Section 95 IBC | Non-Est Petition During Interim Moratorium Cannot Trigger Fresh Moratorium: NCLAT

The National Company Law Appellate Tribunal has clarified that an application filed during an existing interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016, is non-est in law and cannot create a valid moratorium to bar a subsequent application. This ruling reinforces the principle that procedural abuse cannot be weaponized to stall insolvency proceedings against personal guarantors.

Background & Facts

The Dispute

The dispute arises from competing insolvency applications filed against Mohit Arora, a personal guarantor, by two financial creditors of Supertech Ltd. - PNB Housing Finance Limited (PNBHFL) and Indian Financial Corporation Ltd. (IFCI) - under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC). The core issue is whether the second petition filed by PNBHFL on 24.07.2021 was barred by an interim moratorium allegedly triggered by IFCI’s earlier petition filed on 02.06.2021.

Key Facts

• On 04.01.2017, PNBHFL sanctioned a loan of Rs. 275 Crores to Supertech Ltd. and its co-borrowers, Sarv Realtors Pvt. Ltd. and ASP Sarin Realty Pvt. Ltd.
• Mohit Arora, along with Mr. RK Arora and Ms. Sangita Arora, executed personal guarantees on 10.03.2017 to secure the loan.
• The corporate debtor defaulted on repayment obligations, prompting PNBHFL to issue a demand notice under Section 13(2) of the SARFAESI Act, 2002, demanding Rs. 279.20 Crores.
• On 09.07.2021, PNBHFL issued a formal demand notice under Rule 7(1) of the PG to CD Rules, 2019, demanding Rs. 358.91 Crores. No response was received.
• On 26.03.2021, PNBHFL filed its first application under Section 95 IBC (CP(IB) No. 203/ND/2021) against Mohit Arora.
• On 02.06.2021, IFCI filed its application under Section 95 IBC (CP(IB) No. 428/ND/2021) against Mohit Arora.
• On 08.07.2021, PNBHFL withdrew its first petition (CP(IB) No. 203/ND/2021) with liberty to file afresh.
• On 24.07.2021, PNBHFL filed its second application (CP(IB) No. 395/ND/2021) against Mohit Arora.
• On 29.09.2021, the Resolution Professional (RP) was appointed in the second petition (CP(IB) No. 395/ND/2021).
• On 11.10.2022, the Adjudicating Authority admitted the second petition, rejecting the appellant’s contention that it was barred by the interim moratorium triggered by IFCI’s petition.
• On 20.12.2023, RP was appointed in IFCI’s petition (CP(IB) No. 428/ND/2021).
• On 05.04.2024, NCLAT set aside the appointment of RP in IFCI’s petition, holding that RP had already been appointed in PNBHFL’s petition.
• On 13.06.2024, the Adjudicating Authority closed IFCI’s petition (CP(IB) No. 428/ND/2021).

Procedural History

• 26.03.2021: PNBHFL files first Section 95 application (CP(IB) No. 203/ND/2021)
• 02.06.2021: IFCI files Section 95 application (CP(IB) No. 428/ND/2021)
• 08.07.2021: PNBHFL withdraws first petition with liberty to file afresh
• 24.07.2021: PNBHFL files second Section 95 application (CP(IB) No. 395/ND/2021)
• 29.09.2021: RP appointed in second petition (CP(IB) No. 395/ND/2021)
• 11.10.2022: Adjudicating Authority admits second petition
• 20.12.2023: RP appointed in IFCI’s petition (CP(IB) No. 428/ND/2021)
• 05.04.2024: NCLAT sets aside RP appointment in IFCI’s petition
• 13.06.2024: Adjudicating Authority closes IFCI’s petition
• 11.10.2022: Impugned order passed by Adjudicating Authority
• 12.12.2022: Appeal filed before NCLAT (CA(AT)(Ins) No. 1284 of 2022)
• 29.04.2026: NCLAT delivers judgment

The Parties' Positions

Appellant (Mohit Arora): Argued that the second petition by PNBHFL was filed during the interim moratorium triggered by IFCI’s petition on 02.06.2021, rendering it non-maintainable under Section 96 IBC. Also claimed that the liability was discharged due to a change in borrower under HRERA order dated 19.11.2019. Alleged violation of natural justice and improper use of inherent powers.

Respondent No. 1 (PNBHFL): Contended that IFCI’s petition was filed during the interim moratorium triggered by PNBHFL’s first petition on 26.03.2021, making it non-est. Asserted that the appellant concealed material facts and abused the process of law by filing contradictory pleas. Highlighted that Sarv Realtors was a co-borrower under the guarantee deed, negating the discharge argument.

Respondent No. 2 (RP): Did not make submissions.

Relief Sought

The appellant sought quashing of the Adjudicating Authority’s order dated 11.10.2022, dismissal of the second petition (CP(IB) No. 395/ND/2021), and a declaration that the IFCI petition triggered a valid moratorium. Alternatively, sought remand for fresh adjudication.

