The NCLAT held that the moratorium period under Section 101 of the IBC is mandatory and cannot be extended beyond the statutory limit of 180 days.
The National Company Law Appellate Tribunal (NCLAT) Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka reviewed an appeal on Wednesday (22.01.2025) and held that the moratorium period under Section 101 of the IBC is mandatory and cannot be extended beyond the statutory limit of 180 days, emphasizing that judicial interpretation must align with legislative intent and statutory provisions.
In the case of Comp. App. (AT) (Ins.) No. 38 of 2025, the National Company Law Appellate Tribunal (NCLAT) addressed an appeal filed by the Resolution Professional (RP) of the Corporate Debtor challenging the order dated 04.12.2024, passed by the National Company Law Tribunal (NCLT), New Delhi, Court – V, Division Bench. The impugned order had granted a 90-day extension of the Personal Insolvency Resolution Process (PIRP) but did not express any view on the moratorium.
The factual background of the case indicates that the Personal Guarantor had initiated proceedings under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 (IBC), leading to an interim moratorium under Section 96, and the RP was appointed on 08.04.2021. Subsequently, on 30.04.2024, the Adjudicating Authority admitted the Section 94 application, initiating the PIRP with a fresh 180-day moratorium. Following a creditors' meeting on 23.10.2024, revisions to the repayment plan were suggested, and the RP was authorized to seek an extension of the PIRP beyond the initial period, resulting in the impugned order.
The RP argued that the absence of a moratorium during the extended period would render the resolution process ineffective, as creditors might initiate enforcement actions. It was contended that the 180-day period prescribed under Section 101 of the IBC was directory in nature and could be extended by the Adjudicating Authority, with reliance placed on the Supreme Court's decision in P. Mohanraj and Others v. Shah Brothers Ispat Private Limited, REEDLAW 2021 SC 03526. The Personal Guarantor supported the RP's submissions, asserting that the extension of the moratorium was crucial for effective resolution.
The NCLAT, after analyzing the relevant provisions of the IBC, including Sections 94, 96, 99, and 101, concluded that the statutory framework under Section 101 provides for a moratorium period of 180 days, which automatically ceases upon expiry. Referring to principles of statutory interpretation laid down by the Supreme Court, the Tribunal held that the provisions of Section 101 are mandatory and do not allow for an extension beyond the prescribed period.
In reaching its decision, the Tribunal drew parallels with the Supreme Court's ruling in Rajsekhar Gogoi v. State of Assam & Ors., where the Court held that Rule 206 of the Assam Excise Rules, 1945, was mandatory in nature due to the clear statutory consequences of non-compliance. The Tribunal reaffirmed that statutory provisions with prescribed consequences must be interpreted strictly, without judicial modification. The appeal was consequently dismissed, affirming the Adjudicating Authority's order and holding that the moratorium period could not be extended beyond the statutory limit of 180 days under Section 101 of the IBC.
Mr. Milan Singh Negi, Mr. Nikhil Kumar Jha and Ms. Aakriti Gupta, Advocates represented the Appellant.
Ms. Purti Gupta, Ms. Henna George and Ms. Harshita Kakkar, Advocates appeared for the respondent.
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