{"id":21689,"date":"2026-04-09T07:40:45","date_gmt":"2026-04-09T07:40:45","guid":{"rendered":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/?p=21689"},"modified":"2026-04-09T07:45:37","modified_gmt":"2026-04-09T07:45:37","slug":"shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings","status":"publish","type":"post","link":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/","title":{"rendered":"SHIELD OR SWORD? Judicial Response to the Weaponisation of IBC Moratorium to Obstruct SARFAESI Enforcement Proceedings"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\" id=\"abstract\"><span class=\"ez-toc-section\" id=\"Abstract\"><\/span>Abstract<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is common knowledge that people gripped in the clutches of SARFAESI Act device a strategy to disrupt the judicial process by resorting to the provisions of Insolvency and Bankruptcy Code, 2016 thereby constiruting abuse of the process of law. The Courts have consistently deprecated this practice and disallowed this underhand manoeuvre to succeed.<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0c0c0c;color:#0c0c0c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0c0c0c;color:#0c0c0c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Abstract\" >Abstract<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#I_Introduction_The_IBC-SARFAESI_Tension\" >I. Introduction: The IBC-SARFAESI Tension<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Overriding_Effect_and_Moratorium\" >Overriding Effect and Moratorium<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Legislative_Safeguards_Against_Abuse\" >Legislative Safeguards Against Abuse<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#II_The_Statutory_Framework_Sections_94_95_And_96_Of_The_IBC\" >II. The Statutory Framework: Sections 94, 95, And 96 Of The IBC<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Section_96_Automatic_Interim_Moratorium\" >Section 96: Automatic Interim Moratorium<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Constitutional_Validity_And_Supreme_Court_Interpretation\" >Constitutional Validity And Supreme Court Interpretation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Exploitation_Of_Section_96\" >Exploitation Of Section 96<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#III_The_Anatomy_Of_Abuse_A_Recurring_Pattern\" >III. The Anatomy Of Abuse: A Recurring Pattern<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Step-By-Step_Pattern_Of_Abuse\" >Step-By-Step Pattern Of Abuse<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Judicial_Observation_Rozina_Firoz_Hajiani_Case\" >Judicial Observation: Rozina Firoz Hajiani Case<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#IV_The_Bombay_High_Courts_Landmark_Response_Rozina_Firoz_Hajiani_2026\" >IV. The Bombay High Court&#8217;s Landmark Response: Rozina Firoz Hajiani (2026)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#A_The_Factual_Matrix\" >A. The Factual Matrix:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#B_The_Courts_Core_Findings\" >B. The Court&#8217;s Core Findings:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#C_The_Principles_Of_Waiver_And_Estoppel\" >C. The Principles Of Waiver And Estoppel:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#D_The_Disposition\" >D. The Disposition:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#V_Convergent_Jurisprudence_Other_Courts_And_Tribunals_Speak\" >V. Convergent Jurisprudence: Other Courts And Tribunals Speak<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#A_NCLT_Chennai_In_South_Indian_Bank_v_KC_Mohanan_CP_IB_109CHE2023\" >A. NCLT Chennai In South Indian Bank v. K.C. Mohanan (CP (IB) 109\/(CHE)\/2023)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#B_NCLT_Ahmedabad_In_Shabanabanu_Gafarbhai_Mandaviya_v_HDFC_Bank_Ltd_2025\" >B. NCLT Ahmedabad In Shabanabanu Gafarbhai Mandaviya v. HDFC Bank Ltd. (2025)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#C_NCLAT_In_Syed_Sirajis_Salikin_Khadri_v_Edelweiss_ARC_Ltd_2025\" >C. NCLAT In Syed Sirajis Salikin Khadri v. Edelweiss ARC Ltd. (2025)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#D_NCLAT_In_Manoj_Aggarwal_v_Karnataka_Bank_Ltd\" >D. NCLAT In Manoj Aggarwal v. Karnataka Bank Ltd.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#E_Indian_Overseas_Bank_v_RCM_Infrastructure_Ltd_2022_SCC_OnLine_SC_634\" >E. Indian Overseas Bank v. RCM Infrastructure Ltd. (2022 SCC OnLine SC 634)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#VI_The_Critical_Doctrinal_Distinction_Legitimate_Shield_vs_Tactical_Weapon\" >VI. The Critical Doctrinal Distinction: Legitimate Shield vs. Tactical Weapon<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#VII_The_Role_of_Section_65_and_the_Sanctions_Against_Abusive_Filings\" >VII. The Role of Section 65 and the Sanctions Against Abusive Filings<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Judicial_Response_and_Deterrence\" >Judicial Response and Deterrence<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#Writ_Jurisdiction_and_Abuse_of_Process\" >Writ Jurisdiction and Abuse of Process<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#VIII_Implications_For_Secured_Creditors_And_Auction_Purchasers\" >VIII. Implications For Secured Creditors And Auction Purchasers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#IX_The_Systemic_Dimension_Protecting_The_Credit_Ecosystem\" >IX. The Systemic Dimension: Protecting The Credit Ecosystem<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#X_Critical_Analysis_And_The_Road_Ahead\" >X. Critical Analysis And The Road Ahead<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/shield-or-sword-judicial-response-to-the-weaponisation-of-ibc-moratorium-to-obstruct-sarfaesi-enforcement-proceedings\/#XI_Conclusion\" >XI. Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<p>The Apex Court\u2019s consistent stance is that the IBC moratorium is a powerful shield for genuine resolution but is not meant to be deployed as a sword by defaulters through strategic, collusive, or post-auction filings. Principles of estoppel, waiver, and abuse of process provide the doctrinal tools to curb such misuse, especially where third-party rights under SARFAESI have crystallised. The SC precedents mandate to restore creditor and auction-purchaser rights, signalling strong judicial intolerance for weaponisation that defeats the twin objectives of IBC (resolution) and SARFAESI (speedy recovery).<\/p>\n\n\n\n<p>It is pertinent that the Insolvency and Bankruptcy Code, 2016 (IBC) was conceived as an instrument of economic discipline \u2014 a transformative statute to rescue viable enterprises and swiftly resolve unviable ones. Its moratorium provisions, contained in Sections 14, 96, and 101, were crafted as protective shields for genuine debtors engaged in bona fide resolution processes. However, a disturbing and increasingly well-documented pattern has emerged: chronic defaulters strategically weaponise these moratorium provisions \u2014 particularly the automatic interim moratorium under Section 96 \u2014 at the very cusp of concluded SARFAESI enforcement proceedings to nullify the fruits of legitimate recovery efforts and frustrate third-party auction purchasers who have already parted with valuable consideration.<\/p>\n\n\n\n<p>This article undertakes a critical examination of this malpractice against the backdrop of the landmark Division Bench ruling of the Bombay High Court in Rozina Firoz Hajiani &amp; Ors. v. Union of India &amp; Ors. (Neutral Citation: 2026:BHC-OS:6969-DB), decided on March 24, 2026&#8243;. The article charts the trajectory of jurisprudence \u2014 from the Supreme Court&#8217;s seminal pronouncements on the IBC-SARFAESI interface, through NCLT and NCLAT orders condemning procedural abuse, to the High Court&#8217;s emphatic reassertion of writ jurisdiction as a corrective safeguard where subordinate tribunals abdicate their duty to prevent miscarriage of justice.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"introduction-ibc-sarfaesi-tension\"><span class=\"ez-toc-section\" id=\"I_Introduction_The_IBC-SARFAESI_Tension\"><\/span>I. Introduction: The IBC-SARFAESI Tension<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The coexistence of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Insolvency and Bankruptcy Code, 2016 has always carried within it the seed of institutional friction. SARFAESI, designed to empower secured creditors with extrajudicial enforcement rights over secured assets upon a borrower&#8217;s default, represents the creditor&#8217;s most powerful recovery tool. IBC, by contrast, creates a comprehensive insolvency resolution architecture with a temporarily absolute moratorium as its centrepiece.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"overriding-effect-and-moratorium\"><span class=\"ez-toc-section\" id=\"Overriding_Effect_and_Moratorium\"><\/span>Overriding Effect and Moratorium<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Section 238:<\/strong> Grants overriding effect over all inconsistent legislation.<\/li>\n\n\n\n<li><strong>Section 14:<\/strong> Applies to corporate debtors.<\/li>\n\n\n\n<li><strong>Sections 96 and 101:<\/strong> Apply to individuals and personal guarantors.<\/li>\n<\/ul>\n\n\n\n<p>These provisions impose moratoriums that, on their textual face, appear to stay all recovery proceedings. The Supreme Court, in Indian Overseas Bank v. RCM Infrastructure Ltd. (2022 SCC OnLine SC 634), decided on May 18, 2022 (Civil Appeal No. 4750 of 2021) unambiguously held that once CIRP (Corporate Insolvency Resolution Process) is initiated and moratorium ordered under Section 14, SARFAESI proceedings cannot continue, by virtue of the clear legislative intent embedded in Section 14(1)(c) read with Section 238.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"legislative-safeguards-against-abuse\"><span class=\"ez-toc-section\" id=\"Legislative_Safeguards_Against_Abuse\"><\/span>Legislative Safeguards Against Abuse<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Provision<\/th><th>Purpose<\/th><\/tr><\/thead><tbody><tr><td>Section 14<\/td><td>Moratorium during CIRP for corporate debtors<\/td><\/tr><tr><td>Section 96<\/td><td>Interim moratorium for individuals and personal guarantors<\/td><\/tr><tr><td>Section 101<\/td><td>Moratorium post-admission of insolvency application<\/td><\/tr><tr><td>Section 65<\/td><td>Penalises fraudulent or malicious initiation of insolvency proceedings<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Yet, as the Supreme Court itself observed in that case, Section 65 of the IBC expressly penalises fraudulent or malicious initiation of insolvency proceedings. The legislature always envisaged that the moratorium was a tool for genuine resolution \u2014 not a cloak of immunity for serial defaulters who allow SARFAESI proceedings to run their full course and then invoke IBC at the eleventh hour, solely to freeze what they could not challenge in years of prior proceedings.