Interim Moratorium and Moratorium: Sections 96 and 101 IBC

A collective insolvency process works only if individual creditors stop racing to enforce their claims. Part III secures this through two moratoriums: an interim moratorium that begins as soon as an insolvency resolution application is filed, and a moratorium that follows admission. For personal guarantors, the interim moratorium became a tool to delay recovery, and the 2026 Amendment took it away from them. This note explains both moratoriums, how they compare with the corporate moratorium, and the recent changes.

1. The Interim Moratorium, Section 96

• Commencement. When an application is filed under section 94 by the debtor or section 95 by a creditor, an interim moratorium commences on the date of filing in relation to all debts and ceases on the date of admission.
• Effect. Any pending legal action or proceeding in respect of any debt is deemed stayed, and creditors may not initiate any legal action or proceeding in respect of any debt.
• Partners. Where the application concerns a firm's debt, the interim moratorium operates against all the partners of the firm as on the date of the application.
• Exemptions. It does not apply to transactions notified by the Central Government in consultation with a financial sector regulator.

2. The Moratorium, Section 101

• Commencement and duration. On admission under section 100, a moratorium commences in relation to all debts and lasts until 180 days from admission or the approval of the repayment plan under section 114, whichever is earlier.
• Effect. Pending legal actions in respect of any debt are deemed stayed, and creditors may not initiate any legal action or proceeding in respect of any debt.
• Restriction on the debtor. The debtor may not transfer, alienate, encumber or dispose of any of his assets or legal rights or beneficial interests in them.
• Partners and exemptions. As under section 96, it operates against all partners of a firm and does not apply to notified transactions.

Figure 1: The two moratoriums compared

Figure 2: When each moratorium operates

3. Comparison with Section 14

• Trigger. The corporate moratorium under section 14 begins only on admission of the CIRP; Part III adds an interim moratorium on filing, reflecting that an individual's livelihood can be destroyed by enforcement before admission.
• Scope. Section 14 bars suits, enforcement of security, transfer of assets and recovery of property, and lasts until the end of the CIRP; sections 96 and 101 bar legal actions in respect of debts and, after admission, restrict the debtor's dealings.
• Guarantors. The section 14 moratorium in the corporate debtor's CIRP does not protect its personal guarantor (SBI v V. Ramakrishnan, 2018), who must rely on sections 96 and 101 in its own process (Topic 66)

4. Personal Guarantors and the 2026 Change

• Dilip B Jiwrajka, 2023. The Supreme Court described the interim moratorium as protective, operating automatically on filing without any adjudication, and held that the guarantor need not be heard before it begins.
• Misuse. Because the interim moratorium began on filing and lasted until admission, guarantors facing recovery could file their own applications under section 94, or benefit from creditors' applications, to stall enforcement, arbitration and SARFAESI proceedings for long periods; tribunals also read it to cover any debt of the guarantor.
• Section 96(4). The 2026 Amendment provides that section 96 does not apply where the application is filed against a personal guarantor to a corporate debtor, and section 124(4) does the same for the interim moratorium in bankruptcy.
• Tata Capital v Neel Motors, 2026. The Bombay High Court held in August 2026 that section 96(4) applies to applications pending on 26 May 2026, since the words where an application is filed cover applications still under adjudication.
• Effect. A personal guarantor is now protected only by the moratorium under section 101 after the NCLT admits the application.

Figure 3: Further features of the Part III moratoriums

5. Frequently Asked Questions

When does the interim moratorium end?

On the date the application is admitted under section 100. It is then replaced by the moratorium under section 101, or ends if the application is rejected.

How long does the moratorium under section 101 last?

Until 180 days from admission, or the date of approval of the repayment plan under section 114, whichever is earlier.

Can a personal guarantor file under section 94 to stop a bank's SARFAESI action against his house?

Not after 26 May 2026. Section 96(4) excludes the interim moratorium for personal guarantors to corporate debtors, so filing no longer brings an automatic stay; protection begins only on admission under section 101.

Does the moratorium restrict what the debtor himself can do?

Under section 101, yes: the debtor cannot transfer, alienate, encumber or dispose of his assets or interests in them. Section 96 contains no such express restriction.

6. Related Topics

• Topic 22: Moratorium under Section 14. The corporate moratorium.
• Topic 66: Personal Guarantors. The main users of Part III.
• Topic 85: Section 14 Moratorium vs Interim Moratorium. The comparison in detail.