The Legal Issue

The central question was whether a petition filed under Section 95 of the IBC during an existing interim moratorium can validly trigger a new interim moratorium, and whether the Adjudicating Authority may use its inherent powers under Rule 11 of the NCLT Rules to nullify a moratorium tainted by fraud or material concealment.

Arguments Presented

For the Appellant

The appellant relied on Dilip B. Jiwrajka v. Union of India and Krishna Kumar Basia v. SBI to argue that Section 96 IBC mandates automatic commencement of interim moratorium upon filing of any application, and any subsequent application filed during such moratorium is non-est. He contended that IFCI’s petition on 02.06.2021 triggered a valid moratorium, rendering PNBHFL’s second petition on 24.07.2021 invalid. He further argued that the Adjudicating Authority violated natural justice by relying on records of IFCI’s petition without affording him an opportunity to respond. Reliance was placed on Lokhandwala Kataria and Atma S. Berar to assert that inherent powers cannot override statutory mandates or circumvent procedural fairness.

For the Respondent

PNBHFL argued that its first petition on 26.03.2021 triggered the first interim moratorium, making IFCI’s petition on 02.06.2021 non-est. It submitted that the appellant deliberately concealed the pendency of PNBHFL’s first petition when appearing in IFCI’s proceedings, thereby committing fraud and abuse of process. Reliance was placed on Sushant Chhabra v. Catalyst Trusteeship Ltd. to establish that a petition filed during a valid moratorium cannot create a new one. It further argued that the Adjudicating Authority rightly invoked inherent powers under Rule 11 of NCLT Rules to prevent misuse of the IBC framework.

The Court's Analysis

The NCLAT undertook a detailed statutory interpretation of Sections 95 and 96 of the IBC, referencing the Supreme Court’s judgment in Dilip B. Jiwrajka v. Union of India, which clarified that the interim moratorium under Section 96 operates in respect of the debt, not the debtor, and commences immediately upon filing of an application. The Court emphasized that the moratorium is not a judicial order but a statutory consequence.

"The interim moratorium under Section 96 commences from the application filed under Sections 94 or 95, and ceases to have effect on the date of admission of such application."

The Tribunal found that PNBHFL’s first petition on 26.03.2021 triggered the first interim moratorium. IFCI’s petition on 02.06.2021 was therefore filed during this subsisting moratorium and was non-est in law. The Court held that a non-est petition cannot create a valid moratorium, and thus PNBHFL’s second petition on 24.07.2021 was not barred.

The Court further held that the appellant’s conduct - failing to disclose the pendency of PNBHFL’s first petition while appearing in IFCI’s proceedings, and later arguing that the second petition was barred by IFCI’s non-est petition - constituted abuse of process and material concealment. The Adjudicating Authority’s invocation of inherent powers under Rule 11 of the NCLT Rules to treat the IFCI petition’s moratorium as nullity was upheld as a legitimate exercise to prevent misuse of the Code.

"No litigant could be permitted to play hide and seek with the Courts... the act of the appellant... amounts to the abuse of the process and material concealment of fact."

The Court rejected the appellant’s argument under Section 133 of the Contract Act, noting that Sarv Realtors was a co-borrower under the guarantee deed, and the guarantee explicitly stated that liability would not be affected by changes in the borrower’s identity.

The Verdict

The appeal was dismissed. The NCLAT upheld the Adjudicating Authority’s order dated 11.10.2022 admitting the second petition under Section 95 IBC (CP(IB) No. 395/ND/2021). The Court held that IFCI’s petition filed on 02.06.2021 was non-est and could not trigger a valid interim moratorium. The appointment of the Resolution Professional in PNBHFL’s petition on 29.09.2021 remains valid. No costs were awarded.

What This Means For Similar Cases

Interim Moratorium Cannot Be Manufactured Through Sequential Filings

• Practitioners must verify the filing history of all Section 95 applications against a guarantor before filing a new petition.
• A petition filed during an existing moratorium is non-est and cannot be used to bar a subsequent application.
• The date of first filing, not the date of listing or numbering, determines priority.

Fraud and Concealment Nullify Procedural Defenses

• Deliberate non-disclosure of parallel proceedings before the NCLT constitutes abuse of process.
• Tribunals may invoke inherent powers under Rule 11 of NCLT Rules to nullify moratoriums tainted by fraud.
• Guarantors cannot use contradictory arguments to gain tactical advantage - courts will not permit litigants to "have their cake and eat it too."

Guarantee Liability Survives Borrower Restructuring

• A guarantee deed that expressly states liability continues despite changes in borrower identity cannot be discharged under Section 133 of the Contract Act.
• Co-borrower status under the loan agreement is decisive; mere regulatory orders altering project ownership do not extinguish guarantee obligations.