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"statutory-framework-sections-94-95-96-ibc\"><span class=\"ez-toc-section\" id=\"II_The_Statutory_Framework_Sections_94_95_And_96_Of_The_IBC\"><\/span>II. The Statutory Framework: Sections 94, 95, And 96 Of The IBC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Part III of the IBC, which was made applicable to personal guarantors of corporate debtors by the Central Government Notification dated November 15, 2019, introduced a distinct insolvency resolution process for individuals. Under Sections 94 and 95, either the debtor or a creditor may apply to the NCLT to initiate the Insolvency Resolution Process against a personal guarantor. The pivotal feature of this scheme, and its most exploited element, is Section 96.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"section-96-interim-moratorium\"><span class=\"ez-toc-section\" id=\"Section_96_Automatic_Interim_Moratorium\"><\/span>Section 96: Automatic Interim Moratorium<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Section 96 provides that the moment an application is filed under Section 94 or Section 95 \u2014 even before any admission, adjudication, or judicial scrutiny of the application \u2014 an automatic interim moratorium comes into force on all debts of the personal guarantor. This interim moratorium deems all pending legal proceedings in respect of any debt to have been stayed. By its very design, it operates without notice, without judicial determination, and without any examination of the bona fides of the application.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"constitutional-validity-supreme-court\"><span class=\"ez-toc-section\" id=\"Constitutional_Validity_And_Supreme_Court_Interpretation\"><\/span>Constitutional Validity And Supreme Court Interpretation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The constitutional validity of this scheme was upheld by the Supreme Court in Dilip B. Jiwrajka v. Union of India &amp; Ors. 2023 INSC 1018, 2023 SCC OnLine SC 1530 (Writ Petition (Civil) No. 1281 of 2021, decided on November 9, 2023). The Court held that Sections 95 to 100 of the IBC do not violate the principles of natural justice, clarifying that the interim moratorium under Section 96 operates &#8216;in relation to a debt rather than a debtor&#8217; and is protective, not punitive, in character. However, the Court was also careful to note that such moratorium &#8216;must not lead to arbitrary restrictions without sufficient procedural checks&#8217; and that subsequent judicial scrutiny remains available under Section 100.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"exploitation-of-section-96\"><span class=\"ez-toc-section\" id=\"Exploitation_Of_Section_96\"><\/span>Exploitation Of Section 96<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is precisely this automatic pre-admission moratorium that chronic defaulters have exploited as a tactical weapon \u2014 filing applications under Section 94 (debtor-initiated) or engineering a friendly creditor to file under Section 95, solely to trigger an immediate stay on SARFAESI proceedings that have already been pursued by secured creditors for years.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"anatomy-of-abuse-recurring-pattern\"><span class=\"ez-toc-section\" id=\"III_The_Anatomy_Of_Abuse_A_Recurring_Pattern\"><\/span>III. The Anatomy Of Abuse: A Recurring Pattern<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The pattern of abuse documented in judicial decisions follows a remarkably consistent script:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"step-by-step-pattern-of-abuse\"><span class=\"ez-toc-section\" id=\"Step-By-Step_Pattern_Of_Abuse\"><\/span>Step-By-Step Pattern Of Abuse<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>First:<\/strong> The borrower or guarantor remains passive while the secured creditor diligently prosecutes SARFAESI proceedings over an extended period.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Stage<\/th><th>Action Taken<\/th><\/tr><\/thead><tbody><tr><td>Notice<\/td><td>Notice under Section 13(2) is issued<\/td><\/tr><tr><td>Possession<\/td><td>Possession is taken under Section 13(4)<\/td><\/tr><tr><td>Auction<\/td><td>The asset is repeatedly auctioned<\/td><\/tr><tr><td>Completion<\/td><td>A successful bidder eventually emerges<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>The borrower offers no challenge, files no application before the DRT, and makes no payment.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Second:<\/strong> At the precise moment when physical possession of the secured asset is about to be handed over to the auction purchaser \u2014 after the auction is complete, the sale certificate is issued, and third-party rights have crystallised \u2014 the defaulter initiates proceedings under Section 94 or Section 95 of the IBC before the NCLT, claiming the benefit of interim moratorium under Section 96.<\/li>\n<\/ul>\n\n\n\n<p>In some cases, the application is filed before a distant NCLT bench with questionable jurisdiction to maximise procedural inconvenience.