Interim Moratorium and Personal Guarantors under Section 96 of the IBC: YES Bank v. Kunal Jiwarajka and the 2026 Amendment

Exploring the interplay of Section 96 of the Insolvency and Bankruptcy Code, 2016 and Section 68 of the Transfer of Property Act, 1882

When a lender invokes a personal guarantee given for a company’s loans, Part III of the Insolvency and Bankruptcy Code, 2016 (“IBC”) allows the lender to seek an insolvency resolution process against the guarantor. For several years, the mere filing of such an application triggered an automatic “interim moratorium” under Section 96 of the IBC, freezing other legal action against the guarantor. Tribunal decisions such as YES Bank Ltd. v. Kunal Jiwarajka (NCLT, Mumbai, October 2024) held that this freeze could bar a second creditor’s application. From 26 May 2026, Parliament has removed the interim moratorium in personal guarantor cases altogether. This article explains the earlier position, the decision, and what has changed.

The Framework for Personal Guarantors under IBC

Part III of the IBC was made applicable to personal guarantors to corporate debtors from 1 December 2019. A creditor may apply under Section 95, and a guarantor may apply under Section 94. Once an application is filed, Section 97 provides for appointment of a resolution professional, who examines the application and submits a report under Section 99 recommending acceptance or rejection. The Adjudicating Authority then decides under Section 100 whether to admit it.

Until 26 May 2026, Section 96(1) provided that on filing:

• an interim moratorium commenced in relation to all the debts and continued until admission or rejection; and
• during that period, any legal action or proceeding pending in respect of any debt was deemed stayed, and the creditors of the debtor could not initiate any legal action or proceedings in respect of any debt.

In Dilip B. Jiwrajka v. Union of India (Supreme Court, 9 November 2023), a three-judge Bench upheld the constitutional validity of Sections 95 to 100. The Court held that no adjudicatory hearing is required before the resolution professional’s appointment or report, since the Adjudicating Authority determines the matter only at the Section 100 stage, and it noted that the interim moratorium operates for the debtor’s protection.

The Decision in YES Bank v. Kunal Jiwarajka

Facts. YES Bank filed an application under Section 95 (C.P.(IB) No. 908/MB/2022) against Mr. Kunal Jiwarajka as personal guarantor for the debts of JSK Marketing Ltd., which was in liquidation. The guarantor pointed out that another creditor, Orix Leasing & Finance India Ltd., had already filed a Section 95 application against him (C.P.(IB) No. 210(MB)/2021). He also relied on Section 68 of the Transfer of Property Act, 1882, contending that the bank had already proceeded against mortgaged properties.

Holding. The NCLT, Mumbai Bench (Court II) dismissed YES Bank’s application on the ground of the interim moratorium already in force by reason of the earlier application. It relied on Bhavesh Gandhi v. Central Bank of India (NCLAT), in which the Appellate Tribunal held that the words “creditors of the debtor” in Section 96(1)(b) refer to creditors other than the one whose application triggered the moratorium, so that a subsequent Section 95 application by another lender could not be initiated while the first interim moratorium subsisted. The NCLT observed that the scheme of the Code did not contemplate multiple applications against the same personal guarantor by different lenders, and that a creditor so barred is not prejudiced because the moratorium period is excluded in computing limitation.

The dismissal was expressly on this procedural bar, not on the merits. YES Bank was given liberty to revive its petition, or file afresh, subject to limitation, if the earlier application came to be dismissed. The guarantor’s argument based on the Transfer of Property Act did not form the basis of the decision.

The 2026 amendment: No Interim Moratorium for Personal Guarantors

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026) inserted Section 96(4), which provides that the provisions of Section 96 shall not apply where an application is filed for initiating an insolvency resolution process in respect of a personal guarantor to a corporate debtor. A parallel Section 124(4) excludes the interim moratorium in bankruptcy applications against such guarantors. Both provisions came into force on 26 May 2026 under notification S.O. 2625(E) dated 22 May 2026.

The consequences are significant:

• Filing a Section 94 or Section 95 application in respect of a personal guarantor to a corporate debtor no longer stays other proceedings against the guarantor.
• The reasoning in Bhavesh Gandhi and YES Bank, which depended on the interim moratorium under Section 96 of the IBC, no longer supports barring a later creditor’s application in such cases.
• Tribunals have noted in earlier decisions that guarantors sometimes filed Section 94 applications to obtain the benefit of the interim moratorium against creditors; that benefit is no longer available to personal guarantors to corporate debtors.

The moratorium that follows admission under Section 101 of the IBC is not affected by Section 96(4).

Does Section 96(4) Apply to Pending Applications?

