A personal guarantor who has been sheltering behind the interim moratorium since filing an insolvency application no longer has that shelter — and has not had it since 26 May 2026. The Insolvency and Bankruptcy Board of India has now placed that position on record for the entire insolvency profession, confirming that the protection fell away even for applications that were already pending before the Adjudicating Authority on that date.
The confirmation comes through Circular No. IBBI/II/106/2026 dated 21 September 2026, addressed to all registered insolvency professionals, all recognised insolvency professional entities and all registered insolvency professional agencies. The circular communicates two High Court judgments — one from the Bombay High Court and one from the Delhi High Court — on how sub-section (4) of section 96 of the Insolvency and Bankruptcy Code, 2016 operates in time. Both judgments construe section 96(4). It is the circular itself, at paragraph 4, that carries the same position across to section 124.
Quick Answer: Has the Interim Moratorium for Personal Guarantors Ended?
Yes. The interim moratorium under section 96 of the Insolvency and Bankruptcy Code, 2016, and correspondingly under section 124, ceased to operate in respect of a personal guarantor to a corporate debtor with effect from 26 May 2026. IBBI Circular No. IBBI/II/106/2026 dated 21 September 2026 confirms that the cessation applies to applications that were pending before the Adjudicating Authority on 26 May 2026, and not only to applications filed after that date. The position rests on sub-section (4) of sections 96 and 124, inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026. The Bombay High Court (judgment dated 24 July 2026) and the Delhi High Court (judgment dated 19 August 2026) both construed section 96(4) and held it applicable to applications already pending; IBBI has recorded the same position for section 124.
Quick Reference
What Changed?
The statutory change took effect on 26 May 2026. What the circular resolves is the question that followed it: does the removal of the interim moratorium reach applications that were already pending before the Adjudicating Authority on that date?
Why This Matters
The interim moratorium was, for several years, the single most valuable feature of the personal guarantor insolvency route for guarantors themselves. It began the moment an application was filed, before any scrutiny of merits, and it froze the creditor's other remedies while the Adjudicating Authority worked through the process. Where matters remained pending for extended periods, the freeze became the outcome rather than a procedural incident.
Removing the interim moratorium changes the economics of that filing. The guarantor gains nothing automatic by filing, and the creditor's suit, arbitration or enforcement action is no longer parked while the insolvency application waits its turn. The question of whether the removal applied to matters already in the pipeline was therefore not academic — it decided whether a stay that had been operating for months or years survived the amendment. Both High Courts answered that it did not.
Under the Code, when an insolvency application is filed against or by an individual, an interim moratorium starts automatically. During that period, legal action and proceedings relating to the debt are treated as stayed and creditors cannot start fresh action on the same debt. Under section 96 it runs from the date of the application until the date on which the application is admitted. Sub-section (4) removes that pause where the individual is a personal guarantor to a corporate debtor.
Who Is Affected by the IBBI Circular?
What Does Section 96(4) of the IBC Say?
The circular opens by recording the statutory foundation. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 inserted sub-section (4) into section 96 and into section 124 of the Insolvency and Bankruptcy Code, 2016, and the inserted provisions operate with effect from 26 May 2026. The circular describes their effect rather than reproducing their text: it records that the interim moratorium shall not apply in respect of a personal guarantor to a corporate debtor.
The operative words matter, because the entire retroactivity question turns on them. As quoted in the Bombay High Court judgment carried by the circular, section 96(4) is framed around the phrase “where an application is filed” for initiating an insolvency resolution process in respect of a personal guarantor to a corporate debtor. Two points follow. The carve-out is triggered by the filing of an application — under section 94, where the guarantor applies, or section 95, where a creditor applies — so it reaches guarantor-initiated filings as much as creditor-initiated ones. And it is the tense of those words, not any express saving clause, that the Courts had to construe. Practitioners should read the bare text of sections 96(4) and 124(4) in the Amendment Act before relying on any paraphrase of them, including the circular’s.
