the order of this Court, indicating that
the order of the DRT, directing restoration of possession would stand
revived.
80. Subsequently, the petitioner (secured creditor), who was the
respondent in the Special Leave Petition, appeared before the Supreme
Court and filed an application for vacation of the interim order passed by
the Supreme Court. After hearing the parties, the Supreme Court was
pleased to confirm the interim order dated 18.06.2026 passed in the
Special Leave Petition. It was directed that the same would operate till
the disposal of the present writ petition. The petitioner herein was
directed to handover possession of the subject property to the
respondents herein, on or before 22.07.2026. After noting that the writ
petition was listed for hearing before this Court on 31.07.2026, the
Supreme Court requested this Court to make an endeavour to dispose of
the said writ petition itself on the said date or on such other earlier date,
as this Court may deem fit. Accordingly, the Special Leave Petition was
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disposed of.
81. Thereafter, when the present writ petition came up for
consideration on 21.07.2026, having noted the directions issued by the
Supreme Court, this Court directed that possession of the subject
property should be handed over to the respondents, subject to the result
of the writ petition. Thereupon, the writ petition was directed to be listed
on 27.07.2026 for final disposal.
82. After hearing the parties on 27.07.2026, it came to light that one
of the issues arising for consideration was the effect of the aforesaid
amendment, whereby sub-section (4) was added to Section 96 of the
IBC and as to whether it would apply to proceedings initiated by the
respondents before the DRT. Taking note of the fact that the other
petitions in this bunch were being taken up for consideration on the said
issue, this petition was tagged along with the bunch of petitions to be
heard and decided. Accordingly, the learned counsel for the parties
appearing in this petition were heard on the aforesaid issue, as well as
the other issues arising in the present writ petition.
83. In view of the discussion hereinabove and the finding rendered on
the issue with regard to the retroactive applicability of the aforesaid
amendment adding sub-section (4) to Section 96, it is evident that the
respondents cannot claim benefit of interim moratorium triggered by
filing of petitions under Section 95 of the IBC. We find on the basis of
the admitted position on facts that this particular case also demonstrates
the mischief in repeated petitions being filed under Section 95 of the
IBC, only with the intention to trigger the interim moratorium under
Section 96 of the IBC for paralyzing recovery proceedings initiated in
accordance with law by the petitioner (secured creditor).
84. It is to be noted that in the present case, the petitioner was
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constrained to issue notice under Section 13(2) of the Securitisation Act
to the respondents for outstanding amount of Rs.3,58,57,180/- on
account of default on their part in repayment of credit facility. On
09.01.2025, notice was issued for taking symbolic possession of the
secured asset under Section 13(4) of the Securitisation Act. On
16.05.2025, the Competent Magistrate passed an order under Section 14
of the Securitisation Act, appointing Court Commissioner for taking
physical possession of the subject property and on 07.07.2025, the Court
Commissioner issued notice for scheduling such act of taking physical
possession on 23.07.2025.
85. It is at this belated stage that the respondents for the first time
approached the DRT on 17.07.2025, by filing Securitisation Application
No. 648 of 2025 along with interim application for stay. On 23.07.2025,
the DRT passed an order, granting stay on the ground that interim
moratorium was operating under Section 96 of the IBC. It is to be noted
that the petition under Section 95 of the IBC was filed by proprietor of
German Garments against respondent No.1, who is not the owner of the
subject property and it was kept pending only to trigger and enjoy the
interim moratorium. The said petition was filed on 20.07.2025, three
days after filing of the Securitisation Application before the DRT, and
kept in defects, obviously with the intention of claiming interim stay of
physical possession by relying upon interim moratorium under Section
96 of the IBC. It is an admitted position that the registration of the said
petition was declined, on account of non-removal of defects, by the
Registry of the NCLT.
86. On 02.01.2026, the Competent Magistrate passed an order
extending the time period for obtaining physical possession of the
secured asset and on 11.02.2026, the Court Commissioner scheduled the
taking of physical possession on 05.03.2026.
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87. On 01.03.2026, the respondents filed an interim application for
amendment of the securitisation application and also an application,
seeking stay of the aforesaid notice issued by the Court Commissioner.
On the very same date i.e. on 01.03.2026, an entity called M/s. Jeanius
Clothing Company filed another petition under Section 95 of the IBC,
this time against respondent Nos.3 and 4 before the NCLT. This Court
finds the filing of the second petition by the aforesaid entity on
01.03.2026, four days prior to the date fixed for taking physical
possession, as a calculated and mischievous move orchestrated by the
respondents only with a view to claim triggering of interim moratorium
before the DRT.
