Nanda Takawane And Ors vs The State Of Maharashtra Thr. G. P. And … on 7 July, 2026

July 10, 2026

Bombay High Court

Nanda Takawane And Ors vs The State Of Maharashtra Thr. G. P. And … on 7 July, 2026

1. Writ Petition No.13469 of 2025, filed by Nanda Takwane,
raises a challenge to the order dated 02/05/2022 passed by the Deputy
Registrar, Cooperative Societies, Pune, under Section 101 of the
Maharashtra Co-operative Societies Act, 1960 (for short ‘the Act’),
along with the order dated 28/12/2023 passed by the District
Collector under Section 156 of the Act, for executing the order of
02/05/2022 through the Tahsildar Office, Daund. The Respondent
No.2, the Deputy Registrar, had decreed the claim of Seva Vikas Co-
operative Bank, presently under liquidation, for recovery of an
amount exceeding Rs. Ten Crore against the Petitioner.

SPONSORED

The Petition also raises a challenge to the impugned notices
addressed to the Petitioner by the Tahsildar seeking to attach the
subject property set out in the schedule exhibited at Exhibit-A,
situated in Gat No. 394/3/B, with an approximate area of 02 H 00R,
along with the constructive area of RCC structure and a
Mangalkaryalay admeasuring 26,444 sq. ft.

The Petition, therefore, seeks quashing of the impugned
orders/notices as according to the Petitioner, the entire action initiated
against her is in violation of the protection granted in form of
moratorium under the Insolvency and Bankruptcy Code, 2016 (for
short, ‘the Code’) and in particularly under Section 95 and 96 thereof.




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In the second Writ Petition No. 3057 of 2026, filed by four
Petitioners, the challenge is raised to the order dated 19/06/2019,
once again passed by the Deputy Registrar of Cooperative Societies,
and the further orders dated 31/05/2022 and 1/06/2022 passed by the
District Magistrate under Section 156 of the Act read with Rule 107
of Maharashtra Co-operative Societies Rule, 1961. A challenge is
also raised to the impugned notices issued by the Tahsildar Office
seeking possession of the mortgaged properties against the dues
purportedly payable under the Order passed under Section 101 of the
MCS Act. Even in this case, the Petitioners objected to the
proceedings by invoking the protection in form of a moratorium
granted under Section 96 of the IBC.

In this case, the Petitioners had availed financial facility from
Shriram Nagari Sahakari Patsanstha Maryadit, Pune, for business
expansion, and according to the Petitioners, their company,
Siddheshwar Industries Pvt. Ltd. (“SIPL”) is a private limited
company primarily engaged in the business of auto components and
has manufacturing operations at Pimpri and Chakan. While availing
the financial facilities, the Petitioners, along with the co-borrowers,
also executed mortgaged deeds, and certain properties were offered
as collateral security by the Petitioners and the co-borrowers in
different combinations.

2. In the first Petition, where Nanda Takwane is the sole
Petitioner, she stood as a personal guarantor for the loan availed by
Siddheshwar Industries Pvt. Ltd. (SIPL) from Seva Vikas
Cooperative Bank Limited and, by executing personal guarantee(s)
on 26/11/2014, and 14/03/2017, the personal property was mortgaged

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for securing the repayment of the loan facility extended by the
financier.

3. The common factor in both the Petitions is the initiation of
corporate insolvency proceedings against Siddheshwar Industries Pvt.
Ltd. (SIPL) by order dated 14/05/2018 passed by the National
Company Law Tribunal, Mumbai Bench (“NCLT”), under the
Insolvency and Bankruptcy Code, 2016. The Order dated 14/04/2019,
admitted the Petition filed by one Gandhar Oil Refinery (India) Ltd.,
as the corporate debtor, Siddheshwar Industries Pvt. Ltd., defaulted in
making payment of Rs. 15,91,266/- as on 30/09/2017, along with
interest at the rate of 24 % as stipulated in the invoices for the supply
of hydraulic oil, machine lubricant, mineral oil, and other products.

By the order passed by the NCLT on 14/05/2018, the Petition
was admitted and a moratorium under Section 14 was imposed,
thereby, prohibiting 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, or tribunal,
arbitration panel, or any other authority, or any action to foreclose,
recover, or enforce any security interest created by the corporate
debtor in respect of its property, including action under Securitization
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.

The order of moratorium was directed to have effect from
14/05/2018 till completion of the corporate insolvency resolution
process or until the NCLT approved the Resolution Plan under sub-
section (1) of Section 31 of IBC or pass an order of liquidation of
corporate debtor under Section 33.


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Admittedly, subsequent to the CIRP order, the Board of
Directors of the Corporate Debtor stood suspended.

4. The State Bank of India, another creditor preferred an
application under Section 95 of the IBC in the form of Company
Petition (IB) No. 958 of 2022 on 30/04/2022 against Smt. Nanda
Takwane, the personal guarantor of Siddheshwar Industries Pvt. Ltd.,
and on 6/01/2023, by pressing into service the deed of guarantee
executed by her, and the proceedings were initiated in her capacity as
personal guarantor of the corporate debtor.

