Vol 23 (2026) - Issue 5

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Regulatory Proceedings during CIRP: A Conflict Undermining Resolution

Synopsis
This article examines the conflict between regulatory proceedings and the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 ('IBC') during the Corporate Insolvency Resolution Process ('CIRP'). While the moratorium is intended to provide the corporate debtor with a 'breathing space' from legal pressures, courts have allowed several regulatory and governmental proceedings to continue during this period. The article argues that the continuation of such proceedings undermines the core objective of the IBC by imposing operational, administrative, and financial burdens on the corporate debtor and the Resolution Professional.
It highlights how ongoing tax, customs, and regulatory actions divert resources, create uncertainty regarding liabilities, and discourage prospective resolution applicants. Parallel proceedings also fragment the insolvency framework by weakening the central role of the National Company Law Tribunal ('NCLT') and allowing multiple regulators to act independently.
The article concludes that unless policymakers and courts address these structural tensions, the moratorium will remain only a partial safeguard, limiting the effectiveness of the CIRP and undermining the IBC's goal of value maximisation and business revival.