The pairing of the two sections matters. Section 96 sits in the insolvency resolution chapter for individuals and firms, and section 124 sits in the corresponding bankruptcy chapter. Amending only one would have left a gap through which the same protection could return at the next stage. The circular treats the two consistently, noting the position under section 96 and, correspondingly, section 124.
What Did the Bombay High Court Hold in Tata Capital v. Neel Motors LLP?
Tata Capital Financial Services Limited v. Neel Motors LLP and others · Commercial Arbitration Petition No. 620 of 2021 · Judgment dated 24 July 2026
The central question before the Bombay High Court was the reach of the words "where an application is filed". The Court took the view that the phrase captures anything filed and pending before the Adjudicating Authority as on the relevant date. Had the legislature intended to confine the provision to filings made after its introduction, the Court reasoned, it would have used language saying so.
The Court then placed the provision in the category of retroactive application. On its reasoning, reading the words to include applications already filed and still pending does not give the provision retrospective effect; it gives prospective effect running from the date the provision takes force. The consequence drawn was direct: an application for initiating the insolvency resolution process in respect of a personal guarantor to a corporate debtor would not attract section 96(1) and related provisions from 26 May 2026.
Applying that to the facts, the Court found that the moratorium which had operated in respect of the guarantor respondents until 25 May 2026 ceased to operate from 26 May 2026 so far as applications filed under section 95 of the Code were concerned. The Court therefore held that the petition before it was not barred by the moratorium under the Insolvency and Bankruptcy Code, 2016. That is the limit of the holding: the judgment does not deal with any other objection to the petition.
What Did the Delhi High Court Hold in IDBI Trusteeship Services v. Manish Jain?
IDBI Trusteeship Services Ltd. v. Manish Jain and Ors. · CS(COMM) 800/2025 · Judgment dated 19 August 2026
The Delhi High Court reached the same destination by a route anchored in Supreme Court doctrine on retroactive legislation. Reading the insertion of sub-section (4) alongside those principles, the Court concluded that the provision is retroactive even though the Amending Act did not expressly say so. It characterised the resulting effect as "quasi retroactivity", and held that the provision applies to pending applications.
One detail in the Delhi High Court's observation is worth noting for citation accuracy. The Court refers to the amendment as dated 6 April 2026, while the circular states that the inserted sub-sections operate with effect from 26 May 2026. The two dates are not in conflict; they mark different events in the life of the same amendment. 6 April 2026 is the date of the Insolvency and Bankruptcy Code (Amendment) Act, 2026 itself. 26 May 2026 is the date from which sections 96(4) and 124(4) were brought into force, and it is the date that governs when the interim moratorium stopped operating.
The practical rule for pleadings: cite 6 April 2026 when referring to the Amendment Act, and 26 May 2026 when referring to the commencement of the inserted sub-sections and the cessation of the moratorium. Verify each against the Amendment Act and the commencement notification rather than against the circular alone.
Retrospective legislation reaches back and changes the legal character of something that was already completed — it can undo what was validly done earlier.
Retroactive legislation, as the High Courts used the term here, attaches new consequences from the date it comes into force to a situation that is still continuing. A pending application is a continuing state of affairs, so the new rule catches it from the commencement date onwards.
The practical difference: nothing that happened before 26 May 2026 is unwound. The protection simply stops operating on and from that date, even for a guarantor whose application had been filed years earlier.
Old Position vs New Position
Timeline of the Change
What the Circular Does Not Decide
Reading the circular for what it does not say is as useful as reading it for what it does.
- It does not affect the maintainability of the application itself. Cessation of the interim moratorium removes the stay. It does not withdraw, dismiss or suspend the insolvency resolution process application against the guarantor.
- It does not speak to the moratorium that follows admission. The circular deals only with the interim moratorium under sections 96 and 124. It says nothing about the moratorium that commences under section 101 of the Code once an application under section 94 or section 95 is admitted. The Bombay High Court's reference to section 96(1) "and related provisions" is not elaborated, and the circular does not define that expression. Positions on any post-admission moratorium should be taken on the amended statutory text and the judgments themselves.
- It does not address the corporate debtor's own moratorium. The moratorium in a corporate insolvency resolution process is a separate mechanism and is untouched by this circular.
