For several years, personal guarantors of company loans had a shield that lenders found frustrating. Under Section 96 of the Insolvency and Bankruptcy Code, the moment an insolvency application was filed by or against a guarantor, an interim moratorium began. Legal actions and proceedings in respect of the guarantor's debts were paused until the NCLT decided whether to admit the application. Guarantors sometimes filed their own applications under Section 94 precisely to stop a DRT case, a SARFAESI sale or a suit.
That changed on 26 May 2026. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 added a provision to Section 96 stating that the interim moratorium does not apply where an application is filed for initiating an insolvency resolution process in respect of a personal guarantor to a corporate debtor. This page explains what that means for guarantors and lenders, and what protection still exists.
हिंदी में सारांश
पहले, जैसे ही किसी वà¥à¤¯à¤•à¥à¤¤à¤¿à¤—त गारंटर के खिलाफ या उसके दà¥à¤µà¤¾à¤°à¤¾ दिवाला आवेदन दायर होता, धारा 96 के तहत अंतरिम मोरेटोरियम अपने-आप शà¥à¤°à¥‚ हो जाता था और उसके करà¥à¤œà¤¼à¥‹à¤‚ से जà¥à¤¡à¤¼à¥€ कानूनी कारà¥à¤°à¤µà¤¾à¤ˆ रà¥à¤• जाती थी। 26 मई 2026 से लागू संशोधन के बाद, कंपनी के लोन के वà¥à¤¯à¤•à¥à¤¤à¤¿à¤—त गारंटरों पर यह अंतरिम मोरेटोरियम लागू नहीं होता। आवेदन सà¥à¤µà¥€à¤•à¤¾à¤° होने के बाद धारा 101 का मोरेटोरियम (180 दिन) अà¤à¥€ à¤à¥€ मिलता है।
Is this your situation?
- You are a personal guarantor and were relying on an interim moratorium to stop a lender's action
- You filed, or are thinking of filing, your own application under Section 94
- A lender has filed a Section 95 application against you and is continuing a DRT or SARFAESI case
- You are a lender whose recovery was paused because a guarantor filed an application
- Your application was filed before 26 May 2026 and is still pending
How the interim moratorium worked before 2026
Automatic on filing
Under the original Section 96, an interim moratorium began on the date of filing an application under Section 94 (by the guarantor) or Section 95 (by a creditor).
What it covered
Any pending legal action or proceeding in respect of any debt was deemed stayed, and creditors could not start new legal action or proceedings in respect of any debt.
How long
It ended on the date the NCLT admitted or rejected the application.
Why it was controversial
Because admission could take months, guarantors could secure a long pause simply by filing. Tribunals and courts dealt with many disputes about its scope, including whether it covered SARFAESI actions on the guarantor's property.
What Section 96 says now
With effect from 26 May 2026, Section 96 contains a new sub-section providing, in substance, that the interim moratorium shall not apply where an application is filed for initiating an insolvency resolution process in respect of a personal guarantor to a corporate debtor.
Since Part III of the Code, which deals with individuals, has been brought into force mainly for personal guarantors to corporate debtors, this means that in practice:
- filing a Section 94 or Section 95 application in respect of a guarantor of a company loan no longer pauses other proceedings;
- lenders can continue DRT cases, suits and SARFAESI action against the guarantor while the application is pending, subject to any specific orders of courts or tribunals;
- the guarantor's protection now begins only on admission, under Section 101.
The policy reason is clear: Parliament wanted to stop the interim moratorium being used as a delay tactic. Lenders gain leverage; guarantors lose a tool.
What protection remains
Moratorium after admission (Section 101)
Once the NCLT admits the application, a moratorium applies to the guarantor's debts. It lasts 180 days or until a repayment plan is approved, whichever is earlier.
Hearing before admission
The guarantor is heard before admission, after the resolution professional's report. Real defences on invocation, limits and discharge can still be raised. See defending a guarantor petition.
Protection in other forums
Defences and interim relief remain available in the DRT, civil courts and SARFAESI proceedings themselves, on their own merits.