88. On 05.03.2026, the interim application for stay along with
application for amendment were listed before the DRT. It is the case of
the petitioner that the possession of the secured asset i.e. the subject flat
was taken by the Court Commissioner, on the said date, before any order
could be passed in the application filed by the respondents before the
DRT for interim stay. In that light, the application for stay bearing
Interim Application No. 721 of 2026 was disposed of as not pressed. An
application seeking restoration of possession bearing Interim Application
No. 785 of 2026 was taken on record and opportunity was granted to the
petitioner to file reply affidavit.
89. It is the said application seeking restoration of possession that
stood allowed by order dated 09.03.2026. The same is assailed in the
present writ petition. The chronology of events already noted
hereinabove, demonstrates the manner in which the respondents are in
possession of the secured asset, subject to the result of the present
petition.
90. In the light of the findings rendered in this judgment on the
aforesaid question of law and issue regarding retroactive application of
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the amendment, whereby sub-section (4) was added to Section 96 of the
IBC, it is clear that the aforesaid provision applies to pending
proceedings and therefore, the respondents cannot claim benefit of
interim moratorium on the basis of the petition filed under Section 95 of
the IBC on 01.03.2026 by M/s. Jeanius Clothing Company. It is to be
noted that the said petition was eventually registered only on
30.03.2026. But, with the amendment coming into effect from
26.05.2026, the interim moratorium ceased to operate and therefore, the
very basis of interim relief sought and pressed by the respondents,
ceased to have effect. On the said aspect of the matter, the contentions
raised on behalf of the respondents are rejected.
91. But, the other aspects of the matter need consideration.
Mr.D’Souza, learned counsel for the petitioner submitted that the
impugned order was wholly without jurisdiction as restoration of
possession cannot be directed by way of interim order, during pendency
of the securitisation application before the DRT. It was submitted that
the observations of the DRT about ‘oral directions’ was without any
substance, particularly in the light of the specific recording of the fact in
the order dated 05.03.2026 that the respondents did not press the
application for stay bearing Interim Application No. 721 of 2026,
obviously because possession of the secured asset was already taken by
the petitioner. It was submitted that the contention that possession of the
secured asset was taken at 9:00 a.m. itself on 05.03.2026 is not borne out
from the record, as the panchanama recorded while taking possession
specifically records that the action of taking possession started at 11:00
a.m. and continued upto 12:15 p.m. There is nothing on record to show
that the DRT at any point in time considered the three pronged test of
strong prima facie case, balance of convenience and grave and
irreparable loss on 05.03.2026, to pass even an ad-interim direction in
the matter. Therefore, there was no basis for DRT to pass the drastic
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direction against the petitioner for restoration of possession of the
secured asset.
92. Even in the order dated 09.03.2026, there was no discussion on
the question as to whether the respondents had made out any prima facie
case in their favour. Considering the mischievous nature of repeated
petitions being orchestrated and filed under Section 95 of the IBC to
claim interim moratorium under Section 96 thereof, there was no basis
for considering any interim relief on 05.03.2026 and in any case, there
was no basis for passing the impugned order for restoration of
possession. In that light, it was submitted that the writ petition deserved
to be allowed.
93. On the other hand, Mr. Agarwal, learned counsel appearing for the
respondents, apart from adopting the contentions raised by the learned
counsel for the parties, claiming that the aforesaid amendment applies
only prospectively, made submissions on the facts of the present case.
He emphasized that in the light of the sequence of events recorded by
the DRT in the order dated 09.03.2026, it was obvious that the petitioner
had taken physical possession of the secured asset, despite ‘oral
directions’ of the DRT being communicated to the Court Commissioner.
It was submitted that this was a good ground for restoration of
possession. It was submitted that since facts recorded in the proceedings
by the tribunal, are to be treated as conclusive of facts, as per judgment
and order passed by the Supreme Court in the case of State of
Maharashtra vs. Ramdas Shrinivas Nayak & Anr., (1982) 2 SCC 463, no
doubt can be raised regarding the same. It was further submitted that as
per judgment of the Supreme Court in the case of Jang Singh vs. Brij Lal
& Ors., 1963 SCC OnLine SC 219, no act of a Court can prejudice a
party, and hence the impugned order does not deserve interference. It
was submitted that this Court ought to take into consideration the aspect
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of equitable considerations and accordingly, the writ petition may be
dismissed.