The Amendment Act contains no express transitional provision on this point. In Tata Capital Financial Services Ltd. v. Neel Motors LLP & Ors., Commercial Arbitration Petition No. 620 of 2021 (Bombay High Court, 4 August 2026), as reported, a single judge held that the words “where an application is filed” extend to Section 95 applications already filed and pending on 26 May 2026. The Court characterised this as retroactive, not retrospective, application: a new legal requirement applied prospectively to an existing state of affairs. It relied on the Supreme Court’s explanation of that distinction in SEBI v. Rajkumar Nagpal.

This is a recent decision of a single judge of one High Court. Its status on appeal, and the approach of the NCLT, NCLAT and other High Courts, should be checked. Until the question is considered at the appellate level, the treatment of applications pending on the commencement date cannot be regarded as finally settled.

Other Key Changes for Personal Guarantors from 26 May 2026

• Resolution professional’s report. The time for the report under Section 99(1) has been extended from ten days to twenty-one days.
• No repayment plan. New Section 106(1A) provides that if no repayment plan is submitted within the stipulated time, the process is terminated and the debtor or creditors may apply for bankruptcy.
• Transfer of guarantor assets. New Section 28A allows a creditor that has taken possession of a guarantor’s asset by enforcing security to transfer it as part of the corporate debtor’s insolvency resolution, with approval of the corporate debtor’s committee of creditors and, where the personal guarantor is itself in an insolvency or bankruptcy process, approval by more than three-fourths in value of the guarantor’s creditors.
• Transactions defrauding creditors. New Section 164A empowers the Adjudicating Authority to reverse undervalued transactions entered into deliberately to keep assets beyond the reach of creditors, subject to protection for good-faith purchasers for value.

Practical significance

The YES Bank decision accurately reflects how the interim moratorium under Section 96 of the IBC operated before 26 May 2026 and remains relevant for understanding orders passed under the earlier law. For personal guarantors to corporate debtors, however, the 2026 amendment has removed the interim moratorium under Section 96. Enforcement actions, recovery proceedings and competing insolvency applications against such guarantors must now be assessed without the automatic stay that previously followed the filing of an application, subject to any specific order passed by a court or tribunal and the post-admission moratorium under Section 101.

FAQs

1. What was the Section 96 interim moratorium under the IBC?
It temporarily restricted legal proceedings against a personal guarantor after a Section 94 or 95 application was filed.

2. What did YES Bank v. Kunal Jiwarajka decide?
The NCLT held that an existing Section 96 interim moratorium could prevent another creditor from filing a Section 95 application against the same personal guarantor.

3. Is the Section 96 interim moratorium still applicable to personal guarantors?
No. From 26 May 2026, Section 96(4) excludes personal guarantors to corporate debtors from the interim moratorium.

4. Can multiple creditors now initiate proceedings against a personal guarantor?
The statutory bar arising from the Section 96 interim moratorium no longer applies. Other procedural and substantive requirements under the IBC continue to apply.

5. Does the Section 101 moratorium still apply?
Yes. The amendment to Section 96 does not remove the moratorium that follows admission of the insolvency resolution process under Section 101.

Legal Information Disclaimer

This article provides general information about Indian law as it stood on 16 September 2026. It is not legal advice, and reading it does not create an advocate–client relationship. Statutes, rules and judicial interpretations change, and their application depends on the facts of each matter. Readers should consult the current official text of the laws and judgments cited and should not act on this information without advice specific to their circumstances. This article is published for legal awareness and education and is not intended to advertise or solicit professional work.

Sources / Authorities

1. Insolvency and Bankruptcy Code, 2016 — Sections 28A, 94, 95, 96, 97, 99, 100, 101, 106, 124, 164A (as amended) — IBBI – Legal Framework
2. Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026), clauses 17, 51, 52, 53, 55 and 56 — Gazette text (IBBI)
3. Ministry of Corporate Affairs, Notification S.O. 2625(E) dated 22 May 2026 — IBBI
4. YES Bank Ltd. v. Kunal Jiwarajka (Personal Guarantor of JSK Marketing Ltd.), C.P.(IB) No. 908/MB/2022 with I.A. No. 3173 of 2024, NCLT, Mumbai Bench, Court II, October 2024 — NCLT order
5. Bhavesh Gandhi v. Central Bank of India, NCLAT (as extracted in the NCLT order above)
6. Dilip B. Jiwrajka v. Union of India & Ors., Supreme Court of India, 9 November 2023 — IBBI copy
7. Tata Capital Financial Services Ltd. v. Neel Motors LLP & Ors., Commercial Arbitration Petition No. 620 of 2021, Bombay High Court, 4 August 2026 — report, LiveLaw Business
8. Transfer of Property Act, 1882 — Section 68