In the wake of the filing of the application under Section 95, it
is the claim of the Petitioner that the interim moratorium, as
contemplated under Section 96, commenced on the date of the
application, in relation to all the debts, and during the interim
moratorium period there was an embargo on: (i) any legal action or
proceeding pending in respect of any debt; and (ii) on the creditors of
the debtors in initiating any legal action or proceedings in respect of
any debt.

It is in the wake of the aforesaid provision, in the form of a
moratorium being imposed, we are informed that the proceedings
have progressed substantially and a Resolution Professional has been
appointed, who has even filed a report under the IBC before the
NCLT.

5. As far as the second Writ Petition, in which Nanda Takwane,
along with 4 others, availed the loan facility from Respondent No.2,
Shriram Nagari Sahakari Pathsanstha Maryadit, as the Petitioners, in
their individual capacities, along with the co-borrowers, has executed

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mortgaged deeds by mortgaging various properties situated in
different Gat numbers from Pargaon, Taluka Daund, District- Pune,
and in the wake of the CIRP proceedings being initiated against SIPL
by invoking the provisions of the IBC and the Petition having been
admitted, relying upon the application preferred under Section 95 by
the State Bank of India (the financial creditor) against the Petitioners
it is urged that no action can be taken as they are also the guarantors
of the corporate debtor.

6. Drawing advantage of the said application resulting into
imposition of interim moratorium under Section 96, it is the claim of
the Petitioners that, pursuant to the imposition of moratorium and
appointment of the Resolution Professional, who has filed its report
before the NCLT, the proceedings initiated under the Maharashtra
Co-operative Societies Act, 1960, in the wake of the recovery
certificate under Section 101, to be followed by the process being
initiated by the District Magistrate in pursuance of Section 156 of the
Act, cannot continue once the corporate debtor, SIPL, with which the
Petitioners are associated, is undergoing CIRP under the Code, and
particularly when the proceedings under Section 95 of the Code are
initiated against the Petitioners in their individual capacities.

7. In support of the relief in the Petition, the counsel for the
Petitioners by referring to the scheme of IBC and by relying upon the
decision of the Apex Court in Dilip Jiwrajka vs. Union of India and
ors1 would submit that the filing of an application under Section 95
automatically results into the imposition of interim moratorium under
Section 96, from the date of the application, and it is urged that the

1 (2024) 5 SCC 435

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filing of the application under Section 94 or 95 trigger the interim
moratorium, which ceases to have effect on the date of the admission
of the application (under section 100).

Relying upon Section 96 of IBC it is urged before us that the
impact of the interim moratorium imposed is, an embargo being
created upon continuation of any legal action or proceeding in respect
of any ‘debt’, as it is deemed to have been stayed and there is a
complete prohibition in the creditors or the debtors initiating any
legal action or proceedings in respect thereof.

Reliance is also placed upon the decision of this Court in case
of Mr. Ajeet Madhukar Mulay vs. Abhyudaya Co-operative Bank
Limited & Ors (Commercial Arbitration Petition No. 843 of 2024)
as well as another decision of this Court in case of Tata Capital
Limited vs. Geeta Pasi and Ors2.

In support of the Petition based on the effect of the imposition
of interim moratorium, it is also pointed out to us that the IBC
(Amendment) Act 2025, presented through Bill No. 107 of 2025, has
now proposed to insert a new sub-section (4) to Section 96 of the
Code, providing that the provisions therein shall not apply where an
application is initiated in insolvency resolution process in respect of a
personal guarantor to a corporate debtor, filed by a creditor or the
debtor itself and the counsel for the Petitioners would vehemently
urge that the interpretation of Section 96 and the effect of interim
moratorium must be construed in light of the amendment, which is
sought to be introduced in Section 96 of the Code.



2 2024 2 SCC Online Bom 1897

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8. As against the submission advanced on behalf of the
Petitioners, the learned counsel representing the two lenders, who
have secured recovery certificate under section 101 of the
Maharashtra Co-operative Societies Act, 1960 and subsequently
adopted the follow up action under Section 156 of the Act, would rely
upon a significant decision of this Court in case of Rozina Firoz
Hajiani & Ors vs. Union of India, through Ministry of Corporate
Affairs (WP (L) No. 5157 of 2026) where, an attempt to seek resort
to the provisions of IBC, 2016 to frustrate the claim of secured
creditors and auction purchasers from proceeding, in accordance with
law, was highly deprecated by the Division Bench, while
pronouncing its verdict on 18/03/2026. By relying upon the said
decision, it is submitted that in the facts of the case, it is held that the
interim moratorium imposed under Section 96 of the IBC initiated
against the personal guarantor would not apply to the Defendant
No.1, the principal borrower in the suit against whom no proceedings
have been initiated against IBC and the suit was directed to remain
stayed only against Defendant Nos.2 to 4 as moratorium orders were
imperative, as no proceedings were initiated against the principal
borrower.

9. The principle laid down in the aforesaid decision is invoked by
the learned counsel Mr. Sidheshwar Biradar appearing for
Respondent No.3, as he would submit that by no stretch of
imagination can the provisions of the Code and specifically in form
of moratorium shall be invoked to defeat the otherwise lawful and
legal remedy already availed by the financier/ lenders by taking resort
to the provisions of the Maharashtra Cooperative Societies Act.