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Third:<\/strong> Relying upon the automatic moratorium thus triggered, the borrower approaches the DRT with a fresh application, seeking to arrest the handing over of possession on the ground that all proceedings stand stayed.<\/li>\n<\/ul>\n\n\n\n<p>Subordinate tribunals, perhaps uncertain of the legal position or unwilling to venture into the morass of IBC-SARFAESI interaction, accommodate these applications by passing interim orders halting further steps.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Fourth:<\/strong> The secured creditor and the auction purchaser are compelled to chase the moratorium through successive forums \u2014 NCLT, NCLAT, and the Supreme Court \u2014 all while the auction purchaser, who has paid full consideration, is denied the very property for which they bid.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"judicial-observation-rozina-firoz-hajiani\"><span class=\"ez-toc-section\" id=\"Judicial_Observation_Rozina_Firoz_Hajiani_Case\"><\/span>Judicial Observation: Rozina Firoz Hajiani Case<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Bombay High Court in Rozina Firoz Hajiani described this modus operandi with precision. In that case, a successful auction was completed in December 2024 after more than seven years of SARFAESI proceedings initiated in 2017.<\/p>\n\n\n\n<p>Within days of the sale certificate being issued, the personal guarantor filed a Section 94 application before NCLT Mumbai, triggering an interim moratorium.<\/p>\n\n\n\n<p>When the NCLT, NCLAT, and the Supreme Court upheld that the secured asset stood excluded from the moratorium, the borrowers caused another application to be filed under Section 95 before the NCLT, Guwahati \u2014 a separate forum with no apparent nexus to the proceedings \u2014 to generate a fresh moratorium.<\/p>\n\n\n\n<p>Armed with this, the borrowers approached the DRT, which passed an order effectively halting further steps.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"bombay-high-court-landmark-response\"><span class=\"ez-toc-section\" id=\"IV_The_Bombay_High_Courts_Landmark_Response_Rozina_Firoz_Hajiani_2026\"><\/span>IV. The Bombay High Court&#8217;s Landmark Response: Rozina Firoz Hajiani (2026)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"factual-matrix\"><span class=\"ez-toc-section\" id=\"A_The_Factual_Matrix\"><\/span>A. The Factual Matrix:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Credit facilities were extended by Union Bank of India to certain borrower entities, secured by a mortgage over immovable property. Upon default and classification as a Non-Performing Asset, the bank initiated proceedings under the SARFAESI Act. Despite multiple opportunities spanning over seven years and several One-Time Settlement proposals \u2014 none of which were honoured \u2014 the borrowers took no steps to challenge the SARFAESI proceedings before the DRT.<\/p>\n\n\n\n<p>The bank proceeded through multiple unsuccessful auctions before a tenth auction in December 2024 resulted in a successful bid by the petitioners. A sale certificate was issued and registered in favour of the auction purchasers. At this stage, the borrowers and guarantors finally swung into action \u2014 but not to pay their debts. They invoked Sections 94 and 95 of the IBC, triggering moratorium under Section 96. Even after the NCLT, NCLAT and Supreme Court held that the secured asset stood excluded from the moratorium as third-party rights had crystallised, the borrowers engineered a fresh application before NCLT Guwahati. Armed with this, they obtained an order from the DRT halting possession. The Bombay High Court was moved against this DRT order.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"core-findings\"><span class=\"ez-toc-section\" id=\"B_The_Courts_Core_Findings\"><\/span>B. The Court&#8217;s Core Findings:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Division Bench of Justice Manish Pitale and Justice Shreeram V. Shirsat, in a judgment that is both practically significant and doctrinally rich, made the following core findings:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Court noted a systemic pattern: &#8216;In a number of such matters, it is found that the borrowers\/guarantors act as fence sitters and do not take any steps when the secured creditors proceed under Section 13(2) of the Securitisation Act&#8230; At the stage when the auction sale has been conducted&#8230; even after the sale certificate is issued, when physical possession of the secured asset is about to be handed over to the auction purchaser, the original borrowers\/guarantors initiate collusive proceedings under Section 94 or Section 95 of the IBC, claiming triggering of moratorium under Section 96.&#8217;<\/li>\n\n\n\n<li>On the perverse impact on auction purchasers, the Court observed: &#8216;Such borrowers\/guarantors, who are defaulters, wear a cloak of immunity under the garb of moratorium triggered under Section 96 of the IBC&#8230; the auction purchaser is completely frustrated, despite having parted with consideration in terms of the bid amount.