94. On the manner in which the impugned order has been passed, this
Court has carefully perused the same. The impugned order dated
09.03.2026 has to be considered in the light of the proceeding recorded
by the DRT on 05.03.2026. This is crucial for the present petition. A
perusal of the order/proceeding recorded on 05.03.2026 by the DRT
shows that the application for stay bearing Interim Application No. 721
of 2026 was disposed of as not pressed. Nothing in the said proceeding
indicates that any submissions were made on behalf of the respondents
about alleged highhandedness on the part of the petitioner, while taking
physical possession of the secured asset, as per notice issued by the
Court Commissioner in terms of the order passed by the Competent
Magistrate under Section 14 of the Securitisation Act.
95. It was only in the application filed by the respondents bearing
Interim Application No. 785 of 2026, seeking restoration of possession
that allegations were made about ‘oral directions’ of the DRT being
flouted. The petitioner filed reply to the said application, resisting the
relief claimed therein, emphasizing that restoration of the possession
cannot be directed at the interim stage by the DRT.
96. A perusal of the impugned order shows that the DRT observed
that intimation was given to the Court Commissioner about ‘oral
directions’, but possession was taken and that such an act was not
‘appreciable to the law’ when the application was being heard. The DRT
specifically recorded that though at interim stage possession of the
mortgaged property taken by the secured creditor cannot be restored, but
it went ahead to pass the order for restoration of the possession to the
respondents.
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97. We are of the opinion that ‘oral directions’ are not contemplated
in proceedings before any Court or tribunal and if the tribunal is of the
opinion that an ad-interim order or direction is warranted, it must
immediately record at least some reasons in a written order, as regards
prima facie case, balance of convenience and grave and irreparable loss.
There is nothing recorded in the order/proceeding dated 05.03.2026 that
physical possession was scheduled and actually taken by the petitioner
(secured asset) on the basis of an order passed by the Competent
Magistrate under Section 14 of the Securitisation Act, or that for specific
reasons an ad-interim direction was warranted and granted. It is not even
recorded in the said order/proceeding that some ‘oral directions’ were
issued to restrain the petitioner from proceeding to take physical
possession. The said order/proceeding dated 05.03.2026 simply records
that the application for stay of the respondents bearing Interim
Application No. 721 of 2026 was disposed of as not pressed. We are of
the opinion that there is no contemporaneous record as on 05.03.2026
about any ad-interim order restraining the petitioner from taking
physical possession, as per schedule. We are of the opinion that ‘oral
directions’ cannot be issued in such a manner by the DRT and having
noted that restoration of possession of the mortgaged property at interim
stage cannot be granted, the DRT ought not to have passed the impugned
order, directing restoration of the possession to the respondents.
98. We also find substance in the contention of the petitioner that the
recording of events is in the teeth of the documents, in as much as, the
panchanama recorded that the act of taking physical possession
commenced at 11:00 a.m. and continued till 12:15 p.m. Therefore, the
DRT jumping to the conclusion that possession was initiated at 9:00 a.m.
and that ‘oral directions’ were flouted does not appear to be sustainable.
It is to be noted that at no stage either on 05.03.2026 or even at the stage
of passing of the impugned order dated 09.03.2026 did the DRT render
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any finding at all about the respondents having made out even a prima
facie case in their favour for either protecting the possession or seeking
restoration of the possession of the secured asset. The admitted
chronology of events shows that the respondents chose to file the
securitisation application after the proceedings under the Securitisation
Act had reached the stage of execution of the order passed by the
Competent Magistrate under Section 14 of the Securitisation Act. The
initial stay was obtained on the basis of merely orchestrating filing of a
mischievous petition under Section 95 of the IBC, only to obtain the
protection of interim moratorium under Section 96 thereof. The petition
was not even pursued by the entity, which filed it, and registration of the
same was declined by the NCLT.
99. Thereafter, merely four days prior to the possession of the secured
asset being taken on 05.03.2026, the aforesaid second mischievous
petition was orchestrated under Section 95 of the IBC to claim interim
moratorium, thereby indicating the conduct of the respondents and lack
of any submission on the merits of the matter. We are unable to agree
with the respondents that the impugned order of the DRT cannot be
interfered with, as facts recorded in the said order must be accepted as
gospel truth. We are also of the opinion that this is not a case where the
act of the tribunal has caused any prejudice to the respondents. As a
matter of fact, we find that the respondents have not made an attempt at
any stage to demonstrate as to why interim protection could be granted
in their favour, apart from the fact that no submission is made on the
aspect of making good the defaults. Therefore, reliance placed on
judgment of the Supreme Court in the case of State of Maharashtra vs.
