Insolvency and Bankruptcy Code (IBC): List of restraints on FSPs during the moratorium period

Today (29.11.2019) RBI has filed an application under insolvency and liquidation proceeding against “ Dewan Housing Finance Corporation Limited” under Section 227 read with clause (zk) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code (IBC), 2016, read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 (“FSP Insolvency Rules”).

In its press release today the central bank also pronounced the following provisions of sub-sections (1), (2) and (3) of Section 14 of the IBC 2016 which is important for all the stake holders to know.

1. The Adjudicating Authority shall by order declare moratorium* for prohibiting all of the following, Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date.
2. 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;
3. transferring, encumbering, alienating or disposing- off by the corporate debtor any of its assets or any legal right or beneficial interest therein;
4. 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);
5.  The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
6. The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during the moratorium period.
7. The provisions of sub-section (1) shall not apply to —
8.  such transaction as may be notified by the Central Government in consultation with any financial regulator;
9. A surety in a contract of guarantee to a corporate debtor.”

*The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: