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    Question

    Under the Insolvency and Bankruptcy Code, 2016, which of

    the following correctly describes the "moratorium" declared under Section 14 during the Corporate Insolvency Resolution Process (CIRP)?
    A It prohibits only financial creditors from filing suits or continuing legal proceedings against the corporate debtor, while operational creditors may still proceed Correct Answer Incorrect Answer
    B It prohibits institution of suits or continuation of pending suits or proceedings against the corporate debtor, transferring or disposing of its assets, and enforcement of any security interest created by the corporate debtor, and remains in force till the completion of CIRP Correct Answer Incorrect Answer
    C It suspends only the board of directors of the corporate debtor and transfers management to the Resolution Professional, without placing any restriction on legal proceedings by creditors Correct Answer Incorrect Answer
    D It prohibits all transactions including payment of employee salaries and day-to-day operational expenses during the insolvency resolution period Correct Answer Incorrect Answer

    Solution

    Section 14 of the IBC, 2016 declares a moratorium upon admission of an insolvency application by the Adjudicating Authority (NCLT). The moratorium prohibits: (i) institution or continuation of suits or proceedings against the corporate debtor; (ii) transferring, encumbering, alienating or disposing of any assets; (iii) enforcement of any security interest created by the corporate debtor; and (iv) recovery of any property by an owner or lessor. Critically, the moratorium does not prevent payment of employee salaries or day-to-day running of the business the Interim Resolution Professional (IRP) is duty-bound to keep the corporate debtor as a going concern during the CIRP. Option (A) is wrong as the moratorium applies to all creditors equally; Option (C) conflates management suspension with moratorium; and Option (D) incorrectly includes routine operational payments as prohibited

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