&#8217;<\/li>\n\n\n\n<li>On the subversion of the IBC&#8217;s purpose, the Court stressed that &#8216;the manner in which the defaulting borrowers and guarantors have been taking recourse to the provisions of the IBC&#8230; shows that such strategies are frustrating the very object of the IBC, apart from paralyzing the whole process of lawful steps taken by secured creditors.&#8217;<\/li>\n\n\n\n<li>On the DRT&#8217;s jurisdictional error, the Court held that the DRT failed to consider the binding effect of earlier orders of the NCLT, NCLAT and the Supreme Court which had excluded the secured asset from moratorium, and this failure constituted a &#8216;jurisdictional error&#8217; resulting in &#8216;failure of justice.&#8217;<\/li>\n\n\n\n<li>On the need for writ intervention, the Court concluded that &#8216;unless the Court exercising writ jurisdiction takes note of such manifest misuse of the provisions of law and passes an order to set right the obvious wrong, the tendency of such parties to misuse provisions of law and to browbeat subordinate tribunals like the DRT will continue.&#8217;<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"waiver-estoppel-principles\"><span class=\"ez-toc-section\" id=\"C_The_Principles_Of_Waiver_And_Estoppel\"><\/span>C. The Principles Of Waiver And Estoppel:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Significantly, the Bombay High Court also applied the doctrines of waiver and estoppel to shut out the borrowers. It found that by repeatedly offering One-Time Settlement proposals, by allowing the SARFAESI proceedings to run uncontested for over seven years, and by failing to challenge statutory notices before the DRT, the borrowers had waived their right to object to the proceedings at the final stage.<\/p>\n\n\n\n<p>The Court held that the borrowers could not be permitted to derail the process after allowing it to reach culmination and after third-party rights had intervened. The application of these equitable principles reinforces the conclusion that the IBC moratorium cannot be invoked to reverse a process that the debtor had itself tacitly accepted as legitimate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"case-disposition\"><span class=\"ez-toc-section\" id=\"D_The_Disposition\"><\/span>D. The Disposition:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The writ petition was allowed.<\/li>\n\n\n\n<li>The DRT&#8217;s order was set aside.<\/li>\n\n\n\n<li>The secured creditor was held entitled to proceed with further steps pursuant to the auction sale and registration of the sale certificate.<\/li>\n\n\n\n<li>The DRT was directed to expeditiously hear and finally dispose of the securitisation application on merits on or before May 15, 2026.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"convergent-jurisprudence\"><span class=\"ez-toc-section\" id=\"V_Convergent_Jurisprudence_Other_Courts_And_Tribunals_Speak\"><\/span>V. Convergent Jurisprudence: Other Courts And Tribunals Speak<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"nclt-chennai-case\"><span class=\"ez-toc-section\" id=\"A_NCLT_Chennai_In_South_Indian_Bank_v_KC_Mohanan_CP_IB_109CHE2023\"><\/span>A. NCLT Chennai In South Indian Bank v. K.C. Mohanan (CP (IB) 109\/(CHE)\/2023)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Months before the Bombay High Court&#8217;s ruling, the NCLT Chennai Bench had already drawn a firm line against tactical invocation of Section 94. In this case, the personal guarantor of a loan account classified as NPA following a default of approximately Rs. 23 crore filed an application under Section 94, having watched SARFAESI proceedings including auction notices proceed without interference.<\/p>\n\n\n\n<p>The bank opposed the application, arguing that the guarantor had made partial payments and deliberately defaulted on the rest, and that the sole purpose of the Section 94 petition was to obtain the protective umbrella of the Section 96 moratorium while evading recovery.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The NCLT observed that the application was merely to avail moratorium benefits.<\/li>\n\n\n\n<li>Held that Section 94 cannot be used as a safe harbour.<\/li>\n\n\n\n<li>Rejected delay tactics in recovery proceedings.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"nclt-ahmedabad-case\"><span class=\"ez-toc-section\" id=\"B_NCLT_Ahmedabad_In_Shabanabanu_Gafarbhai_Mandaviya_v_HDFC_Bank_Ltd_2025\"><\/span>B. NCLT Ahmedabad In Shabanabanu Gafarbhai Mandaviya v. HDFC Bank Ltd. (2025)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In a striking demonstration of judicial intolerance for calculated abuse, the NCLT Ahmedabad Bench imposed costs upon a debtor who filed a Section 94 application on August 21, 2025 \u2014 barely four days before an auction scheduled for August 25, 2025 \u2014 for the undisguised purpose of triggering the automatic moratorium to halt the auction.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Application aimed to frustrate SARFAESI proceedings.<\/li>\n\n\n\n<li>Declared as abuse of IBC process.<\/li>\n\n\n\n<li>Costs of Rs. 50,000 imposed.<\/li>\n\n\n\n<li>Amount directed to Prime Minister&#8217;s National Relief Fund.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"nclat-syed-sirajis-case\"><span class=\"ez-toc-section\" id=\"C_NCLAT_In_Syed_Sirajis_Salikin_Khadri_v_Edelweiss_ARC_Ltd_2025\"><\/span>C. NCLAT In Syed Sirajis Salikin Khadri v. Edelweiss ARC Ltd. (2025)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Section 94 misuse to stall SARFAESI recovery declared abuse of process.