IMPORTANT POINT
The moratorium under Section 96 of the IB Code applies to all debts, including those of personal guarantors, and prohibits any legal action against them during its operation.

JUDGMENT

Avinash G. Gharote, J. - The petition questions the order dated 07.10.2022 (page-48) by which the learned arbitrator has kept the proceedings before him in abeyance as long as the moratorium under Section 95 of the IB Code 2016 operates in respect of the debts owed by the respondent No.2/Tarun Kapoor were concerned and the subsequent order dated 20.03.2023 refusing to vacate the aforesaid order (page -51).

2. The facts leading to the present petition in brief are as under:

i) The present petitioner which is a finance company had granted channel finance facility to Sterling Motor Company of Noida, Uttar Pradesh under various documents. One Mr. Tarun Kapoor is the Proprietor of Sterling Motor Company (SMC for short hereinafter), who had executed the aforesaid documents as a Proprietor and had also stood as guarantor for repayment of the finance. Mrs. Pavan Kapoor, Mr. B.L. Passi and Rameshwar Sweets and Namkeens Pvt. Ltd. stood as guarantors. As there was default on part of SMC its account was categorized as NPA on 04.09.2019 and by a notice dated 15.10.2019 the loan was recalled by the petitioner.

ii) The Petitioner thereafter initiated arbitration proceedings before Gulnar A. Mistry, Advocate who was appointed as Arbitrator.

iii) During the pendency of the arbitration proceedings an application namely C.P (IB) - 1097(ND)/2020 came to be filed by Volkswagen Finance Pvt. Ltd against SMC Mr. Tarun Kapoor, as a result of which an application came to be filed by Mr. Tarun Kapoor and Mrs.Pavan Kapoor before the Arbitral Tribunal, contending that in view of Sec.96 of the IB Code, a moratorium had come into effect due to the above proceedings on account of which the Arbitral proceedings were required to be kept in abeyance. The learned Arbitrator by the order dated 11/1/2021 (pg.64) accorded the benefit of the moratorium to Mr. Tarun Kapoor, the proprietor of SMC and one of the guarantors Smt. Pavan Kapoor and proceedings against them were directed to remain in abeyance, but the arbitration proceedings against the respondents 4 & 5 were directed to continue.

iv) The NCLT proceedings continued and the Member Judicial (NCLT) New Delhi, Court - III, by the order dated 04.01.2021 (Page-52) appointed Mr. Kamal Agarwal as the Resolution Professional (RP) and also passed an interim moratorium order in the following terms:

'10. It is made known to everyone that one filing this application by the Applicant/Creditor the interim-moratorium commences as is stipulated under Section 96 (1)(a) in relation to all the debts of the personal guarantor and shall cease to have effect on the date of admission of this Application and during the interim moratorium period the following is prohibited:

a. Any pending legal action or proceedings in respect of any debt of the personal guarantor shall be deemed to have been stayed; and

b. The creditors of the personal guarantor shall not initiate any legal action or proceedings in respect of any debt.

c. The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.'

v) By an order dated 11.01.2021 (Page 57) the earlier order dated 04.01.2021 was rectified by changing of name as Mr.Tarun Kapoor, instead of Mrs. Pavan Kapoor and so also the dates as indicated therein.

vi) In the application filed by Volkswagen Finance Pvt. Ltd. being C.P (IB)-25 (ND)/2021 under Section 95(1) of the Insolvency and Bankruptcy Code 2016 (IB Code) r/w Rule 7(2) of the IB Code (Application to Adjudicating Authority for IRP for personal guarantors to (C.D.) Rules 2019 against Smt. Pavan Kapoor, by an order dated 03.02.2021 (Page 59) the Member Judicial (NCLT) New Delhi, Court - III appointed one Kamal Agarwal as Resolution Professional and also granted a moratorium in the following terms: ( Page -61)

'10. It is made known to everyone that on filing this Application by the Applicant/Creditor the interim moratorium commences as is stipulat