Negotiated standstill
Lenders sometimes agree a standstill while settlement talks proceed. These need to be in writing.
Applications filed before 26 May 2026
Many guarantor applications were pending on 26 May 2026, some with interim moratoria already in operation. Whether those interim moratoria continue, and how pending proceedings should now be treated, depends on the wording of the amendment, the transitional position and any orders passed in the particular case. This is an area where tribunals' views may develop.
If you are a guarantor or a lender in a case filed before that date, do not assume either way. We review the dates, the orders passed and the proceedings affected, and where necessary seek clarification from the NCLT.
What guarantors should do now
Stop relying on filing as a pause
Do not file a Section 94 application expecting it to stop a lender's action. It will not, for guarantors of company loans.
Defend each proceeding on its merits
Respond in DRT, SARFAESI or suit proceedings with your actual defences, such as guarantee limits, discharge or accounting errors.
Prepare for the admission hearing
Use the resolution professional's examination and the admission hearing to put your case on record.
Consider a negotiated settlement early
With less leverage from delay, a realistic settlement offer backed by assets is often the best route.
Plan for Section 101
If admission is likely, prepare a repayment plan, because the post-admission moratorium is limited to 180 days.
What lenders should do now
Review stayed proceedings
If your recovery was paused because of a guarantor application, check the dates and orders to see whether you can proceed.
Continue parallel remedies
Pursue DRT, suit or SARFAESI action alongside a Section 95 application, keeping in mind that a Section 101 moratorium will apply after admission.
Use the new Section 28A
Where you have taken possession of a guarantor's assets under applicable law, consider whether transferring them into the company's process with the committee's approval will yield better value. See personal guarantor insolvency.
Time and typical cost
Fees are agreed in writing and do not depend on the outcome.
| Task | Usual time | What it involves |
|---|---|---|
| Review of your case after the amendment | 2 to 4 days | Dates, orders, proceedings affected |
| Clarification application to NCLT (if needed) | Weeks | Drafting and hearing |
| Defence or recovery strategy | Ongoing | Coordinated across forums |
Documents to share with us
For guarantors
- Guarantee deed and invocation letters
- Your Section 94 application or the lender's Section 95 application
- Orders in DRT, SARFAESI or suit proceedings
For lenders
- Section 95 application and status
- Orders staying your proceedings and their dates
- Details of guarantor assets in your possession
A guarantor who filed too late to help
Here's a made-up example. A Noida promoter who had guaranteed his company's Rs 9 crore loan learned in June 2026 that the bank had scheduled an auction of his house under SARFAESI. A friend suggested filing his own insolvency application to trigger a moratorium, as others had done in earlier years.
We explained that, after 26 May 2026, an application by a personal guarantor of a company loan no longer triggers an interim moratorium. Instead, we raised his defences before the DRT in the SARFAESI challenge, including an error in the bank's valuation of the house and a failure to credit recoveries from the company's assets. The DRT directed a fresh valuation, and the bank agreed to discuss a settlement.
Before and after 26 May 2026
| Point | Before the amendment | From 26 May 2026 |
|---|---|---|
| Filing by or against a guarantor of a company loan | Interim moratorium began on filing | No interim moratorium |
| Pending DRT, suit or SARFAESI actions between filing and admission | Deemed stayed | Generally continue, subject to orders of the forum |
| Guarantor filing own Section 94 application | Often used to pause recovery | No pausing effect |
| Protection after admission | Moratorium under Section 101 | Unchanged: moratorium under Section 101 |
| Duration of post-admission moratorium | Up to 180 days or until a repayment plan is approved | Unchanged |
Mistakes to avoid after the change
- For guarantors, relying on old advice: strategies that worked before May 2026 no longer do. Revisit any plan built around the interim moratorium.
- For lenders, assuming all stays have lapsed: where a forum passed a specific stay order, that order must be dealt with on its own terms.
- For both, ignoring the Section 101 moratorium: once an application is admitted, legal actions concerning the guarantor's debts are paused for up to 180 days.
