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2022 (2) TMI 364 - HC - Insolvency and BankruptcyWilful Defaulter - squaring off of debt - proceedings under wilful defaulter guidelines are covered under the moratorium under Section 96 of the Act or not - HELD THAT:- The argument that the bank having instituted proceedings under the wilful defaulter guidelines could not and/or should have instituted proceedings under Section 95 of the IBC is fallacious. There is, in fact, no bar to proceed parallelly under the two laws. The purpose of the two proceedings is completely different. It is essentially for a creditor to take a call when and what proceedings it wants to take against a borrower constituent. A plain reading of the two Sections would clearly indicate that the Moratorium U/s. 14 aims at protecting the “Corporate Debtor” and none else. The object and purpose is to protect the image of the juristic person to enable smooth passage of a Resolution Plan. The value of the Corporate Debtor must be protected and kept away from the acts and omissions of its promoters and shareholders. This would make the CD more attractive and would generate more interest in prospective suitors - The very purpose of separation of corporate insolvency under Part II of the IBC from individual insolvency under Part III must be understood. They are separate and distinct and aim to achieve different ends. The principles applied the incorporate insolvency cannot be applied to personal insolvency. It is essentially for this purpose that this Legislature has applied the moratorium under Section 14 to the corporate debtor as a whole and moratorium under Section 96 is restictively applied only to the debt. The object and purpose of a moratorium is to invite resolution applicants for revival of corporate debtors under Part II. Under Part III however the purpose of moratorium is to facilitate repayment/resolution of the debt to all categories of debtors. The object and purpose of the Master Circular for willful default is dissemination credit information of the willful defaulter so that other lenders are cautioned and do not lend any further money. It is also aim at preventing further fraud and loss of public money. A willful defaulter proceeding is not for recovery of debt. The repayment of debt will not ipso facto extinguish the default. This has to be assist and applied in the facts of the instant case - this Court is inclined to accept the argument of Mr. Rai for the bank that the moratorium in respect of debt is restricted to proceedings of recovery of any debt against the respondent “in person”. Recovery proceedings or proceedings under Section 96 of the IBC, 2016, or the borrower’s success therein, would not absolve the borrower who has been found to be a wilful defaulter. The willful defaulter proceedings only aims at dissemination of information. The bank’s responsibility to institute criminal proceedings would also be interfered with if the arguments of the petitioners are accepted - this Court is not inclined to entertain the writ petition. Petition dismissed.
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