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Reliance is also placed by him upon the decision of the Apex Court in
case of State Bank of India vs. V. Ramakrishnan and Anr 3, holding
that moratorium under Section 14 is inapplicable to a personal
guarantor of corporate debtor before and after its amendment in the
year 2018. It is urged that with the clarificatory amendment being
introduced in IBC in the year 2018, vide insertion of Section 3(b),
making it evidently clear that moratorium under Section 14 shall not
apply to a surety in a contract of guarantee for corporate debtor, it
was however held that the amendment being clarificatory can operate
retrospectively, by holding that the interpretation of the provision was
always like this since its enactment and conclusively it was held that
SARFAESI proceedings against personal guarantor of corporate
debtor can continue under SARFAESI Act, even though a
moratorium may be in force against a corporate debtor under Section
14 of the IBC.

Reliance is also placed upon the decision of the learned Single
Judge in case of IL & FS Financial Services Limited vs. Serveall
Constructions Pvt Ltd4, where the law laid down in Geeta Passi
(supra), and Dilip Jiwrajka (supra) received consideration and it was
held that the interim moratorium imposed under Section 96 of the
IBC initiated for Defendant Nos.3 and 4, who are personal guarantors
would not apply to the Defendant No.1, the principal borrower
against whom no proceedings have been initiated under IBC.

10. In light of the rival contentions advanced, we would refer to
the provisions of the IBC, as they are pressed into service for stalling
the action initiated by the lenders-banks/patsanstha either against the
3 (2018) 17 SCC 394
4 2026 SCC Online Bom 2460

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guarantors of the corporate debtor or the borrowers, who along with
the co-borrowers had mortgaged their properties as a security for the
loan facility availed.

The Insolvency and Bankruptcy Code, 2016, which has
consolidated and amended the laws relating to insolvency resolution
of corporate persons, partnership firms and individuals in a time
bound manner for maximization of value of its assets to promote
entrepreneurship, and balance the interest of all stakeholders, apply to
the companies, partnerships and proprietary firm as well as the
personal guarantors to corporate debtors as well as individual in
relation to their insolvency, liquidation, or bankruptcy. The IBC has
defined ‘creditor’ in Section 3 (10) as below:-

“(10) ‘creditor’ means any person to whom a debt is owed and includes a
financial creditor, an operational creditor, a secured creditor, an unsecured
creditor and a decree-holder;”

Debt is defined in Section 3 (11) as below:-

“(11) ‘debt’ means a liability or obligation in respect of a claim which is due
from any person and includes a financial debt and operational debt;”

11. Chapter II of the Code has set out the corporate insolvency
resolution process, which permits the initiation of process by a
financial creditor, an operational creditor or the corporate debtor
itself, when it commits a default and the said chapter comprise of
declaration of moratorium and public announcement, on admission of
the application filed before the adjudicatory authority under Section 7
or Section 9 or Section 10 and Section 14 will cover a moratorium
prohibiting all of the following:-

“(a) 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

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panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the corporate debtor
any of its assets or any legal right or beneficial interest therein;

(c) 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);

(d) the recovery of any property by an owner or lessor where such property is
occupied by or in the possession of the corporate debtor.”

12. Another provision for moratorium in form of ‘interim
moratorium’ is found to be in Chapter III, when a debtor, who
commits a default or the creditor, may apply either personally or
through a resolution professional to the adjudicating authority, for
initiating the insolvency resolution process by submitting an
application.

This action result in imposition of moratorium under Section
96 which provides for the following:-

“96. Interim moratorium- (1) When an application is filed under section 94 or
section 95-

(a) an interim-moratorium shall commence on the date of the application in
relation to all the debts and shall cease to have effect on the date of admission of
such application; and

(b) during the interim-moratorium period-

(i) any legal action or proceeding pending in respect of any debt shall be deemed
to have been stayed; and

(ii) the creditors of the debtor shall not initiate any legal action or proceedings
in respect of any debt.”

13. Clause 2 and Clause 3 of Section 96 reads thus:-

‘(2) Where the application has been made in relation to a firm, the interim-
moratorium under sub-section (1) shall operate against all the partners of the
firm as on the date of the application.

(3) The provisions of sub-section (1) shall not apply to such transactions as may
be notified by the Central Government in consultation with any financial sector
regulator.”

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14. By the amending Act of 2026, the following clause is inserted
but the effective date of the same is not yet notified and the said
clause is thus:-

‘(4) the provisions of this section shall not apply where an application is filed for
initiating an insolvency resolution process in respect of a personal guarantor to
a corporate debtor.’

