Authority: High Court of Judicature at Bombay

Order Date: 18 September 2026

Case Overview

  • The bench (Justices Manish Pitale & Shreeram V. Shirsat) considered a batch of writ petitions (WP 2819, WP 3374, WP 7805, WP 7587, WP 7598, WP 7600, WPL 22742, WPL 24045) filed by various secured creditors (Indian Bank, RBL Bank, Godrej Finance, Asset Reconstruction Co. India, Apna Sahakari Bank) against borrowers/guarantors.
  • Central question: whether sub‑section (4) of Section 96 of the Insolvency and Bankruptcy Code, 2016 (added by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and effective 26 May 2026), operates retroactively (i.e., also to applications filed under Sections 94/95 that were pending on that date) or only prospectively.
  • Petitioners argued that the amendment was remedial, intended to curb rampant misuse of the interim moratorium under Section 96 by personal guarantors of corporate debtors, and therefore must apply to pending proceedings.
  • Respondents contended that the plain language (“is filed”) and the presumption against retrospective operation meant the amendment should apply only to applications filed after 26 May 2026, preserving the interim moratorium as a vested right.
  • The Court examined extensive submissions, referenced a recent Single‑Judge judgment in Tata Capital Financial Services Ltd. v. Neel Motors LLP (which held the amendment prospective but effective to facts existing on the amendment date), and analyzed statutory interpretation principles (literal rule, mischief rule, retroactive vs. retrospective operation, vested rights).
  • The Court reviewed comparative case law on retroactivity (e.g., Dilip Vs Mohd. Azizul Haq, BCCI v. Kochi Cricket Private Limited, SEBI v. Rajkumar Nagpal, Ellora Paper Mills Ltd., TRF Ltd., Perkins Eastman Architects, M. Rajendran v. KPK Oils, Bengal Immunity Co.) and the Select Committee report on the IBC Amendment Bill 2025.
  • The Court concluded that the amendment is procedural, does not affect a vested right, and was enacted to address a clear legislative mischief; therefore, it must operate retroactively to pending applications as well.

Final Outcome

  • The Court held that sub‑section (4) of Section 96 applies retroactively, extinguishing the interim moratorium for all pending insolvency applications concerning personal guarantors as of 26 May 2026.
  • Accordingly, the Court disposed each writ petition:
  • WP 7805 – Allowed petition; held interim moratorium does not apply; directed DRAT to hear appeals by 31 Oct 2026 and DRT‑Aurangabad to proceed with recovery.
  • WP 2819 – Quashed DRT‑I orders dated 03 Oct 2024 and 13 Mar 2026; held interim moratorium ceased on 26 May 2026; confirmed auction sale and physical possession of secured asset.
  • WP 3374 – Set aside DRT‑Pune order restoring possession; directed possession to be handed over to secured creditor; rejected respondents’ claim of interim moratorium.
  • WP 7587, 7598, 7600 – Quashed DRT‑Pune restraining orders; held interim moratorium inapplicable; allowed banks to accept auction proceeds and issue sale certificates.
  • WPL 22742 & WPL 24045 – Directed Court Commissioners to fix dates for police‑assisted physical possession of the secured flats/row‑house; ordered police support including lady constables.
  • The Court emphasized that the amendment’s retroactive effect is essential to curb the “number one mechanism” of misusing Section 96 to siphon crores, as highlighted by NCLT members and the Select Committee.
  • All pending applications in the listed petitions were disposed of.

Topics: Insolvency Law, Retroactive Legislation, Secured Creditors