In Sincere Securities Pvt. Ltd.,[1] the Supreme Court (SC) has given the Indian Corporate Insolvency process a practical way forward for conservation of resources of an Insolvent Entity. At the heart of this judgement lies the provision of ‘moratorium’ under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), which is a statutory legal shield to guard the corporate debtor from (i) eviction (ii) litigation and (iii) enforcement, while the corporate insolvency resolution process (CIRP) is pending. But, the question is, what happens when this legal shield itself becomes a shackle for the corporate debtor? And, what if the retention of an expensive property will drain more oxygen out of the already struggling corporate debtor than it actually provides? In Sincere Securities Pvt. Ltd., the SC has addressed these dilemmas with clarity and precision and held that the moratorium is not something like an iron cage. Rather it is a ‘legally protective mechanism’ which must not be weaponised, to block the necessary capital and funds of the Corporate Debtor. In Sincere Securities Pvt. Ltd. case, a leased/licensed property, which was in the possession of the corporate debtor, became financially burdensome for the corporate debtor, during the pendency of the insolvency proceedings. The Court here held that Section 14(1)(d) of the IBC 2016, which categorically bars the recovery of the property by the owner or the lessor when the moratorium is applicable, is not supposed to be misapplied to block both the (i) Committee of Creditors (CoC) and (ii) Resolution Professional (RP) from relinquishing such property when such decisions are necessary to be taken for the commercial viability.