<\/li>\n\n\n\n<li>Moratorium cannot be used as a delay mechanism.<\/li>\n\n\n\n<li>Decision cited across multiple NCLTs.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"nclat-manoj-aggarwal-case\"><span class=\"ez-toc-section\" id=\"D_NCLAT_In_Manoj_Aggarwal_v_Karnataka_Bank_Ltd\"><\/span>D. NCLAT In Manoj Aggarwal v. Karnataka Bank Ltd.<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Repeated Section 94 filings identified as abuse.<\/li>\n\n\n\n<li>Non-prosecution by guarantors criticized.<\/li>\n\n\n\n<li>Pattern-based misuse condemned.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"supreme-court-rcm-case\"><span class=\"ez-toc-section\" id=\"E_Indian_Overseas_Bank_v_RCM_Infrastructure_Ltd_2022_SCC_OnLine_SC_634\"><\/span>E. Indian Overseas Bank v. RCM Infrastructure Ltd. (2022 SCC OnLine SC 634)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>While this Supreme Court decision held that Section 14 moratorium prohibits continuation of SARFAESI proceedings against a corporate debtor after CIRP commences, the Court was also alive to the possibility of the IBC being invoked with mala fide intent.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Voluntary insolvency petitions may be misuse.<\/li>\n\n\n\n<li>Section 65 IBC applicable in mala fide cases.<\/li>\n\n\n\n<li>Foundational judgment on IBC-SARFAESI interplay.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"critical-doctrinal-distinction-legitimate-shield-vs-tactical-weapon\"><span class=\"ez-toc-section\" id=\"VI_The_Critical_Doctrinal_Distinction_Legitimate_Shield_vs_Tactical_Weapon\"><\/span>VI. The Critical Doctrinal Distinction: Legitimate Shield vs. Tactical Weapon<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The jurisprudence surveyed above crystallises a critical doctrinal distinction that courts and tribunals have begun to draw with increasing precision: there is a fundamental difference between a genuinely distressed borrower who invokes insolvency proceedings with a bona fide intent to restructure obligations and resolve debts, and a strategic defaulter who invokes the same provisions solely to obtain the automatic moratorium as a litigation weapon.<\/p>\n\n\n\n<p>The IBC&#8217;s moratorium provisions were never designed to be weaponised by defaulters who:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>(i) deliberately allow SARFAESI proceedings to run their full course without challenge;<\/li>\n\n\n\n<li>(ii) make serial OTS proposals they have no intention of honouring;<\/li>\n\n\n\n<li>(iii) file insolvency applications only after a successful auction, the issuance of a sale certificate, and the crystallisation of third-party rights;<\/li>\n\n\n\n<li>(iv) forum-shop before distant NCLT benches with questionable jurisdiction; and<\/li>\n\n\n\n<li>(v) once repelled from one forum, engineer fresh applications before another to generate a new moratorium cycle.<\/li>\n<\/ul>\n\n\n\n<p>In such cases, the Section 96 moratorium is not protective \u2014 it is predatory. It does not shield a debtor from harassment while he pursues genuine resolution; it enables a debtor to expropriate the value that an innocent auction purchaser has legitimately acquired. The courts have recognised that permitting this would not only undermine the credit ecosystem and financial discipline, but would also undermine the IBC itself \u2014 for a statute deployed as an engine of mischief eventually loses the legitimacy that is its lifeblood.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"role-of-section-65-and-sanctions-against-abusive-filings\"><span class=\"ez-toc-section\" id=\"VII_The_Role_of_Section_65_and_the_Sanctions_Against_Abusive_Filings\"><\/span>VII. The Role of Section 65 and the Sanctions Against Abusive Filings<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 65 of the IBC expressly provides that any person who fraudulently or maliciously initiates insolvency proceedings under the Code shall be punishable with imprisonment and fine. This provision signals that the legislature was alive to the risk of the IBC being invoked dishonestly. Yet, Section 65 has remained largely dormant as a prosecutorial tool. The courts have instead responded through the more immediate mechanisms of dismissal with costs, imposition of financial penalties, and writ intervention.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"judicial-response-and-deterrence\"><span class=\"ez-toc-section\" id=\"Judicial_Response_and_Deterrence\"><\/span>Judicial Response and Deterrence<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Ahmedabad NCLT&#8217;s imposition of costs in Shabanabanu Gafarbhai Mandaviya is a step in the right direction, but a more systematic deployment of Section 65 by creditors, particularly in cases where the documentary record reveals a pre-planned strategy of repeated IBC filings timed to frustrate specific enforcement steps, could serve as a powerful deterrent.