Calcutta High Court Strikes Down Recovery Suit Filed During IBC Interim Moratorium: Ambootia Tea Exports Private Limited & Ors. vs Rani Sati Abasan Private Limited

Overview of the Case

The Calcutta High Court, in the matter of Ambootia Tea Exports Private Limited & Ors. vs Rani Sati Abasan Private Limited, rendered a significant ruling on the interplay between civil recovery proceedings and the statutory embargo imposed under Section 96 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Court set aside the judgment and decree dated February 5, 2026, holding that the recovery suit filed during the subsistence of the interim moratorium was fundamentally incompetent and could neither have been filed by the respondent nor received by the Court.

This decision carries wide-ranging consequences for creditors pursuing recovery actions against individuals who are subject to insolvency proceedings under Part III of the Insolvency and Bankruptcy Code, 2016, and clarifies the legal consequences of initiating litigation in contravention of the statutory moratorium.

Background Facts

The respondent, Rani Sati Abasan Private Limited, instituted a money recovery suit on December 12, 2022, asserting that the appellants were jointly and severally liable for funds lent and advanced to Appellant No. 1. The appellants, including Appellant Nos. 2 and 3 who were individuals, had been subject to proceedings initiated under Section 95 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT), Kolkata.

The timeline of insolvency proceedings is critical to understanding the legal controversy:

  • The Section 95 petition was initially rejected by the NCLT on September 22, 2021
  • On appeal, the NCLAT revived the proceedings by order dated May 27, 2022
  • Subsequent NCLT orders were passed on July 22, 2022 and September 5, 2022
  • The NCLT ultimately admitted the Section 95 proceedings on June 5, 2024

Accordingly, when the respondent filed the suit on December 12, 2022, the interim moratorium under Section 96 of the IBC was squarely in operation — having commenced upon revival of the Section 95 proceedings by the NCLAT and continuing until the NCLT's admission order on June 5, 2024.

Procedural History

Before the learned Single Judge, two applications were pending simultaneously:

  1. GA COM 4 of 2024 — Filed by the appellants under Order VII Rule 11 of the Code of Civil Procedure, 1908, seeking rejection of the plaint
  2. GA COM 3 of 2024 — Filed by the respondent under Order XII Rule 6 of the Code of Civil Procedure, 1908, seeking judgment on admissions

The Single Judge dismissed the appellants' application and decreed the suit in favour of the respondent. Aggrieved, the appellants preferred the present appeal before the Division Bench.

The Division Bench identified and adjudicated upon the following principal legal questions:

  • Whether the suit instituted during the operation of the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 was legally maintainable
  • Whether the plaint was liable to be rejected under Order VII Rule 11(d) of the Code of Civil Procedure, 1908
  • Whether the plaint could be bifurcated between Defendant No. 1 (the corporate entity) and Defendant Nos. 2 and 3 (the natural persons under insolvency proceedings)

The Court deliberately refrained from deciding whether the subject matter constituted a commercial dispute under the Commercial Courts Act, 2015, having resolved the appeal on the IBC moratorium question alone.

Statutory Framework: Section 96 of the IBC

The Court extracted and closely examined Section 96 of the Insolvency and Bankruptcy Code, 2016, which reads: