Case Note & Summary
The petitioners, M/s. Kapole Advertising Agency and others, were the original borrowers who had approached the Bombay High Court challenging two orders dated 09.01.2026 passed by the Debts Recovery Tribunal-II, Mumbai (DRT). The DRT had rejected Interim Application Nos.2524 of 2025 and 2526 of 2025 filed by the petitioners in pending Securitisation Application No.411 of 2025. The petitioners contended that the DRT failed to appreciate the effect of the pendency of a petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal, Mumbai (NCLT), which triggered an interim moratorium under Section 96 of the IBC. The petitioners argued that the existence of the interim moratorium barred the continuation of the securitisation proceedings before the DRT, and the DRT's rejection of their interim applications was based on irrelevant considerations. The court, after hearing the parties, found that the DRT had indeed overlooked the statutory moratorium under Section 96 IBC. The court noted that the pendency of a Section 95 petition automatically imposes an interim moratorium, which prohibits the initiation or continuation of any legal proceedings against the debtor in respect of any debt. The DRT's orders did not address this crucial aspect and were therefore unsustainable. The court allowed the writ petition and the interim application, quashing the impugned orders and remitting the matters back to the DRT for fresh consideration. The court directed the DRT to decide the interim applications afresh, taking into account the provisions of Section 96 IBC and the pendency of the Section 95 petition before the NCLT. The court also clarified that all contentions of the parties were kept open.
Headnote
A) Insolvency and Bankruptcy Code - Interim Moratorium - Section 96 IBC - Effect on Pending Proceedings - The pendency of a petition under Section 95 IBC before the NCLT triggers an automatic interim moratorium under Section 96 IBC, which prohibits the initiation or continuation of any legal proceedings against the debtor in respect of any debt. The DRT failed to consider this statutory bar while rejecting the borrowers' interim applications for stay of securitisation proceedings. Held that the DRT's orders were passed on irrelevant considerations and are liable to be set aside (Paras 1-5). B) Securitisation and Debt Recovery - Interim Relief - Prima Facie Case - The borrowers had made out a strong prima facie case for interim protection as the continuation of SARFAESI proceedings during the pendency of the Section 95 petition would frustrate the purpose of the moratorium. The DRT's rejection of the interim applications without addressing the impact of Section 96 IBC was erroneous. Held that the impugned orders are quashed and the matters are remitted back to the DRT for fresh consideration (Paras 5-6).
Issue of Consideration
Whether the Debts Recovery Tribunal erred in rejecting interim applications filed by borrowers seeking stay of securitisation proceedings despite the pendency of a petition under Section 95 of the Insolvency and Bankruptcy Code, 2016, which triggers an interim moratorium under Section 96 IBC.
Final Decision
The court allowed the writ petition and the interim application, quashing the impugned orders dated 09.01.2026 passed by the DRT-II, Mumbai. The matters were remitted back to the DRT for fresh consideration of the interim applications, taking into account the provisions of Section 96 IBC and the pendency of the Section 95 petition before the NCLT. All contentions of the parties were kept open.
Law Points
- Interim moratorium under Section 96 IBC
- Effect of pendency of Section 95 petition on SARFAESI proceedings
- DRT's jurisdiction during moratorium
- Prima facie case for interim relief