15. The very said chapter further contain provision for admission
or rejection of the application and Section 101 prescribe that when
the application is admitted under Section 100, a moratorium shall
commence in relation to all the debts and shall cease to have effect at
the end of the period of one hundred and eighty days beginning with
the date of admission of the application or on the date on which the
Adjudicating Authority passes an order on the repayment plan under
Section 114, whichever is earlier. Sub-section (2) of Section 101
deserve the reproduction and we reproduce the same:-

‘(2) During the moratorium period–

(a) any pending legal action or proceeding in respect of any debt shall be
deemed to have been stayed;

(b) the creditors shall not initiate any legal action or legal proceedings in
respect of any debt; and

(c) the debtor shall not transfer, alienate, encumber or dispose of any of his
assets or his legal rights or beneficial interest therein;’

16. It is this interim moratorium under Section 96, which is pressed
into service to halt or assert the continuation of proceedings initiated
against the Petitioners by invoking the provisions of the Maharashtra
Co-operative Societies Act, 1960, as there was a default in repayment
of the facility advanced. In terms of the registered mortgaged deed,
which was executed, by the borrowers/guarantors, it is the claim of
the Bank that it is entitled to realise the amount due and payable to it
from the proceeds that would be collected by sale of such property,

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on its attachment. Pursuant to the recovery certificate being obtained,
demand notices were issued in respect of the mortgaged property and
it is urged that this process was initiated prior to the date of filing of
Section 95 proceedings by the State Bank of India before the NCLT
and the liability of the borrower/guarantor was already crystallized.

17. It is urged before us by Mr. Sidheshwar Biradar that there is an
outstanding amount of Rs. 20,00,00,000 (Twenty Crores) recoverable
from the Petitioners as well as the surety which is public money and
the Respondent No.3 has already undergone liquidation process and it
is necessary to recover the said amount by selling the mortgaged
property.

The basic premise on which the relief in WP No. 13469 of
2025 is opposed is that the Petitioner Nanda Takwane as well as the
Directors of SIPL always showed their willingness to pay outstanding
amount under the OTS scheme and even after filing of the Writ
Petition they approached the bank for accepting OTS proposal, but by
filing the proceedings in form of the present Petition they are seeking
stay of the recovery proceedings though the certificate issued under
Section 101 of the Maharashtra Co-operative Societies Act is never
subjected to challenge and therefore this attempt to project the
moratorium amounts to abuse of process of law and the Petition
deserves rejection with heavy cost. It is urged that the submission
advanced by the Petitioner is an attempt to misuse the jurisdiction of
this Court.

In WP No. 3057 of 2026, Mr. Veerdhaval Kakade appearing for
Shriram Nagari Sahakari Pathsanstha and its Recovery Officer have
some how similar stand as adopted by advanced by Mr. Biradar, as

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he would submit that the Respondent no.2 has initiated proceedings
under Section 101 of the Cooperative Societies Act, and the recovery
certificate was issued as early as on 19/06/2019 against the Petitioner
and the Co-borrowers and this order was never challenged by them.
Thereafter, Respondent No.2, initiated execution proceedings before
the District Collector, Pune, by invoking Section 156 and the District
Magistrate passed order on 31/05/2022, and thereafter on 1/06/2022
appointed the Tahsildar, Daund to execute the recovery certificate and
take possession of the secured assets.

In regards to the defence of interim moratorium under Section
96 of IBC, it is submitted that the insolvency proceedings under
Section 95 are initiated against the Petitioner by SBI, being the
personal guarantor of the corporate debtor namely Siddheshwar
Industries Pvt. Ltd., but the co-borrowers in the loan transactions are
not party to the insolvency proceeding and it is categorically asserted
that Shriram Nagari Sahakari Pathsanstha has no transactions with
the corporate debtor namely SIPL and the loan transactions between
the Petitioners and the Pathsanstha are independent transaction,
which has no relationship with corporate debtor. In addition, it is also
urged that blanket moratorium cannot be extended to the present
execution proceedings and he would place reliance upon the decision
of the Apex Court in case of Saranga Anilkumar Aggarwal vs.
Bhavesh Dhirajlal Shet and ors5.

He would pose a question as to whether the benefit of
moratorium can also be availed by the co-borrowers, who are not
party to the insolvency proceedings and it is his specific submission

5 (2025) 4 SCC 629

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that the liability of borrower and co-borrower is co-extensive/co-
terminus in respect of the debt but the moratorium under Section 96
of IBC is not co-extensive and therefore the benefit of the interim
moratorium cannot be extended to co-borrowers/co-judgment debtor
in execution proceedings when no such proceedings are initiated
under IBC against them.

By relying upon Section 128 of the Indian Contract Act, he
would submit that a Surety’s liability is co-extensive with the
principal debtor, and it is not affected by the borrowers insolvency
proceedings. He would place reliance upon the decision in case of IL
& FS Financial Services Limited vs. Serveall Constructions Pvt Ltd
(supra).

In such circumstances, it is sought to be urged that the
Respondent No.2, has secured assets of co-borrowers, who are not
party to the insolvency proceedings and therefore, there is no
question of depletion of the assets of the debtors in the insolvency
proceedings, if that is to be considered as the object in imposing
interim moratorium.

18. In light of the scheme involved under Section 14 and Section
96 moratorium, it is worth to note that an interim moratorium
imposed upon an application being filed under Section 94 by a
debtor, who commits a default, to the adjudicating authority for
initiation of insolvency resolution process or when the creditor has
filed an application to the adjudicating authority for initiation of
insolvency process, from the date of filing of such application, an
interim moratorium shall commence in relation to ‘all the debts’ and
this shall continue till the date of admission of such application.


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During this interim moratorium, legal action or proceedings in
respect of such debts shall deem to have been stayed and even the
creditors of the debtor are forbidden from initiating any legal action
or proceedings in respect of the debt.

While the validity of the said provision was tested in Dilip
Jiwrajka (supra), the triggering of interim moratorium under Section
96, was considered, to be on the submission of application under
Section 94 or Section 95. While clarifying the purpose of interim
moratorium, being to restrain the initiation or continuation of legal
action or proceedings against the debt, the Apex Court emphasized on
the words ‘in respect of any debt’ and also contra-distinguished the
said provision from the provision for moratorium contained in
Section 14 in relation to CIRP in Part II and we deem it appropriate
to reproduce the relevant observations :-

“57. Section 96, as its marginal note indicates, deals with an “interim-
moratorium”. In terms of Section 96, the interim moratorium takes effect on the
date of the application. In other words, the very submission of an application
under Section 94 or Section 95 triggers the interim moratorium which then
ceases to have effect on the date of the admission of the application (under
Section 100). The consequences which flow from an interim moratorium are
specified in clause (b) of sub-section (1) of Section 96. The impact of the interim-
moratorium under Section 96 is that a legal action or proceeding pending in
respect of any debt is deemed to have been stayed and the creditors or the
debtors shall not initiate any legal action or proceedings in respect of any debt.
The crucial words which are used both in clause (b)(i) and clause (b)(ii) of sub-
section (1) of Section 96 are “in respect of any debt”. These words indicate that
the interim-moratorium which is intended to operate by the legislature is
primarily in respect of a debt as opposed to a debtor. Clause (b) of sub-section
(1) indicates that the purpose of the interim-moratorium is to restrain the
initiation or the continuation of legal action or proceedings against the debt.

58. This must be contra-distinguished from the provisions for moratorium which
are contained in Section 14 in relation to the CIRP under Part II. Section 14(1)

(a) provides that on the insolvency commencement date, the institution of suits or
continuation of pending suits or proceedings against the corporate debtor,
including proceedings in execution shall stand prohibited by an order of the
adjudicating authority. Clause (b) of sub-section (1) of Section 14 empowers the
adjudicating authority to declare a moratorium restraining the transfer,
encumbrance, alienation or disposal by the corporate debtor of any of its assets

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or any legal right or beneficial interest therein. Significantly, the moratorium
under Section 14 operates on the order passed by an adjudicating authority. The
purpose of the moratorium under Section 96 is protective. The object of the
moratorium is to insulate the corporate debtor from the institution of legal
actions or the continuation of legal actions or proceedings in respect of the
debt.”

19. In light of the authoritative guidance to the aforesaid effect,
when the interim moratorium contemplated under Section 96 is
applicable in relation to all ‘debts’ and the term ‘debt’ being defined
under the IBC to cover a liability or obligation in respect of a claim,
which is due from ‘any person’ and that it shall include a financial
debt and operational debt, the interim moratorium which shall operate
qua ‘all the debts’ , is a provision intended to freeze legal
proceedings. As debt is a liability or obligation, apart from the
borrower, even a person who is a guarantor/surety is also covered
because the protection is not available against a particular debtor or
guarantor, but it is a protective mechanism intended to freeze the
legal action or proceedings pending in respect of the ‘debt’ and the
creditor of the debtor is prohibited from initiating any legal action or
proceedings in respect of the debt. The imposition of moratorium is
in relation to debt and not the debtor and this protection is available
to the debtor as well as its guarantor and when a moratorium is qua
the debt, it is equally applicable to the Guarantor as well as the
Debtor/ Borrower. The definition of the term ‘debt’ also offers a
clarity, as it is defined to be a liability or obligation in respect of a
claim which is due from ‘any person’, which therefore diminishes the
line between the persons from whom the debt is due and it may be a
borrower or a guarantor. As per Section 126 of the Contract Act,
1872, ‘a contract of guarantee’ is a contract to perform the promise or

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discharge the liability of a third person in case of his default and the
person giving the guarantee, referred to as ‘surety’, gives the
guarantee on default of the ‘principal debtor’.

20. In Tata Capital Limited Vs. Geeta Passi & Ors. (supra), the
learned Single Judge of this Court was confronted with an identical
situation, when it was sought to be argued that considering a debt,
which remains unpaid, the creditor could move the Court against the
principal borrower and the surety/guarantor for recovery of the debt
as the liability of surety/guarantor is co-extensive with that of the
principal borrower and creditor may choose to proceed against the
guarantor alone for recovery of debt, without suing principal
borrower, in the backdrop of the scope of ‘debt’ in such a scenario
and the following observation of the learned Single Judge is relevant
to note :-

“9. A “debt”, is defined in Section 3(11) of the Insolvency and Bankruptcy Code
to mean a liability or obligation in respect of a claim which is due from any
person and includes a financial debt and operational debt. It is material to note
that Section 3(11) of the Insolvency and Bankruptcy Code when it defines
“debt”, states it to be a liability or obligation in respect of a claim which is due
from “any person”. The very use of the expression “any person”,would mean
that no distinction can be drawn on the basis of, from whom the debt is due, a
principal borrower or a guarantor. Section 96 of the Insolvency and Bankruptcy
Code, also uses the expression “all the debts”, in clause (a) of sub-section (1)
and “any debt”, in sub-clauses (i) and (ii) of clause (b) of sub-section (1). When
Section 96 of the Insolvency and Bankruptcy Code, speaks of a moratorium in
respect of “any debt”, the same would mean the entire debt, irrespective from
whom it is due.”

Clarifying that the protection mandate of Section 96 of IBC is
in respect of ‘debt’, on facts it is held that when the NCLT granted a
moratorium under Section 96 of IBC in favour of Mr.Kapoor, the
principal borrower being the proprietor of SMC and Mrs Pavan
Kappor, being the guarantor, it was held that it will have to be
construed as a moratorium in respect of the entire ‘debt’ and the

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claim cannot make distinction between a ‘debt’ vis-a-vis the principal
debtor or other parties thereto as guarantors or even considering their
co-extensive liability and it is categorically held thus :-

“The ‘debt’ for the purpose of the moratorium, cannot be severed into the ‘debt’
of the principal borrower or for that matter of one of the guarantors on the one
hand, and the debt of the other guarantors, in this case the legal heirs of original
Respondent 4, Mr B.L. Passi.”

Thus, it was held that the ‘debt’ is ‘debt’ for all the purpose and
it is a ‘debt’ in its entirety and it is not permissible to distinguish
between the debt of a principal borrower and that of the guarantor.

21. The aforesaid pronouncement from the learned Single Judge
was followed by another Single Judge in Mr.Ajeet Madhukar Mulay
(supra), where a challenge was raised to the Arbitration Award
alongwith the orders passed in the applications filed by the
petitioners, who stood as guarantors for the financial assistance
availed by one M/s Nirmangold Alloys Private Limited and M/s
Nirmangold Plasttech Private Limited.

When there was default in repayment, the credit facility
accounts of the company were classified as NPA and notices were
issued to the principal borrower and the guarantors, which were not
complied with, giving rise to a dispute filed under Section 84 of
Multi-State Co-operative Societies Act, 2002. Similarly, the
arbitration proceedings were invoked by the disputant bank, seeking
recovery of the outstanding amount and during the pendency of the
arbitration proceedings, applications were filed under Section 94 of
the IBC and the Arbitrator held that since the moratorium had
commenced, the arbitration cannot proceed.

The said order, being a subject matter of the Arbitration
Petition, it was noted that the principal borrowers, M/s Nirmangold

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Plasttech Private Limited and M/s Nirmangold Alloys Private
Limited were admitted to insolvency and undergoing corporate
insolvency process under the IBC and the two of the guarantors
claimed benefit of the interim moratorium under Section 96 of IBC
premised on filing of applications under Section 94 of IBC for
personal insolvency. It was urged that as per the provisions of IBC,
the filing of application under Section 94 triggers an interim
moratorium in relation to ‘all the debts’ from the date of filing of the
application and during the interim moratorium, any legal action or
proceedings in respect of any debt shall be deemed to have been
stayed. This submission was accepted by the learned Arbitrator, who
stayed the arbitration proceedings qua the two guarantors, but
continued the proceedings against the other guarantors. By placing
reliance upon the decision in the case of Tata Capital Limited Vs.
Geeta Passi & Ors. (supra) and in the light of the observations in
Dilip Jiwrajka (supra), the learned Single Judge held thus :-

“67(a) The continuation of the arbitration proceedings against the
Petitioners despite the stay of “debt” under Section 96 of IB Code on the
applications filed by the other guarantors disregards the binding judicial
pronouncement of Hon’ble Apex Court and this Court and is violative of
fundamental policy of Indian law under Section 34(2)(b)(ii) of Arbitration Act.”

22. The applicability of triggering of moratorium, as contemplated
in Section 96, received a further clarification by Delhi High Court in
Axis Trustee Services Ltd. Vs. Brij Bhushan Singal & Anr. 6, when
the following clarification was recorded :-

“34. Before the insolvency applications were filed against defendant
No.1, counsel for the defendants had also contended that the interim moratorium
in respect of one of the co-guarantors would also apply to the other co-
guarantor for the same debt as the liability of both the co-guarantors arise from
the same debt. Reliance is placed on the words “any debt” occurring in section
96(1)(b) of the IBC. Though I need not delve into this submission in view of the
fact that insolvency proceedings have subsequently been filed against defendant
6 2022 SCC OnLine Del 3634

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No.1, however, since I have heard counsels for the parties extensively on this
issue, I propose to address the same.

35. In my view, the language of section 96(1) of the IBC cannot be
stretched so as to include all co-guarantors within the ambit of the interim
moratorium. The reference to “all the debts” in section 96(1)(a) has to be in
respect of all debts of a particular debtor. This is clear from the language used
in section 96(1)(b)(ii) to the effect that “the creditors of the debtor shall not
initiate any legal action or proceedings in respect of any debt”. Therefore, the
effect of the interim moratorium is only in respect of the debts of a particular
debtor. By no stretch of imagination can it be said to include other independent
guarantors in respect of the same debt of a corporate debtor. Merely because an
interim moratorium under section 96 is operable in respect of one of the co-
guarantors, the same would not apply to the other go-guarantor(s).”

