Civil Suit Filed During Moratorium Period Under IBC Is Non Est in Law  – Bombay High Court Quashes Proceedings Filed in Violation of Section 14

“IBC Overrides CPC: Suit Barred by Moratorium Cannot Be Resurrected Post-Facto” – Bombay High Court, in a notable judgment under civil revisional jurisdiction, held that a civil suit filed during the moratorium period declared under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) is a nullity in law and liable to be rejected outright under Order VII Rule 11 read with Section 151 of the Civil Procedure Code, 1908.

Justice M.S. Jawalkar set aside the trial court’s order that had erroneously refused to reject the plaint, holding that the suit, having been instituted on 21.01.2022, during an active moratorium under IBC, was barred by law, and the plaint itself was non-maintainable.

“The suit filed during the subsistence of moratorium is non est as per Section 14(1)(a) of the Code.”
(Para 4, Judgment)

“Moratorium Under IBC Creates a Blanket Bar on Institution of Suits Against Corporate Debtor”

The core dispute involved a civil suit for declaration, possession, arrears of rent, and injunction filed by the respondent (landowner) against M/s Mohota Industries Ltd., a corporate debtor undergoing Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC. The CIRP was initiated by NCLT on 30.08.2021, and the moratorium under Section 14(1)(a) remained in force until the approval of the resolution plan on 19.05.2023.

Despite this, the suit was filed on 21.01.2022, well within the moratorium period.

“Clause 1(d) of the NCLT order explicitly bars the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.”
(Para 12, Judgment)

The Court held that civil courts have no jurisdiction to entertain such suits due to the express statutory bar under Section 14 read with Section 63 of the IBC.

“Resolution Plan Freezes All Pre-CIRP Claims – Rent Claim Must Be Raised Before RP”

Justice Jawalkar held that claims for rent during CIRP constitute operational debt and must be routed through the Resolution Professional (RP) in accordance with IBC procedures. Since the respondent failed to raise her claim before the RP, her right to initiate civil proceedings stood extinguished.

“Once a resolution plan is duly approved by the Adjudicating Authority under Section 31, the claims as provided in the plan shall stand frozen... all such claims which are not a part of the resolution plan shall stand extinguished.”
(Electrosteel Steel Ltd. v. ISPAT Carrier Pvt. Ltd., Civil Appeal No. 2896/2024; Para 18, Judgment)

The Court reiterated the binding precedent laid down by the Supreme Court in Ghanshyam Mishra, emphasizing the concept of a “fresh slate” for resolution applicants.

“Section 238 of IBC Has Overriding Effect over CPC and Other Laws”

The trial court had erroneously reasoned that since the moratorium had ended by the time the matter was being adjudicated, the suit could continue. This approach was rejected.

“It is not necessary to look only into the pleadings in the plaint while considering Order VII Rule 11, specifically when the IBC is a special legislation which empowers NCLT to prohibit parties from initiating proceedings during the moratorium period.”
(Para 27)

The Court invoked Section 238 of the IBC, which gives the Code overriding effect over all other laws:

“The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”

The prohibition under Section 14 being mandatory, any civil suit instituted in defiance of this bar is void ab initio, irrespective of when it is adjudicated.

“Civil Court Lacks Jurisdiction Over Matters Within Domain of NCLT”

Reinforcing Section 63 of the IBC, the Court held:

“No civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which NCLT or NCLAT has jurisdiction.”

The suit in question, which sought recovery of possession and rent from the Corporate Debtor, was clearly a matter squarely within NCLT’s domain during CIRP.

Court Refuses to Recognize “Partial Validity” of the Suit

The respondent’s contention that at least the declaration and rent arrears portion of the suit should survive was also rejected. The Court clarified:

“Plaint cannot be rejected in part. Once the institution of the suit itself is barred by law, the entire plaint must be rejected.”
(Para 22)

The Court distinguished judgments such as Embassy Property and C. Ramachandran, holding that those were either public law matters or cases involving co-ownership rights, which were inapplicable to the present case.

“Suppression of Moratorium Status in Suit Filing Is Fatal”

The Court was also critical of the respondent’s suppression of the ongoing CIRP and moratorium status at the time of filing the suit. Such conduct, it held, further justified the rejection of the plaint.

“Admittedly, the suit was filed on 21.01.2022, suppressing this fact [of moratorium].”
(Para 27)

The High Court allowed the Civil Revision Application, set aside the trial court’s order dated 23.11.2023, and ordered rejection of the plaint.

“The plaint is rejected under Order VII Rule 11 read with Section 151 CPC. The IBC being special legislation overrides the CPC. The order passed by the trial court is contrary to the settled position of law.”

This judgment reiterates and reinforces the strict statutory embargo placed by Section 14 of the IBC. The institution of any civil suit against a corporate debtor during moratorium is not merely voidable but void ab initio. The Court has reaffirmed that IBC overrides CPC, and that civil courts must not entertain suits that the NCLT alone is competent to adjudicate.

Date of Decision: June 9, 2025