top of page

Interim Moratorium Does Not Commence If Application Is Filed Before a Forum Devoid of Jurisdiction


In a case where a prior application filed under s.95 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) was dismissed as withdrawn, the National Company Law Appellate Tribunal, New Delhi (‘NCLAT’) in Arvind Dham v. State Bank of India[i], held that no interim moratorium could be said to have commenced. Consequently, an application from another financial creditor (‘FC’) would be maintainable.

Brief Facts

  • The present appeal was filed challenging the order of the National Company Law Tribunal (‘NCLT’), New Delhi, by which NCLT Delhi dismissed an interlocutory application (‘IA’) filed against the order of NCLT Delhi wherein an application filed by the State Bank of India (‘SBI’) under s.95(1), pertaining to personal insolvency of personal guarantor (‘PG’) was admitted.  

  • L&T Finance filed an earlier application with respect to the same PG before the NCLT, New Delhi. The application filed by L&T was later dismissed as withdrawn on jurisdictional issues.

  • However, vide order dated 23.11.2020, the NCLT Delhi had earlier accepted the application filed by the SBI and appointed the interim resolution professional (‘RP’). The Appellant, viz., the PG, approached the NCLT, New Delhi, to recall the order.

  • However, the IA was dismissed on the grounds that the application of SBI has been admitted after considering the report of the RP and objections of the Appellant. It is pertinent to mention that the order pertaining to the dismissal of this application was delivered after the L&T application was dismissed.

  • In this case, the appellant has given personal guarantees to two corporate debtors, Castex Technologies Pvt Ltd and Stride Auto Parts Ltd.

  • Further, a deed of guarantee was furnished in favour of L&T for securing a debt of Castex and in favour of SBI for securing a debt of Stride. An application to initiate the corporate insolvency resolution process (‘CIRP’) against Castex was filed by SBI before NCLT Chandigarh.

  • While CIRP was initiated against Castex by SBI before NCLT Chandigarh, CIRP came to be initiated against Stride before NCLT New Delhi.

  • Pursuant to the above, L&T filed an application under s. 95 against the PG with respect to the debt of Castex before NCLT New Delhi. Subsequently, SBI initiated insolvency proceedings against Stride before NCLT, New Delhi.

  • As CIRP against Castex was initiated before the NCLT, Chandigarh, while s. 95 proceedings against PGs were instituted before the NCLT, New Delhi, and such an application, bereft of jurisdiction, was dismissed.

Arguments of Appellant (PG)

  • The Appellant argued that the order dismissing the IA was without jurisdiction. It was argued that L&T filed the application under s.95 of the IBC before the application by SBI. Therefore, the interim moratorium kicked in when L&T filed the application.

  • Further, as per the scheme of s.96, no creditor had jurisdiction to file any proceedings against the PG after the commencement of the interim moratorium.

  • Therefore, it was submitted that the application filed by SBI was without jurisdiction and was hit by an interim moratorium, which commenced on filing the application by L&T.

Arguments of the Respondent (SBI)

  • SBI argued that the NCLT, New Delhi rightly admitted the s.95 application of the SBI, as the application of L&T before NCLT New Delhi was without jurisdiction.

  • As per ss.60(1) & 60(2), an application for initiating insolvency proceedings against the PG must be filed where the CIRP against the corporate debtor is pending. Therefore, in the circumstances of the present case, as the CIRP against Castex was initiated before the NCLT, Chandigarh, the insolvency against the PG should have been initiated there only.

  • The SBI submitted that an interim moratorium shall not kick in on an application without jurisdiction. Hence, there was no invalidity in filing s.95 of the application against the same PG by SBI before NCLT, New Delhi.


  • It was held that the application by L&T with respect to debts pertaining to Castex should have been filed before NCLT, Chandigarh, as CIRP proceedings pertaining to the corporate debtor have been pending there.

  • However, the application was filed before NCLT, New Delhi, devoid of jurisdiction and dismissed as withdrawn. Withdrawal of the application by the court clearly indicated that the application could not have proceeded as NCLT, New Delhi. Hence, the same was withdrawn.

  • The NCLAT held that since the application was filed before the NCLT, Delhi, which was not competent to entertain the application, an interim moratorium under s.96 could not kick in.

  • The appellant's argument that the interim moratorium kicked in as soon the application under s.95 was filed, regardless of it being filed before a forum devoid of jurisdiction was held against the statutory scheme of the IBC.

  • The NCLAT, upholding the principle that an order passed by a court without jurisdiction is a nullity, held that in facts of the present case, it was not the case that NCLT, Delhi lacked jurisdiction to pass an order under s.95(1) but was incompetent to entertain the application of L&T which should have been filed before NCLT, Chandigarh where CIRP proceedings against Castex were pending.

Our Analysis

The NCLAT has clarified another paradox that may arise in relation to the application pertaining to the initiation of personal insolvency under the provisions of IBC and the consequent commencement of an interim moratorium. The question that arose, in this case, was – in case an application under s.95 was pending before the NCLT and later was dismissed on the grounds of being bereft of jurisdiction, whether, under such circumstances, an application by another FC would be maintainable or not. The NCLAT concluded that in cases where an application under s.95 is filed before a forum that is not competent to entertain such application, such application being devoid of jurisdiction, the interim moratorium shall not kick in. Hence, an application under s.95 by another FC against the same PG was held to be maintainable under such circumstances.

End Note

[i] [2024] 162 649 (NCLAT-New Delhi).

Authored by Huzaifa Salim, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


bottom of page