On June 14, 2023, the Ministry of Corporate Affairs (MCA) issued a notification taking away the relief of moratorium available to corporate debtors under Section 14(1) of the Insolvency and Bankruptcy Code, 2016, from certain oil companies which have entered into transactions, arrangements or agreements specified therein.
Accordingly, the said Section has been made inapplicable where a corporate debtor has entered into production or revenue-sharing contracts, exploration licenses, or mining leases under the Oilfields (Regulation and Development) Act, 1948 and rules made thereunder. The said exclusion extends to any transactions, arrangements or agreements, including Joint Operating Agreement, connected or ancillary to the said transactions, arrangements or agreements.
Section 14(1) of the Code states as follows: –
“Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: —
(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.”
The said provision provides relief to corporate debtors by preventing the institution of suits against them, etc. during the Corporate Insolvency Resolution Process (CIRP) period. And in the exercise of powers conferred under Section 14(3)(a) of the Code, the Ministry has deprived the oil companies of the relief of moratorium for entering into transactions mentioned above.