23. The counsel for the Respondents would place heavy reliance
upon the decision of the learned Single Judge in Rozina Firoz
Hajiani (supra) and we have carefully perused the finding rendered
in the said judgment, which necessarily has to be appreciated against
the facts of the case and the court taking note of a disturbing trend, in
regards to the manner in which the chronic defaulters were resorting
to the provisions of IBC, 2016 to frustrate secured creditors and
auction purchasers from proceeding, in accordance with law, under
the provisions of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (for short,
“the Securitisation Act“).

Specifically noting that the borrowers/guarantors act as fence
sitters and do not take any steps when the secured creditors proceed
under section 13(2) and take any further consequential steps, till the
culmination of the process and the auction purchasers coming into
picture. Noting that at the stage, when the auction sale is conducted
and the auction purchaser comes into picture and in some cases, even
when the sale certificate is issued and the physical possession is
about to be handed over, the original borrowers/guarantors initiate

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collusive proceedings under Section 94 or 95 of IBC, triggering a
moratorium under Section 96, by approaching the NCLT. As a result,
the whole process comes to a standstill and such
borrowers/guarantors, who are defaulters, wear a cloak of immunity
under the garb of moratorium triggered under Section 96 of IBC. In
such a scenario, the secured creditor and/or the auction purchaser are
left with no other option, than to approach the NCLT and at times the
proceedings are carried to NCLAT and then to the Supreme Court,
but in this full process, the interest of the auction purchaser is
completely frustrated, despite having parted with consideration in
terms of the bid amount.

It is in this premise, when the facts before the Court revealed
that the bank took steps for realisation of its unpaid dues and time to
time conducted the auction and when it issued the tenth auction
notice, scheduling the date for auction, the borrowers and guarantors
approached the DRT, by filing securitisation application, which was
after more than seven years when the notice was served on the
borrowers and guarantors under Section 13(2) of the Securitisation
Act. In the auction conducted, the petitioners were found to be the
successful bidders and deposited the entire amount and sale
certificate was issued in their favour, which was also registered and
they were put in physical possession.

At this crucial stage, the personal guarantor filed an application
under Section 94 of IBC and claimed the umbrage of the moratorium
under Section 96 and this fact being brought to the notice of DRT, the
Tribunal refused to proceed in the wake, by observing that there was
a moratorium imposed.



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24. It is in these grave circumstances, the Court observed that Debt
Recovery Tribunal was not justified in stalling the proceedings and it
should have taken note of sequence of events, including one
important fact that the NCLT, Mumbai excluded the secured assets
from moratorium, but ignoring this, the DRT passed one line order,
restraining the bank from taking any further steps till disposal of the
interim application pending in the securitisation application. Noting
that the whole exercise was purported to be a manifest misuse of
provisions of law, and the Court in exercise of its writ jurisdiction
pass an order to set right the obvious wrong, it was noted that the
parties would continue to misuse the provisions of law to browbeat
the subordinate tribunals like DRT and, therefore, it was found to be a
case, where the High Court shall exercise its writ jurisdiction and the
impugned order passed by the DRT was set aside, by directing that
the bank need not await disposal of the interim application for taking
further steps in pursuance of the auction sale and registration of sale
certificate in favour of the petitioners. The Court Commissioner was
directed to proceed in accordance with law in terms of the order
passed by the competent authority under Section 14 of the
Securitisation Act and take consequential steps.

The law laid down in Rozina Firoz Hajiani (supra) will,
therefore, have to be appreciated in the backdrop of the malicious
attempt to use the proceedings to defeat the due course of law.
Reliance placed upon the aforesaid judgment by the Respondents,
therefore, do not lay down as a proposition of law that in every case,
where an application is filed under Section 94 by the debtor or under
Section 95 by the creditor to initiate insolvency resolution process, it

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is an attempt to dislodge the claim of the creditor.

25. The decision in the case of State Bank of India Vs. V.
Ramakrishnan & Anr. (supra) upon which the reliance is placed by
the Respondents, also revolve around Section 14 of the IBC, where it
is held that the moratorium under Section 14 is inapplicable to a
personal guarantor of corporate debtor and with clarity it is ruled that
not only was Section 14 inapplicable to personal guarantor of
corporate debtor prior to its amendment in 2018, but this position of
law is confirmed by the clarificatory amendment through insertion of
Section 3(b), which make it clear that moratorium under Section 14
shall not apply to a surety in a contract of guarantee for corporate
debtor. In fact, in the said decision, the Apex Court noted the
distinction between moratorium under Section 96 alongwith Section
101 and the moratorium imposed under Section 14 and observed that
Section 14 cannot possibly apply to a personal guarantor and when an
application is filed under Part III, an interim moratorium or a
moratorium is applicable in respect of ‘any debt’. Drawing A
distinction, it is noted that it is a separate moratorium, applicable
separately in the case of personal guarantors against whom
insolvency resolution process may be initiated under Part III and the
protection of the moratorium under these sections is far greater than
that of Section 14 in that pending legal proceedings in respect of the
debt and not the debtor are stayed.

