Authority: High Court of Judicature at Bombay

Order Date: 18 September 2026

Case Overview

  • The matter comprised a batch of writ petitions (WP 2819, WP 7805, WP 3374, WP 7587, WP 7598, WP 7600, WPL 22742, WPL 24045) filed by several banks and financial institutions challenging the operation of sub‑section 4 of Section 96 of the Insolvency and Bankruptcy Code (IBC) introduced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, effective 26 May 2026.
  • Petitioners (Indian Bank, RBL Bank Limited, Godrej Finance Limited, Asset Reconstruction Co. India Limited, Apna Sahakari Bank Limited) argued that the amendment should operate retroactively to curtail the rampant misuse of the interim moratorium by personal guarantors of corporate debtors.
  • Respondents (borrowers, guarantors, State of Maharashtra, and other individual defendants) contended that the amendment should apply prospectively only, invoking the literal rule of statutory interpretation and the protection of vested rights.
  • Counsel for petitioners included Mr. Amir Arsiwala, Mr. Charles D'Souza, Mr. Shadab S. Jan and others; counsel for respondents included Mr. Mayur Khandeparkar, Mr. Harish Adwant, Mr. Viraj Parekh and others.
  • The court examined extensive submissions, citing Supreme Court precedents (e.g., BCCI v. Kochi Cricket Private Ltd., M. Rajendran v. KPK Oils, Vineeta Sharma v. Rakesh Sharma, SEBI v. Rajkumar Nagpal, Tata Capital Financial Services Ltd. v. Neel Motors LLP), the distinction between retroactive, retrospective and quasi‑retroactive operation, and the mischief‑rule.
  • The court noted the Select Committee on the IBC (Amendment) Bill, 2025 report, which highlighted misuse of Section 96 by personal guarantors to stall creditor actions, and the need for a curative amendment.
  • After detailed analysis, the court concluded that sub‑section 4 of Section 96 is a procedural, remedial amendment intended to eliminate a mischief and therefore must operate retroactively, affecting applications filed under Sections 94/95 that were pending on 26 May 2026.

Final Outcome

  • The amendment is held to apply retroactively to all pending insolvency proceedings involving personal guarantors, thereby extinguishing the interim moratorium for such cases from 26 May 2026 onward.
  • Writ Petition 7805 of 2026 (Assets Reconstruction Co. India Ltd. v. Veer Gurjar Aluminium Industries Pvt. Ltd.): The court held that the interim moratorium does not apply; the DRAT was directed to hear the regular appeals and recovery proceedings by 31 Oct 2026.
  • Writ Petition 2819 of 2026 (Indian Bank v. Shabbir Abbas Patel): The restraining orders dated 03 Oct 2024 and 13 Mar 2026 were quashed; the auction sale dated 30 Sep 2024 and sale certificate dated 25 Feb 2026 were upheld as valid; the DRT‑I’s restraining order was set aside; police assistance was ordered for possession.
  • Writ Petition 3374 of 2026 (Godrej Finance Ltd. v. Ashok Rajkumar Gupta): The DRT’s order restoring possession was set aside; respondents were directed to hand over the property to the petitioner within four weeks.
  • Writ Petitions 7587, 7598, 7600 of 2026 (Apna Sahakari Bank Ltd. v. various borrowers): The DRT’s restraining orders preventing the bank from accepting the balance of auction proceeds and from issuing sale certificates were quashed; the bank’s rights to proceed with the securitisation‑related actions were restored.
  • Writ Petition (L) 22742 of 2026 and (L) 24045 of 2026 (RBL Bank Ltd. v. State of Maharashtra): The court directed the Court Commissioners to fix dates for physical possession of the secured flat in Borivali (East) and the row‑house in Chembur (East); police protection, including lady constables, was ordered; the banks may deposit charges for police assistance.
  • All pending applications in the above petitions were disposed of.

Topics: Insolvency Law, Interim Moratorium, Judicial Interpretation