The moratorium under section 14 of the IBC prohibits recovery of property in possession of the corporate debtor, and an interim injunction protecting such property should not be vacated solely due to the pendency of insolvency proceedings if the resolution professional is directed to pursue active arbitration.

JUDGMENT: (Per Hon’ble Justice Moushumi Bhattacharya)

1. The Commercial Court Appeal assails a Docket Order dated 04.03.2025 whereby the learned Commercial Court at Hyderabad dismissed the Commercial Original Petition (COP No.45 of 2019) filed by the appellant No.1 (Kaizen Power Limited). The appellant No.1 filed the COP under section 9 of The Arbitration and Conciliation Act, 1996 (‘1996 Act’) for restraining the respondent (APIIC) from acting on a Show Cause Notice dated 03.04.2019 and taking steps for termination of a Lease Deed dated 25.10.2010 executed between the appellant No.1 and the respondent. The appellant No.2, Resolution Professional, appointed under The Insolvency and Bankruptcy Code, 2016 (‘IBC’) on 13.12.2019 represents the appellant No.1/Corporate Debtor.

2. The Commercial Court had initially passed an ex parte ad interim order of injunction against the respondent on 03.05.2019 and the same had been extended thereafter from time to time. However, by the impugned Docket Order, the Commercial Court refused to grant any further extension in favour of the appellant No.1 and proceeded to dismiss the COP. The primary reason stated in the impugned Docket Order for dismissal of the COP is that the appellant No.1 had not taken any steps for initiating arbitral proceedings in terms of the Arbitration Agreement between the appellant and the respondent - which is contrary to section 9(2) of the 1996 Act. The Commercial Court also noted that the proceedings under the IBC were initiated against the appellant No.1 and Moratorium was imposed on 30.12.2019. The Commercial Court was hence of the view that the interim order granted to the appellant No.1 on 03.05.2019 could not indefinitely be continued for years together.

3. Learned Senior Counsel appearing for the appellants submits that the impugned Docket Order is in violation of section 14(1)(a) of the IBC which bars continuation of proceedings and passing of any Order, Decree or Award against the Corporate Debtor (appellant No.1 herein) during subsistence of Moratorium. Counsel relies on section 14(1)(d) of the IBC to urge that recovery of any property by a Lessor during the Moratorium period is prohibited where such property is occupied or in possession of the Corporate Debtor. Counsel argues that the appellant had referred the dispute to arbitration pursuant to which the High Court appointed Justice Madan B.Lokur, Former Judge of the Supreme Court as the Sole Arbitrator on 02.01.2020. The Sole Arbitrator passed a procedural order on 19.05.2020 but was thereafter constrained to adjourn the arbitration proceedings sine die on 22.05.2020 in view of the Moratorium imposed by the National Company Law Tribunal (NCLT), Kolkata.

4. Counsel seeks to argue on the urgency of the matter on the ground that the Resolution Plan involves the leasehold rights of the appellant No.1 over the subject land, which is a major asset of the appellant No.1. The primary argument, however, is that the impugned Docket Order and the Show Cause Notice issued by the respondent on 03.04.2019 is in violation of the Moratorium under the IBC which continues till approval of a Plan or passing of a Liquidation Order.

5. Learned Senior Counsel appearing for the respondent submits that the appellant No.1 enjoyed the interim order dated 03.05.2019 for almost six years but failed to pursue arbitral proceedings despite appointment of the Sole Arbitrator by this Court on 02.01.2020. Counsel