THE INSOLVENCY AND BANKRUPTCY CODE, 2016: IMPACT OF MORATORIUM ON PRE-EXISTING CONTRACTUAL ARRANGEMENTS AND EXCEPTIONS TO STATUTORY MORATORIUM
The aim of this research paper is to evaluate the implication of statutory moratorium upon pre-existing contractual arrangements. The evaluation of the moratorium’s impact involves appreciating the fundamentally distinct rationales which form the basis of insolvency law and contract law. Multifarious views have emerged to resolve this conflict. The Indian insolvency regime, in light of introduction of the Insolvency and Bankruptcy code, 2016, prima facie adheres to the view that bankruptcy law has an overriding effect over the prevailing laws. This helps in achieving the insolvency law’s objective of collectivity among creditors in the administration and distribution of assets. However, it blatantly ignores the importance of certainty in mutually beneficial exchanges, which forms the basis of contract law and is essential for expediting commerce. Accordingly, by extinguishing pre-insolvency obligations the moratorium can prejudice the interests of contract vendee. The author, while analysing such alteration in pre-existing contractual relations, tends to focus on the bankruptcy law’s objective of maintaining the corporate debtor as a going concern. The present code has a single- minded focus upon value maximization of assets, without being cognizant of the highly specialized operations of some corporate debtor. This undermines the new code’s objective of effectively reviving stressed assets. The author also puts forth the suggestion of granting exemption from the moratorium to certain category of debts. Mature insolvency law jurisdictions have acknowledged the special nature of certain debts and have accordingly exempted them from the moratorium. The author undertakes a comparative analysis of such exceptions and studies their feasibility in the Indian Context.