- It does not deal with limitation. How the period during which the interim moratorium operated is to be treated for limitation purposes is not addressed, and creditors reviving old proceedings should take advice on that point.
- It prescribes no filing, form, fee or deadline. The circular is a communication of a legal position, not a compliance requirement with a due date.
Practical Implications
For creditors and lenders
Enforcement files that were closed off on the strength of an interim moratorium deserve a fresh look. Both reported cases were creditor proceedings outside the insolvency forum — a commercial arbitration petition before the Bombay High Court and a commercial suit before the Delhi High Court — and in both, the guarantor's insolvency filing had been the obstacle. That obstacle fell away on 26 May 2026.
The same logic reaches the remedies lenders use most often against guarantors. Measures under the SARFAESI Act, 2002, applications and execution before a Debts Recovery Tribunal, invocation notices under the deed of guarantee and civil suits on the guarantee were all commonly held up while the interim moratorium subsisted. Section 96 no longer bars them in respect of a personal guarantor to a corporate debtor. Whether a particular action can actually resume still turns on the orders and facts in that file. Recovery teams should identify every account where a guarantor filing produced a stay and assess, account by account, whether the stayed proceeding can be revived or listed.
For insolvency professionals
In personal guarantor assignments, the professional's own working assumption about the status of parallel proceedings needs to change. Communications to creditors, status notes and progress reports that describe an interim moratorium as subsisting will be inaccurate for any period after 25 May 2026. The circular is addressed to the profession precisely so that this is no longer treated as an open question in individual assignments.
For personal guarantors and their advisers
A guarantor with a pending application should expect creditor action to resume and should not assume that an old filing continues to hold the position. Defences to the underlying claim remain available on their merits; what is gone is the automatic procedural shelter.
For corporate groups and promoters
Where a promoter stood as personal guarantor, the group's exposure map changes. Resolution planning that assumed the guarantor would be insulated during the corporate process needs revisiting, since the guarantor can now be pursued in parallel.
Assume a lender filed an application under section 95 against a promoter who had guaranteed the borrowings of a corporate debtor in 2023. The application remained pending, and the lender's recovery suit against the same promoter was adjourned because of the interim moratorium. On the position recorded in the circular, the interim moratorium in that matter stopped operating on 26 May 2026. The recovery suit is no longer barred by section 96 from that date, while the section 95 application continues before the Adjudicating Authority. This example is hypothetical and is used only to illustrate how the cessation operates.
Action Plan for Practitioners
The circular imposes no form, filing or deadline. The steps below are CorpLawUpdates guidance on giving effect to the position it records, not obligations created by the circular.
Frequently Asked Questions
The circular, dated 21 September 2026, records that the interim moratorium under section 96 and correspondingly section 124 of the Insolvency and Bankruptcy Code, 2016 ceased to operate in respect of a personal guarantor to a corporate debtor from 26 May 2026, including for applications pending before the Adjudicating Authority on that date. It communicates judgments of the Bombay High Court dated 24 July 2026 and the Delhi High Court dated 19 August 2026.
From 26 May 2026. That is the date on which sub-section (4) of sections 96 and 124 of the Insolvency and Bankruptcy Code, 2016, inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, took effect.
Yes. IBBI has recorded that the interim moratorium ceased to operate from 26 May 2026 in respect of applications pending before the Adjudicating Authority as on that date. Both the Bombay High Court and the Delhi High Court held that the provision reaches pending applications.
Sub-section (4) of section 96 and sub-section (4) of section 124 of the Insolvency and Bankruptcy Code, 2016, inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, provide that the interim moratorium shall not apply in respect of a personal guarantor to a corporate debtor.
By judgment dated 24 July 2026 in Commercial Arbitration Petition No. 620 of 2021, the Bombay High Court held that the words "where an application is filed" cover applications already filed and pending before the Adjudicating Authority, that the provision applies retroactively with prospective effect from its commencement date, and that the moratorium operating in respect of the guarantor respondents until 25 May 2026 ceased from 26 May 2026. The Court therefore held that the petition before it was not barred by the moratorium under the Code.