Ramdas Shrinivas Nayak & Anr. (supra) and Jang Singh vs. Brij Lal
& Ors. (supra), is misplaced.
100. Reliance placed on judgment of the Supreme Court in the case of
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M. S. Sanjay vs. Indian Bank & Ors. (judgment and order dated
29.01.2025 passed in Civil Appeal No. 1188 of 2025) on the ground of
equitable consideration, is also misplaced. If equitable considerations are
to be taken into account, we find that the respondents have indulged in
all acts possible to deprive the logical consequences of steps taken by
the petitioner under the Securitisation Act. The mischief of orchestrating
successive petitions under Section 95 of the IBC is obvious, as noted
hereinabove, only to trigger interim moratorium, which no longer
survives w.e.f. 26.05.2026. Such parties like the respondents cannot be
heard to raise the ground of equitable considerations for any relief from
this Court exercising writ jurisdiction.
101. As regards the objection regarding maintainability of the writ
petition and availability of alternative remedy for the petitioner to
approach the DRAT, suffice it to say that when an order is passed by a
Court or tribunal in the teeth of settled position of law, the order can be
said to be without jurisdiction (East India Commercial Company
Limited, Calcutta & Anr. vs. Collector of Customs, Calcutta, AIR 1962
SC 1893).
102. In view of the above, we find that the writ petition deserves to be
allowed and the impugned order deserves to be set aside. Accordingly,
the writ petition is allowed. The impugned order is set aside and the
respondents are directed to handover possession of the subject property
to the petitioner (secured creditor) within four weeks from today.
WRIT PETITION NO.7587 OF 2026 (A.S.)
(Apna Sahakari Bank Ltd. & anr. Vs. M/s. Image Industries Pvt. Ltd. & ors.)
WRIT PETITION NO.7598 OF 2026 (A.S.)
(Apna Sahakari Bank Ltd. & anr. Vs. M/s. Warna Industries Limited & ors.)
WRIT PETITION NO.7600 OF 2026 (A.S.)
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(Apna Sahakari Bank Ltd. & anr. Vs. M/s. Gandharv Farms & Resorts Pvt. Ltd. & ors.)
103. The petitioner in these three writ petitions is a bank, which is a
secured creditor and the petitions have been filed impugning identical
orders passed by the Debts Recovery Tribunal, Pune (DRT) in interim
applications filed by the contesting respondents (borrowers /
guarantors), preventing the petitioner bank from accepting balance 75%
amount from the auction purchaser and further restraining it from
issuing sale certificate.
104. According to the petitioner bank, such unreasoned orders having
the drastic effect of stalling the logical consequences of action taken by
the petitioner bank under the provisions of the Securitisation Act and
that too, without hearing the auction purchaser, which is a vital party,
demonstrates that the writ petitions filed directly challenging the
impugned orders deserve to be entertained and allowed. It was
submitted on behalf of the petitioner bank that even if ad-interim orders
were to be passed by the DRT, the three pronged test of strong prima
facie case, grave and irreparable loss and balance of convenience ought
to have been applied, reaching findings in favour of the contesting
respondents before issuing the said restraining directions.
105. Apart from this, it was submitted that the amendment introducing
sub-section (4) in Section 96 of the IBC applies to the pending
proceedings, and therefore, the interim moratorium as claimed by the
contesting respondents cannot apply. On this basis, it was submitted that
the impugned orders deserve to be set aside. It was emphasized that the
filing of the petition by the Punjab National Bank (PNB) under Section
95 of the IBC on 01.10.2022 against the mortgagors / guarantors of the
credit facilities was suppressed by the contesting respondents throughout
the proceedings and advantage of the same is now sought to be taken at
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the fag end of the proceedings when the auction purchasers have also
come into the picture. On this basis, it was claimed that interim reliefs
could not be claimed on the basis of the interim moratorium triggered by
filing of the said petition, while keeping the said fact suppressed, only to
be used as a protective shield at the end of the proceedings. It was
emphasized that the securitisation applications were filed belatedly and
with the amendment coming into force, the ground of interim
moratorium cannot inure to the benefit of the contesting respondents.
