Does moratorium apply to action for bounced cheque?

By Alok Dhir, Dhir & Dhir Associates
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Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), means a period when no judicial proceedings for recovery, enforcement of security interest, sale or transfer of assets, or termination of essential contracts can be instituted or continued against the corporate debtor. Once a petition under the IBC is admitted against the corporate debtor, the moratorium kicks in on the insolvency commencement date and remains in force during the corporate insolvency resolution process (CIRP) period. An interesting question is whether the moratorium applies to the proceedings under section 138 of the Negotiable Instruments Act, 1881 (NI Act).

Alok DhirManaging partnerDhir & Dhir Associates
Alok Dhir
Managing partner
Dhir & Dhir Associates

As per the IBC, a petition for insolvency against a corporate debtor can be triggered by a financial creditor, an operational creditor or by the corporate debtor itself in cases where the default amount is more than ₹100,000 (US$1,500).

The CIRP is time bound and the relief of moratorium is available to the corporate debtor only during the CIRP period, i.e. for 180 days, which can be extended by 90 days. Even the period of 180 days is not absolute because the committee of creditors, at any time within such period, may decide to liquidate the corporate debtor and the moratorium will cease.

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Dhir & Dhir Associates is a leading full-service law firm in India. Alok Dhir is the managing partner at Dhir & Dhir Associates.

D-55, Defence Colony
New Delhi – 110 024
India

Contact details:
Tel: +91 11 4241 0000
Fax: +91 11 4241 0091
Email: alok.dhir@dhirassociates.com
Website: www.dhirassociates.com

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