The Article has been drafted by Suman Kumar Jha (Founder & Managing Partner), Afnaan Siddiqui (Co-Founder & Partner), Visakha Raghuram (Associate) and Vaibhav Khurana (Associate).
A Personal Guarantor filed an application under Section 94(1) of the Insolvency and Bankruptcy Code (IBC) which allows a Debtor who has committed a default to file an application for initiating the insolvency resolution process, either by themselves or through a Resolution Professional, this led the Adjudicating Authority to impose an interim moratorium under Section 96 on 08.04.2021. Later, on 30.04.2024, the Adjudicating Authority admitted the application, initiating the Personal Insolvency Resolution Process (PIRP) and imposing a fresh moratorium for 180 days under Section 101, set to end on 28.10.2024. Before the moratorium expired, the Resolution Professional sought a 90-day extension, filing an application on 28.10.2024. The Adjudicating Authority allowed the extension for completing the PIRP but did not extend the moratorium. Dissatisfied with this decision, the Resolution Professional filed an appeal challenging the non-extension of the moratorium.
The Hon’ble NCLAT dismissed the appeal, holding that the moratorium under Section 101(1) of the IBC is strictly time-bound and cannot be extended beyond 180 days. It emphasized that the statute explicitly provides for both the commencement and automatic cessation of the moratorium, leaving no discretion for the Adjudicating Authority or the Appellate Tribunal to extend it. NCLAT relied on the Supreme Court’s ruling in Newtech Promoters & Developers Pvt. Ltd. v. State of Uttar Pradesh & Ors. [(2021) ibclaw.in 188 SC], which held that courts must interpret legislative provisions based on their plain meaning without altering their intended scope. Similarly, in Kotak Mahindra Bank Ltd. v. A. Balakrishnan & Anr. [(2022) ibclaw.in 62 SC], the Supreme Court reiterated that when statutory language is clear and unambiguous, courts cannot add or subtract words to modify the legislature’s intent.
NCLAT also distinguished this case from Mr. Vikash Gautamchand Jain RP of Kethos Tiles Pvt. Ltd. [(2024) ibclaw.in 499 NCLAT], where it had allowed an extension based on Section 54D, which does not prescribe automatic cessation. It was also stated that, since Section 101(1) expressly mandates that the moratorium ceases either at the end of 180 days or upon approval of the repayment plan under Section 114 by the Adjudicating Authority, wherein the Adjudicating Authority, approves or rejects a repayment plan on the basis of a report of a meeting of creditors which is submitted by the Resolution Professional — whichever is earlier—the tribunal ruled that no extension was permissible. It also referred to P. Mohanraj and Ors. v. Shah Brothers Ispat Pvt. Ltd. [(2021) ibclaw.in 24 SC], clarifying that while the Supreme Court had examined the effects of a moratorium under Section 14 of the IBC, it did not consider whether a moratorium under Section 101 could be extended.
Therefore, the tribunal concluded that the statutory provisions of Section 101(1) were clear, and any attempt to extend the moratorium would contradict legislative intent. Since the 180-day period had ended on 28.10.2024, the moratorium had lapsed automatically, making the appeal untenable. Accordingly, the NCLAT dismissed the appeal as meritless.