106. On the other hand, the learned counsel appearing for the
contesting respondents submitted that this cannot be said to be a case of
mischief on the part of the contesting respondents as the petition under
Section 95 of the IBC was filed as far back as on 01.10.2022 by PNB.
There was no question of any connivance between the said bank and the
contesting respondents to mischievously seek triggering of interim
moratorium. The contentions with regard to the effect of the amendment
raised on behalf of the said respondents have been already recorded
hereinabove. It was further submitted that although the impugned orders
are brief, the intention behind the said orders is to prevent further
complications setting in before any decision is taken on the pending
interim applications. On this basis, it was submitted that the writ
petitions deserve to be dismissed.
107. As regards the effect of the amendment, findings have been
already rendered hereinabove against the contesting respondents. We
have already held that sub-section (4) introduced in Section 96 of the
IBC applies to pending proceedings, and therefore, the interim
moratorium triggered by filing of the petition under Section 95 of the
IBC ceased to exist from 26.05.2026 onwards. Accordingly, the
contesting respondents cannot claim any interim reliefs and / or
protection on the basis of such interim moratorium, which has ceased to
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operate.
108. The said respondents in these petitions have submitted that there
is no indication of any mischief or connivance between the bank that
filed the petition under Section 95 of the IBC and the contesting
respondents herein. But, in the light of our finding rendered hereinabove
that the amendment applies across the board as larger public interest
cannot be ignored, particularly in the light of the opinion of stakeholders
in such proceedings recorded in the aforesaid report of the Select
Committee that triggering of interim moratorium under Section 96 had
become the number one mechanism to siphon of crores of rupees by
debtors, we are inclined to hold against the contesting respondents on
the said aspect.
109. Even otherwise, we find substance in the contention raised on
behalf of the petitioner bank (secured creditor) that the contesting
respondents in these petitions deliberately suppressed the fact of filing of
the petition under Section 95 of the IBC by the Punjab National Bank on
01.10.2022 and sought to rely upon the said fact only when interim
applications were filed before the DRT. In the earlier securitisation
applications filed by the contesting respondents herein, in the years 2023
and 2025, there was no whisper about such alleged interim moratorium
operating from October 2022.
110. It is correctly pointed out by the petitioner bank that when
attempts at auction sale were made earlier, which had failed and even
when physical possession of the secured asset was taken by the
petitioner bank, at no stage did the contesting respondents reveal the fact
about filing of the petition under Section 95 of the IBC by the PNB.
Even when One Time Settlement (OTS) proposals were made by the
contesting respondents - borrowers, such interim moratorium was
suppressed and only in the interim applications filed in the year 2026,
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for the first time did the contesting respondents reveal the filing of such
a petition to claim the benefit of interim moratorium. This in itself is
found to be mischievous conduct on the part of the contesting
respondents, who have sought to rely upon such interim moratorium
only to frustrate the petitioner bank, which is a secured creditor. It is this
very mischief that is addressed by the aforementioned amendment by
introducing sub-section (4) in Section 96 of the IBC. Since we have
already held hereinabove that the amendment applies to even pending
proceedings, in any case, the interim moratorium has ceased to operate,
and therefore, on this count, we hold against the contesting respondents.
111. As regards the impugned orders in these writ petitions, we find
that the DRT has gravely erred in issuing directions restraining the
petitioner bank from accepting balance 75% amount from the auction
purchasers and also directing that sale certificate shall not be issued.
According to us, these are drastic directions issued against the secured
creditor and particularly, against the auction purchasers, who are not
even heard by the DRT. This is clear violation of the principles of
natural justice. In any case, there is not an iota of discussion in the
impugned orders on the question as to whether the contesting
respondents satisfy the three pronged test of strong prima facie case,
grave and irreparable loss and balance of convenience. Even if the DRT
were to pass an ad-interim order, discussion on the said aspects was
necessary, particularly in the light of the earlier securitisation
applications filed by the contesting respondents and the history of the
litigation between the parties. Such perfunctory orders having a drastic
adverse effect on the petitioner bank (secured creditor) and the auction
purchaser cannot be countenanced and therefore, the impugned orders
deserve to be set aside. Accordingly, Writ Petition Nos.7587 of 2026,
7598 of 2026 and 7600 of 2026 are allowed and the orders impugned
therein are quashed and set aside.
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WRIT PETITION (L) NO.22742 OF 2026 (O.S.)
(RBL Bank Limited Vs. State of Maharashtra & Ors.)
WRIT PETITION (L) NO.24045 OF 2026 (O.S.)
