IBC Moratorium Bars Even Appeals: Kerala High Court Quashes Rent Control Proceedings Against Corporate Debtor

IBC Moratorium Bars Even Appeals: Kerala High Court Quashes Rent Control Proceedings Against Corporate Debtor

Introduction

The Kerala High Court has set aside an order passed by the Rent Control Appellate Authority after finding that proceedings had continued against a corporate debtor despite a moratorium being in force under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).

A Division Bench comprising Chief Justice Soumen Sen and Justice Syam Kumar V.M. held that once a moratorium is declared, neither the institution nor the continuation of suits or proceedings against the corporate debtor is permissible, and that an appeal is legally a continuation of the original proceedings.

Factual Background

The dispute arose from eviction proceedings initiated by Attukal Bhagavathy Temple Trust against Attukal Devi Institute of Medical Sciences Ltd. before the Rent Control Court in Thiruvananthapuram. The landlord sought eviction under Section 11(2)(b) of the Kerala Buildings (Lease and Rent Control) Act on the ground that rent had not been paid from August 2013 to August 2015. On February 1, 2026, the Rent Control Court passed an order directing eviction of the tenant institute.

Procedural Background

Aggrieved by the eviction order, the tenant institute filed an appeal before the Rent Control Appellate Authority. During this period, insolvency proceedings had been initiated against the tenant company under the IBC, and a moratorium under Section 14 had come into effect. The Resolution Professional representing the corporate debtor approached the appellate authority seeking a direction to maintain status quo in the appeal in view of the statutory moratorium.

Despite the moratorium, the Rent Control Appellate Authority proceeded with the appeal, leading to a challenge before the Kerala High Court.

Issues

1. Whether an appeal pending against a corporate debtor can continue during the subsistence of a moratorium under Section 14 of the IBC.

2. Whether an appeal constitutes a continuation of the original proceedings for the purposes of the moratorium.

3. Whether the Rent Control Appellate Authority acted contrary to the statutory moratorium by proceeding with the appeal.

Contentions of the Parties

The corporate debtor contended that once the Corporate Insolvency Resolution Process had commenced, Section 14 of the IBC prohibited the continuation of any legal proceedings against the company. It argued that the appeal before the Rent Control Appellate Authority was a continuation of the eviction proceedings and therefore could not proceed during the moratorium period.

The landlord trust had meanwhile submitted its claim for arrears of rent before the Resolution Professional in the insolvency proceedings pending before the National Company Law Tribunal.

Reasoning and Analysis

The High Court observed that Section 14(1) of the IBC clearly provides that upon declaration of a moratorium, there shall be no institution or continuation of suits or proceedings against the corporate debtor. The Bench emphasised that an appeal is a continuation of the original proceedings and therefore falls within the scope of the moratorium. The Court noted that the moratorium was in force on the date when the Rent Control Appellate Authority took up the appeal for hearing. The fact that the Corporate Insolvency Resolution Process had not been completed by August 23, 2025 did not alter the position, as the process continued to be monitored by the National Company Law Tribunal.

The Court clarified that the moratorium under the IBC continues until either a resolution plan is approved under Section 31 or an order for liquidation is passed under Section 33. As neither of these events had occurred, the moratorium remained operative.In view of this statutory bar, the Court held that the Rent Control Appellate Authority could not have proceeded with the appeal against the corporate debtor.

Decision

The Kerala High Court set aside the order of the Rent Control Appellate Authority and held that the proceedings could not continue against the corporate debtor during the subsistence of the moratorium under Section 14 of the Insolvency and Bankruptcy Code.

In this case the appellant was represented by Advocates A.C. Venugopal, Gautham Mohan, Smt. Vidhya A.C. Meanwhile the respondent was represented by Advocates Aswin Gopakumar, Anwin Gopakumar, Aditya Venugopal, Mahesh Chandran,Saranya Babu, Abhishek S., Rohit P. Gopika B.S.