By judgment dated 19 August 2026 in CS(COMM) 800/2025, the Delhi High Court held that sub-section (4) of section 96 is retroactive even though the Amending Act did not expressly say so, described its effect as quasi retroactivity, and held that it applies to pending applications.
No. The circular addresses only the cessation of the interim moratorium. An insolvency resolution process application in respect of a personal guarantor continues before the Adjudicating Authority; what has stopped is the automatic stay that used to accompany it.
Section 96 no longer bars such proceedings in respect of a personal guarantor to a corporate debtor from 26 May 2026. The Bombay High Court proceeded on that basis in the arbitration petition before it. Any other applicable stay, order or statutory bar would still need to be examined in the individual matter.
The inserted sub-sections are expressed to apply in respect of a personal guarantor to a corporate debtor. On their terms they do not extend to other individual debtors, and the circular does not address that category.
The circular is issued in exercise of the powers conferred under section 196 of the Insolvency and Bankruptcy Code, 2016, and is signed by Sanjay Manocha, General Manager, Insolvency and Bankruptcy Board of India.
CorpLawUpdates Analysis
For compliance teams, the immediate issue is not the legal proposition but its reach across live files. A cessation date of 26 May 2026 sitting inside a circular dated 21 September 2026 means roughly four months in which many matters were probably handled on the older assumption. Status notes, adjournment requests and internal escalation memos written in that window may now read incorrectly, and the correction exercise is a records exercise as much as a legal one.
The second point worth watching is the phrase the Bombay High Court used when it said the application would not fall within section 96(1) "and related provisions". That expression is not defined in the judgment extract carried by the circular, and IBBI has not elaborated it. Whether it is read narrowly, as covering only the machinery of the interim moratorium, or more expansively, will shape arguments at later stages of the personal guarantor process. Positions taken now should be capable of surviving either reading.
Third, the choice to communicate this through a circular rather than leave it to case reporting is itself a signal. Section 196 circulars go to the entire regulated community at once. By routing the position through insolvency professionals, entities and agencies, IBBI has made it difficult for an individual assignment to continue treating the retroactivity question as unsettled. Professionals who take a contrary position in a specific matter should be able to justify it on the record.
Finally, the judgments the circular carries are not the last word, and the position has already moved. On 18 September 2026, three days before the circular is dated, a Division Bench of the Bombay High Court decided a batch of writ petitions brought by secured creditors, led by Indian Bank v. Shabbir Abbas Patel and others (Writ Petition No. 2819 of 2026), to the same effect — holding that an interim moratorium cannot survive 26 May 2026 merely because the section 94 or section 95 application happened to be filed earlier. That decision is not referred to in the circular. It matters because it comes from a Division Bench rather than a single judge, so within Maharashtra it carries greater weight than the Tata Capital judgment on which the circular relies, and it should be cited alongside.
Two High Courts agreeing does not close the subject nationally either. Coordinate benches elsewhere, and any appellate consideration, may still refine the reasoning. The circular states the position on the material before IBBI; it does not, and cannot, foreclose further judicial development. Track the point rather than file it away.
Source Note
Document: Circular on judgments of the Hon'ble Bombay High Court and Delhi High Court on cessation of interim moratorium in respect of personal guarantors to corporate debtors
Issuing authority: Insolvency and Bankruptcy Board of India, 7th Floor, Mayur Bhawan, Connaught Place, New Delhi – 110 001
Reference number: IBBI/II/106/2026
Date: 21 September 2026
Signatory: Sanjay Manocha, General Manager
Issued under: Section 196 of the Insolvency and Bankruptcy Code, 2016
Judgments referred to: Tata Capital Financial Services Limited v. Neel Motors LLP and others, Commercial Arbitration Petition No. 620 of 2021 (Bombay High Court, 24 July 2026); IDBI Trusteeship Services Ltd. v. Manish Jain and Ors., CS(COMM) 800/2025 (Delhi High Court, 19 August 2026)
Primary source: https://www.ibbi.gov.in
This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Readers should verify the applicable primary regulatory source before taking action.