(RBL Bank Limited Vs. State of Maharashtra & Ors.)
112. The petitioner bank has filed these two petitions for directions to
the Court Commissioner to carry out the commission for execution of
orders passed by competent Magistrates for taking physical possession
of the subject secured assets. In Writ Petition (L) No.22742 of 2026, the
secured asset is a flat located in a building at Borivali (East), Mumbai
and in Writ Petition (L) No.24045 of 2026, the secured asset is a row-
house at plot No.370, Chembur (East), Mumbai.
113. The contesting respondents (borrowers / guarantors) are resisting
the present petition on the ground that petitions under Section 95 of the
IBC have been filed triggering interim moratorium and that therefore,
directions cannot be issued in these writ petitions for taking physical
possession of the secured assets.
114. As noted hereinabove, the learned counsel for the petitioner bank
(secured creditor) has submitted that with the insertion of sub-section (4)
in Section 96 of the IBC, by way of amendment, the interim moratorium
has ceased to operate as the said provision applies to pending
proceedings also.
115. On the other hand, the learned counsel for the contesting
respondents urged that the said provision, added by way of amendment,
would apply only prospectively in proceedings initiated after
26.05.2026.
116. Since we have elaborately discussed the rival submissions and
reached findings in favour of the petitioner bank (secured creditor), we
are of the opinion that applying the said findings to the facts of the
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present case, the contesting respondents cannot resist the directions
sought in these writ petitions, only on the ground that an interim
moratorium is operating. In the absence of the interim moratorium and it
ceasing to operate from 26.05.2026, as we have held that the
amendment applies retroactively, the orders passed by the competent
Magistrates under Section 14 of the Securitisation Act for taking
physical possession of the secured assets ought to be executed. There is
no other ground pointed out by the contesting respondents or any
restraining order from the competent tribunal for resisting the directions
sought in the present writ petitions. Therefore, there can be no
impediment in allowing the writ petitions.
117. In view of the above, the writ petitions are allowed. In Writ
Petition (L) No.22742 of 2026, the respondent No.4 - Court
Commissioner is directed to fix a date at the earliest for taking physical
possession of the subject flat, which is the secured asset. Respondent
No.4 - Court Commissioner shall inform respondent No.1 i.e. Senior
Inspector of Police, Borivali Police Station about the date so fixed for
taking physical possession. Upon doing so and the petitioner bank
depositing the charges for police protection and assistance, the said
Senior Inspector of Police, Borivali Police Station shall provide
adequate police personnel, including lady constables to assist the Court
Commissioner to take physical possession of the said secured asset on
the fixed date. The police shall use adequate, necessary and
proportionate force, if so required, to take physical possession of the
secured asset and to hand it over to the petitioner bank.
118. Similarly, Writ Petition (L) No.24045 of 2026 is also allowed and
the respondent No.4 - Court Commissioner is directed to fix a date for
taking physical possession of the subject row-house (secured asset). The
Court Commissioner shall inform the respondent No.1, Senior Inspector
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Final_WP2819&group_26.doc
of Police, Chembur Police Station about the date so fixed for taking
physical possession. Upon doing so and the petitioner bank depositing
the charges for police protection and assistance, the said Senior
Inspector of Police, Borivali Police Station shall provide adequate police
personnel, including lady constables to assist the Court Commissioner to
take physical possession of the said secured asset on the fixed date. The
police shall use adequate, necessary and proportionate force, if so
required, to take physical possession of the secured asset and to hand it
over to the petitioner bank.
119. All the writ petitions are disposed of in above terms. Pending
applications are also disposed of.
(SHREERAM V. SHIRSAT, J.) (MANISH PITALE, J.)
Priya / Bipin / Minal
MINAL Digitally signed
by MINAL
SANDIP SANDIP PARAB
Date: 2026.09.18
PARAB 14:44:50 +0530
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- Mayur Khandeparkar
- Rohaan Cama
- Prashant Kamble
- Amir Arsiwala
- Arya Chougule
- Anirudh Hariani
- Nikhil Rajani
- Abhishek Pandey
- Angel Pandey
- Anupamaa Pawar
- Charles D'souza
- Charles D'souza
- Charles D'souza
- Harish Adwant
- Haryani
- Kruti Bhavsar
- Mrunalini Deshpande
- Rohaan Cama
- Shadab S Jan
- Shadab S Jan
- Shamant Satiya
- Viraj Parekh
- Viraj Parekh