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"writ-jurisdiction-and-abuse-of-process\"><span class=\"ez-toc-section\" id=\"Writ_Jurisdiction_and_Abuse_of_Process\"><\/span>Writ Jurisdiction and Abuse of Process<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Courts have additionally invoked the inherent jurisdiction doctrine and the principle that abuse of process is itself a ground for exercising extraordinary jurisdiction. The Bombay High Court&#8217;s exercise of writ jurisdiction in Rozina Firoz Hajiani, notwithstanding the ordinarily available remedy of an appeal before the DRAT, was grounded in the &#8216;peculiar circumstances&#8217; of systemic abuse, manifest injustice to third-party purchasers, and the subordinate tribunal&#8217;s failure to apply binding precedent \u2014 precisely the kind of exceptional case that attracts writ jurisdiction under Article 226 of the Constitution.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"implications-secured-creditors-auction-purchasers\"><span class=\"ez-toc-section\" id=\"VIII_Implications_For_Secured_Creditors_And_Auction_Purchasers\"><\/span>VIII. Implications For Secured Creditors And Auction Purchasers<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The emerging jurisprudence carries several practical and legal implications for banks, financial institutions, and auction purchasers:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>First:<\/strong> Auction purchasers must act promptly when IBC proceedings are initiated post-auction. The Rozina Firoz Hajiani fact pattern demonstrates that if the secured asset has been excluded from moratorium by a final judicial determination at any level, that determination creates binding precedent that subsequent tribunals are obligated to follow. Relying upon an order passed by NCLT Guwahati in the face of contrary orders by the NCLT Mumbai, NCLAT, and the Supreme Court constitutes a jurisdictional error that is amenable to writ correction.<\/li>\n\n\n\n<li><strong>Second:<\/strong> Secured creditors should contemporaneously document and present the complete chronological record of SARFAESI proceedings before any tribunal hearing a Section 94 or Section 95 application. The pattern of fence-sitting, repeated OTS failures, and delayed IBC filings must be placed in its full context, as the courts have consistently found this factual matrix to be the decisive indicator of mala fide intent.<\/li>\n\n\n\n<li><strong>Third:<\/strong> Creditors should explore costs and Section 65 proceedings more aggressively against serial abusers. The imposition of costs \u2014 even the relatively modest sum of Rs. 50,000 in Shabanabanu Gafarbhai Mandaviya \u2014 sends a signal and creates a record. More significantly, it defeats the purely costless nature of tactical filings, which at present impose all the risk on the creditor and auction purchaser while the defaulter bears none.<\/li>\n\n\n\n<li><strong>Fourth:<\/strong> The Bombay High Court&#8217;s ruling clarifies that writ jurisdiction under Article 226 is not entirely ousted by the SARFAESI Act&#8217;s provisions for appeal before the DRAT when the DRT&#8217;s order involves a jurisdictional error and results in a failure of justice. This is a significant clarification in light of the Supreme Court&#8217;s earlier ruling in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd., which had cautioned against entertaining SARFAESI disputes in writ proceedings where the statutory remedy of Section 17 is available.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"systemic-dimension-credit-ecosystem\"><span class=\"ez-toc-section\" id=\"IX_The_Systemic_Dimension_Protecting_The_Credit_Ecosystem\"><\/span>IX. The Systemic Dimension: Protecting The Credit Ecosystem<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The problem that courts have been addressing is not merely one of individual injustice to a particular auction purchaser or secured creditor. It is a systemic problem with macroeconomic consequences. When the moratorium under Section 96 can be invoked as a tactical weapon to freeze concluded enforcement proceedings, several harmful consequences follow:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The auction market for bank-recovered properties is chilled. Prospective bidders, knowing that their purchase can be frozen post-auction through a tactical IBC filing, will bid lower or refrain altogether. This depresses recovery values for banks and, ultimately, costs the banking system and the taxpayer.<\/li>\n\n\n\n<li>Non-performing asset resolution is delayed, worsening bank balance sheets and impeding credit availability. The very problem that both SARFAESI and IBC were designed to solve \u2014 the protracted entrenchment of defaulters in possession of assets they cannot service \u2014 is perpetuated rather than resolved.<\/li>\n\n\n\n<li>The IBC&#8217;s credibility as a time-bound resolution mechanism is undermined when its provisions are abused by defaulters to extend rather than resolve insolvency. As the Bombay High Court observed, this &#8216;frustrates the very object of the IBC, apart from paralyzing the whole process of lawful steps taken by secured creditors.&#8217;<\/li>\n<\/ul>\n\n\n\n<p>A robust judicial response \u2014 of the kind delivered by the Bombay High Court in Rozina Firoz Hajiani, by the NCLT Chennai in K.C. Mohanan, and by the NCLAT in Syed Sirajis Salikin Khadri \u2014 is therefore not merely about doing justice in an individual case. It is about preserving the institutional integrity of both the SARFAESI regime and the IBC, and ensuring that neither statute is reduced to an instrument of obstruction.