IBC Amendment Excluding Personal Guarantors From Interim Moratorium Applies To Pending Cases: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has held that the amendment to the Insolvency and Bankruptcy Code (IBC), which excludes personal guarantors to corporate debtors from interim moratorium protection, applies even to proceedings that were pending when the amendment came into force.

The bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha held that Section 96(4) of the IBC, introduced through the Insolvency and Bankruptcy Code (Amendment) Act, 2026, operates retroactively and applies to pending proceedings.

“We are of the considered view that the amending provisions made under Section 96 of the Code would apply retroactively, and also to the pending proceedings. Since the impugned order has been passed on 31st August 2026, when there was no interim moratorium, in our considered opinion, no illegality has been committed by the adjudicating authority in passing impugned orders,” the tribunal held.

The ruling came in appeals filed by Sangeeta Aggarwal and Sri Narain Aggarwal, challenging separate orders passed by the National Company Law Tribunal (NCLT) on August 31, 2026. The NCLT had initiated personal insolvency resolution processes against them on applications filed by Equentia Financial Services.

Canara Bank had initiated separate insolvency proceedings against Sangeeta and Narain under Section 95 of the IBC in December 2024. These applications triggered an interim moratorium under Section 96, staying legal proceedings relating to their debts and preventing creditors from initiating fresh ones.

Equentia filed its own applications against the two guarantors in November 2025. They argued that these were filed during the subsistence of Canara Bank's moratorium and were therefore non-est. They also contended that the 2026 amendment, which introduced Section 96(4) with effect from May 26, could not validate the applications retrospectively.

Equentia argued that the amendment applied to pending cases. The NCLAT agreed, relying on Bombay and Delhi High Court rulings, including Tata Capital, IDBI Trusteeship and Indian Bank. It also noted the Supreme Court's October 28, 2026 decision in Chitrasen Nagnath Gulave, which declined to interfere with the Bombay High Court's ruling.

The tribunal also referred to the Select Committee report on the IBC Amendment Bill, 2025, which highlighted concerns about personal guarantors misusing interim moratorium protection to obstruct or delay legitimate recovery proceedings.

The NCLAT also made its own observation on the issue:

“We are also of the considered view and may say with our experience that whenever recovery proceedings begin against a personal guarantor, the guarantor rushes to file an application before the Adjudicating Authority, invoking interim moratorium and this provision has been widely misused and this Appellate Tribunal has also flagged the issue in many of its judgments,” it observed.

The tribunal also referred to an IBBI circular dated September 21, 2026, which clarified that the interim moratorium under Section 96 had ceased to operate from May 26, 2026, in respect of pending applications involving personal guarantors to corporate debtors.

Applying Section 96(4), the NCLAT held that the amendment operated retroactively and applied to the pending proceedings. Since the NCLT passed the impugned orders on August 31, 2026, after the amendment came into force, the tribunal found no illegality in initiating the insolvency resolution processes.

The NCLAT dismissed both appeals. It made no order as to costs and disposed of the pending applications.