- For guarantors, delaying the defence: with no pause on filing, the admission hearing comes quickly. Prepare your objections and documents early.
- For lenders, skipping the demand notice: the procedural requirements for a Section 95 application still apply in full.
Why Parliament made the change
The interim moratorium was designed to give individuals in genuine distress a breathing space while their insolvency was being examined. For guarantors of large company loans, it had a different effect. Because admission often took months, guarantors could file an application and keep lenders' recovery actions frozen for long periods, sometimes years, without the process moving forward. Lenders, the government and committees reviewing the Code identified this as a significant source of delay. The 2026 amendment addresses it by removing the interim moratorium for guarantors to corporate debtors, while keeping the full protection of the Section 101 moratorium once a tribunal has examined the case and admitted it.
Checklist for a guarantor after the 2026 change
- List all creditors, debts and guarantees with amounts
- Note which recovery actions are pending: SARFAESI notices, DRT cases, civil suits, cheque cases
- Check whether a Section 95 application has already been filed against you, and when
- If an application was filed before 26 May 2026, get the order sheet and see what the NCLT recorded on the moratorium
- Collect bank statements and asset details for the last three years
- Review each guarantee deed for limits, conditions and invocation
- Consider whether a negotiated settlement or repayment plan is realistic
- Take advice before filing anything in the hope of a moratorium
Protection that still exists
Losing the interim moratorium does not leave a guarantor without protection. The moratorium under Section 101 still begins once the NCLT admits an application, and it pauses legal actions and proceedings in respect of the guarantor's debts for the period of the insolvency resolution process. Before that stage, a guarantor's defences lie in the forum where each action is pending: before the DRT in a SARFAESI challenge, before the civil or commercial court in a suit, and before the NCLT itself at the admission hearing under Section 100.
Those defences can be substantial. A guarantee may have been discharged by a change in the loan terms without consent, the claim may exceed a capped guarantee, or the creditor may not have credited recoveries from the company's own assets. The resolution professional's report stage is also an opportunity to put the guarantor's case in writing. See defending a guarantor case and personal guarantor insolvency.
A guarantor with a pending application from 2025
Here's a made-up example. A Ghaziabad guarantor had filed his own Section 94 application before NCLT New Delhi in late 2025, and the interim moratorium had been in operation since then. After 26 May 2026, the bank argued before the DRT that the moratorium had ended and asked it to proceed with a pending recovery application.
The answer depended on the transitional position and the orders in his case. We placed the NCLT's order sheet before the DRT and asked the NCLT to clarify the position in his matter. In the meantime, we prepared his defences on the merits, including that the bank had released a co-guarantor without his consent. The guarantor then used the time to negotiate a one-time settlement with the bank, which both sides recorded before the NCLT.
Frequently Asked Questions
Is there still an interim moratorium for personal guarantors?
Not for applications concerning personal guarantors to corporate debtors filed on or after 26 May 2026, when the amendment to Section 96 came into force.
Can I file my own application to stop a bank auction?
Not for that purpose. Filing no longer triggers an interim moratorium for guarantors of company loans.
When does a moratorium apply now?
After the NCLT admits the application, under Section 101, for up to 180 days or until a repayment plan is approved.
What about applications filed before 26 May 2026?
The position depends on the transitional effect of the amendment and the orders in your case. Take specific advice.
Can the lender continue DRT and SARFAESI proceedings while my application is pending?
Generally yes, after the amendment, subject to any specific orders of the forum concerned.
Does this affect individuals who are not guarantors?
Part III of the Code has so far been brought into force mainly for personal guarantors to corporate debtors, so the practical impact is on them.
What should a guarantor do now?
Defend each proceeding on its merits, prepare for the admission hearing and consider an early, realistic settlement.
How are your fees decided?
By the work involved, agreed in writing. They do not depend on the result.
Guarantor or Lender After the 2026 Change?
Send us the application, the dates and any stay orders. We will explain how the amendment affects your case and what to do next.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Need help with Interim Moratorium for Personal Guarantors?
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
