EFFECT OF MORATORIUM AND ITS INTERPLAY WITH THE PROVISIONS OF THE NEGOTIABLE INSTRUMENTS ACT AN EVOLVING SUBJECT

The issue of the applicability of moratorium under the Insolvency & Bankruptcy Code, 2016 (“the Code”) and its interplay with proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) has been a vexed topic.

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In this article, I intend to dwell on a recent judgment of the Hon'ble Supreme Court in Vishnoo Mittal Vs Shakti Trading Company 2025 SCC Online SC 558, which has addressed certain key issues.

Before delving into the said judgment, one must understand a few fundamental aspects which are germane to the issue under consideration. I wish to analyse them in the ensuing paragraphs and then pro-

1. Section 14 of the Code - What does it cover?

Section 14 of the Code provides a moratorium in respect of a corporate debtor under the Corporate Insolvency Resolution Process. Section 14 of the Code confers a moratorium in respect of the following:

i. The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

ii. Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

iii. Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); and

iv. The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.