The difference in language of Sections 14 and 101 was set out
for a reason, which was reflected in the following words :-

“26.1 Section 14 refers only to debts due by corporate debtors, who are
limited liability companies, and it is clear that in the vast majority of cases,
personal guarantees are given by Directors who are in management of the
companies. The object of the Code is not to allow such guarantors to escape

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from an independent and co-extensive liability to pay off the entire outstanding
debt, which is why Section 14 is not applied to them. However, insofar as firms
and individuals are concerned, guarantees are given in respect of individual
debts by persons who have unlimited liability to pay them. And such guarantors
may be complete strangers to the debtor-often it could be a personal friend. It is
for this reason that the moratorium mentioned in Section 101 would cover such
persons, as such moratorium is in relation to the debt and not the debtor.”

26. The decision in case of BRS Ventures Investments Limited Vs.
SREI Infrastructure Finance Limited & Anr. 7 does not take the case
of the Respondents any further, as it laid down a proposition of law
that a resolution plan of a corporate debtor approved by the
adjudicating authority binds the corporate debtor, its employees,
members, creditors, guarantors and other stake holders and, therefore,
where a company furnishes a corporate guarantee for securing a loan
taken by another company and if the CIRP of the corporate guarantor
ends in a resolution plan, it will bind the creditor of the corporate
debtor and the corporate guarantor’s liability may end in such a case
by operation of law. But, such a resolution plan of the corporate
guarantor will not affect the liability of the principal borrower to
repay the loan amount to the creditor after deducting the amount
recovered from the corporate guarantor or the amount paid by the
resolution applicant on behalf of the corporate guarantor as per the
resolution plan.

27. The situation before us is, however, completely distinct than
the one which is existed in BRS Ventures Investments Limited
(supra). The Petitioners before us are the guarantors of the corporate
debtor, Siddheshwar Industries Private Limited (“SIPL”), which is
undergoing CIRP. Upon the State Bank of India filing separate
applications under Section 95 against the personal guarantors of the

7 (2025) 1 SCC 456

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corporate debtor, SIPL, the interim moratorium has come into
operation.

Writ Petition No.3057 of 2026 is accompanied with the case
status of all the applications filed by the State Bank of India against
the four Petitioners, the guarantors, being impleaded as Respondents
and this include Smt.Nanda Takawane, Vikas Takawane, Raviraj
Takawane and Yuvraj Takawane, all being the personal guarantors to
the corporate debtor, SIPL. We are informed that the said applications
are pending before the NCLT and since it is in relation to the ‘debt’,
which is due and payable by the corporate debtor, SIPL, and the
Petitioners are the guarantors to the said transaction, upon the
application being filed by the creditor (State Bank of India), on filing
of the application, the interim moratorium is triggered in relation to
all the debts and by virtue of clause (b) of sub-section (1) of Section
96 of IBC, any legal action or proceedings pending in respect of the
debt is deemed to be stayed and the creditors or the debtors are not
allowed to initiate any legal action or proceedings in respect of such
debt.

In light of the aforesaid position clearly surfacing on record,
we are not persuaded to accept the submission that the proceedings
initiated under Section 101 of the Maharashtra Co-operative Societies
Act, 1960, resulting into a recovery certificate being issued against
the Petitioners, shall be allowed to proceed. However, when we have
perused the list of the borrowers/co-borrowers furnished by
Mr.Kakade, we find that the borrowers of Seva Vikas Co-operative
Bank Limited are the four Petitioners, but the co-borrowers are
distinct individuals. In the said transaction, once again the guarantors

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are interchangeably the four Petitioners in Writ Petition No.3057 of
2026, but the mortgaged property is the property of the co-borrowers.
We must clarify that the moratorium imposed under Section 96 do
apply to the debt which is due and payable to the corporate creditor
by the corporate debtor, but if the mortgaged properties belong to the
co-borrowers, who are not the guarantors of the corporate debtor i.e.
SIPL, the moratorium will not impact these properties, if the
properties exclusively belong to the co-borrowers. However, if the
property is joint in the name of the co-borrowers and the Petitioners,
who are the individual guarantors of the corporate debtor and though
they happened to be the borrowers of Seva Vikas Co-operative Bank,
such transactions shall not proceed.

28. The conclusion drawn by us to the aforesaid effect restrict the
moratorium only to the principal borrower and the guarantor of the
corporate debtor and this provision in fact intended to cover the debt
of a personal guarantor, if he was a personal guarantor to a corporate
debtor, who is admitted to IBC proceedings and to do away with the
said mischief, the Section 96 of IBC is amended to include a
provision to the effect that the moratorium shall not apply, where an
application is filed for initiating an insolvency resolution process in
respect of a personal guarantor to a corporate debtor, but since this
provision has not yet come into force, we must issue a declaration
sought by the Petitioners and as long as the moratorium continue to
be in force, the Respondents, the officials from the Co-Operative
Department and the Recovery Officer of Shree Ram Nagari Sahakari
Patsanstha and Seva Vikas Bank Limited shall stay their hands of and
shall not take steps for recovery of the amount due and payable,

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though the recovery certificate is secured by them. But we clarify that
this prevention is applicable only to the Petitioners and their
properties only.

The Writ Petitions are made absolute in the aforesaid terms.
In light of the aforesaid pronouncement, the Interim
Application seeking stay of the further notices stands disposed of.

(MANJUSHA DESHPANDE, J.)                      (BHARATI DANGRE, J.)




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