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"critical-analysis-road-ahead\"><span class=\"ez-toc-section\" id=\"X_Critical_Analysis_And_The_Road_Ahead\"><\/span>X. Critical Analysis And The Road Ahead<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The current judicial response, while salutary, reveals a structural tension that legislation alone can resolve. The automatic pre-admission moratorium under Section 96 \u2014 upheld by the Supreme Court in Dilip B. Jiwrajka as constitutionally valid \u2014 is, by design, capable of being triggered without any scrutiny of the applicant&#8217;s bona fides. The legislature&#8217;s intent was to provide immediate relief to genuinely distressed debtors who would otherwise face a cascade of recovery proceedings during the delicate period of insolvency resolution. The problem is not with the provision&#8217;s validity but with its availability to strategic misuse.<\/p>\n\n\n\n<p>A possible legislative correction would be to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Grant the NCLT or the DRT concurrent power to record whether third-party rights in a secured asset have already crystallised prior to an IBC filing, and to issue a certificate to that effect which would bind all subsequent tribunals.<\/li>\n\n\n\n<li>Alternatively, amend the IBC to provide that Section 96 moratorium does not operate in respect of any secured asset where a sale certificate has been registered in favour of an auction purchaser prior to the filing of the Section 94 or Section 95 application.<\/li>\n<\/ul>\n\n\n\n<p>Such a provision would align statutory text with the judicial consensus that completed SARFAESI transactions are not disturbed by subsequent moratoriums.<\/p>\n\n\n\n<p>Judicially, the Supreme Court may eventually need to resolve the tension between the broad textual protection of Section 96 (which speaks of &#8216;all debts&#8217;) and the equitable principle that a debtor who has allowed enforcement proceedings to culminate cannot retrospectively invoke moratorium protection to divest an innocent purchaser of completed title. The Bombay High Court has pointed the way, but a definitive Supreme Court ruling settling the temporal limits of Section 96 moratorium vis-\u00e0-vis completed SARFAESI sales would eliminate the uncertainty that makes satellite litigation possible.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"conclusion\"><span class=\"ez-toc-section\" id=\"XI_Conclusion\"><\/span>XI. Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The judgment of the Bombay High Court in Rozina Firoz Hajiani v. Union of India (2026:BHC-OS:6969-DB) is a landmark in the evolving jurisprudence governing the IBC-SARFAESI interface. By quashing the DRT&#8217;s order, recognising the systemic pattern of abuse, invoking writ jurisdiction on grounds of manifest misuse and jurisdictional error, and directing expeditious disposal of the underlying securitisation application, the Division Bench has sent an unambiguous message: the courts will not permit the IBC to be deployed as a sanctuary for delinquency.<\/p>\n\n\n\n<p>Read alongside the NCLT Chennai&#8217;s ruling in K.C. Mohanan, the NCLT Ahmedabad&#8217;s cost-imposition in Shabanabanu Gafarbhai Mandaviya, the NCLAT&#8217;s ruling in Syed Sirajis Salikin Khadri, and the Supreme Court&#8217;s foundational analysis in Dilip B. Jiwrajka, the emerging jurisprudence forges a coherent anti-abuse doctrine:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Moratorium provisions are protective in purpose<\/li>\n\n\n\n<li>Any invocation of those provisions for an extraneous purpose \u2014 namely, the obstruction of concluded enforcement proceedings \u2014 will be treated as an abuse of process<\/li>\n\n\n\n<li>Such abuse deserves dismissal, costs, and writ correction<\/li>\n<\/ul>\n\n\n\n<p>The health of India&#8217;s credit markets, the sanctity of auction proceedings, and the institutional credibility of the insolvency regime alike demand nothing less.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Abstract It is common knowledge that people gripped in the clutches of SARFAESI Act device a strategy to disrupt the judicial process by resorting to the provisions of Insolvency and Bankruptcy Code, 2016 thereby constiruting abuse of the process of law. The Courts have consistently deprecated this practice and disallowed this underhand manoeuvre to succeed.<\/p>\n","protected":false},"author":73,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"two_page_speed":[],"_jetpack_memberships_contains_paid_content":false,"_joinchat":[],"footnotes":""},"categories":[7],"tags":[4765],"class_list":{"0":"post-21689","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-banking-finance-laws","7":"tag-banking-finance-laws"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/21689","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/users\/73"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/comments?post=21689"}],"version-history":[{"count":2,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/21689\/revisions"}],"predecessor-version":[{"id":21736,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/21689\/revisions\/21736"}],"wp:attachment":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/media?parent=21689"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/categories?post=21689"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/tags?post=21689"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}