Moratorium Under Section 14 of IBC
It protects the corporate debtor and its assets. Not the guarantor, not the directors, not other people's property.
When the NCLT admits a CIRP application it declares a moratorium (s. 13(1)(a)). From the insolvency commencement date, section 14 freezes legal action against the corporate debtor and the debtor's own disposal of assets, so the resolution professional can keep the business intact while creditors look for a plan.
The moratorium is wide but not total. The exceptions in section 14(3), the protection of essential supplies, and the point at which it ends are where most exam questions sit. Below is the law as at the exam cut-off of 4 February 2025, with the 2026 changes marked.
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What the Moratorium Prohibits (Section 14(1))
- (a) Suits and proceedings
- Instituting new suits, or continuing pending suits or proceedings, against the corporate debtor, including execution of any judgment, decree or order of any court, tribunal, arbitration panel or other authority.
- (b) Disposal by the debtor
- Transferring, encumbering, alienating or disposing of any of its assets or any legal right or beneficial interest in them.
- (c) Enforcement of security
- Any action to foreclose, recover or enforce a security interest created by the corporate debtor over its property, including action under the SARFAESI Act, 2002.
- (d) Recovery by owners and lessors
- Recovering property that is occupied by or in the possession of the corporate debtor.
Supplies and Licences
- check_circleLicences, permits, registrations, quotas, concessions and clearances from any government or regulator cannot be suspended or terminated on the ground of insolvency, as long as current dues for their use during the moratorium are paid (Explanation to s. 14(1)).
- check_circleEssential supplies cannot be cut off during the moratorium (s. 14(2)). Regulation 32 lists them: electricity, water, telecommunication and IT services, to the extent they are not a direct input to the debtor's output. Water for drinking and sanitation is essential; water for generating hydro-electricity is not.
- check_circleOther supplies the IRP or RP considers critical to preserve value and keep the business going cannot be stopped either, unless dues for supply during the moratorium are unpaid (s. 14(2A)).
What the Moratorium Does Not Cover
Transactions notified by the Central Government in consultation with a financial sector regulator or other authority
Source
s. 14(3)(a)
Example
MCA notification S.O. 4321(E) for aircraft, engines and airframes under the Cape Town Convention
A surety in a contract of guarantee to the corporate debtor
Source
s. 14(3)(b)
Example
A bank can still proceed against the promoter who personally guaranteed the company's loan
Action against assets the debtor does not own
Source
s. 14(1)(b), (c) apply to the debtor's assets and security created by it
Example
A promoter's own flat mortgaged to secure the company's loan
| Exception | Source | Example |
|---|---|---|
| Transactions notified by the Central Government in consultation with a financial sector regulator or other authority | s. 14(3)(a) | MCA notification S.O. 4321(E) for aircraft, engines and airframes under the Cape Town Convention |
| A surety in a contract of guarantee to the corporate debtor | s. 14(3)(b) | A bank can still proceed against the promoter who personally guaranteed the company's loan |
| Action against assets the debtor does not own | s. 14(1)(b), (c) apply to the debtor's assets and security created by it | A promoter's own flat mortgaged to secure the company's loan |
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When It Starts and Ends
The moratorium runs from the date of the order until the CIRP is complete (s. 14(4)). It ends earlier, on the date the NCLT approves a resolution plan under s. 31(1) or passes a liquidation order under s. 33, whichever comes first (proviso to s. 14(4) and s. 31(3)(a)).
Separate moratoria exist for other processes: the pre-packaged process and the insolvency of personal guarantors each have their own. Do not import section 14's rules into them without checking the section that governs them.
What the 2026 Amendment Added
In force from 26 May 2026. Not part of the exam's cut-off law.
| Change | Section |
|---|---|
| A surety cannot use the guarantee to start or continue action against the corporate debtor during the moratorium; the s. 14(3)(b) exception protects only action against the surety | Explanation to s. 14(3)(b) |
| Critical supplies under s. 14(2A) expressly carved into the opening words of s. 14(1) | s. 14(1) |
| The liquidation order itself declares a moratorium on suits and on enforcement of security, applying s. 14 with necessary changes, subject to s. 52 | s. 33(1)(b)(iv) |
| A creditor that took a guarantor's asset by enforcing security may transfer it during the CIRP with prior CoC approval | s. 28A |
How the Limited Insolvency Examination Tests This
Case studies list events after commencement and ask which ones the moratorium stops. A bank issuing a SARFAESI notice on the factory: barred. A landlord seeking to evict the company from leased premises: barred. A bank invoking the promoter's personal guarantee: allowed. The electricity distributor disconnecting the office supply for pre-CIRP arrears: not allowed, because electricity is an essential supply unless it is a direct input to what the company produces.
The trap is reading the moratorium as protecting everyone connected with the company. It protects the corporate debtor and its assets. Guarantors, directors in their personal capacity and third-party assets fall outside section 14.
FAQs
What is moratorium under section 14 of IBC?expand_more
A freeze, declared by the NCLT when it admits a CIRP application, on suits and proceedings against the corporate debtor, on the debtor disposing of its assets, on enforcement of security interests, and on recovery of property by owners or lessors.
Does the IBC moratorium apply to personal guarantors?expand_more
No. Section 14(3)(b) excludes a surety in a contract of guarantee to the corporate debtor, so creditors can proceed against guarantors during the CIRP.
When does the moratorium end?expand_more
When the CIRP is completed, or earlier on the date the NCLT approves a resolution plan or passes a liquidation order (section 14(4)).
Can electricity be disconnected during the moratorium?expand_more
Not for an essential supply. Electricity, water, telecom and IT services, to the extent not a direct input to output, cannot be terminated or suspended during the moratorium (section 14(2) and regulation 32).
Next steps
- Personal Guarantorsarrow_forward
- IBC vs SARFAESIarrow_forward
- Lalit Kumar Jain casearrow_forward
- CIRP Stepsarrow_forward
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