INTRODUCTION

The Apex Court on May 21,2021 in Lalit Kumar Jain V. Union of India &Ors[1] recognized and upheld the Rules on Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) 2019, as notified by the Central Government on November 15, 2019.

The question whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments (NI) Act  can be said to be covered by the moratorium provision, namely, Section 14 of the Insolvency and Bankruptcy Code (IBC) has been a crucial issue in the legal domain. Various High courts have had dissenting opinion in relation to this concerning matter. However the Apex court has now put an end to all doubts and confusions.

When the Corporate Debtor defaults in making payments to its creditors the process of Corporate Insolvency Resolution Process (CIRP) can be initiated against it by its creditors. The Insolvency and Bankruptcy Code, 2016 (hereafter “the Code”) provides the process for insolvency resolution process (IRP). For this purpose the government also enacted the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and  Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereafter “the Rules”).

In a recent case, the National Company Law Tribunal ("NCLT"), New Delhi in M/s Brand Reality Services Ltd. v. M/s Sir John Bakeries India Pvt.