Interim Moratorium explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Two features distinguish the moratorium in a financial service provider's insolvency. The interim moratorium runs from the date of filing rather than from admission, and the licence that lets the FSP do business is protected from suspension or cancellation throughout.
From filing, not from admission
For an FSP the interim moratorium commences on and from the date of filing of the application against it. In an ordinary corporate insolvency there is no interim moratorium at all — protection begins on admission, when section 14 takes effect.
The gap between filing and admission is exactly the period in which a financial firm is most vulnerable. The filing is a public event; depositors and counterparties react to it; and an unprotected interval would allow a run to empty the firm before the tribunal had even considered the application. Because only the appropriate regulator may file, the early protection is not open to abuse — it attaches to a supervisory decision, not to a creditor's tactical filing.
The licence or registration which authorises the FSP to engage in the business of providing financial services shall not be suspended or cancelled during the interim moratorium and the CIRP.
This is the most consequential provision in Chapter 11. An FSP's real value is almost entirely its authorisation, its book and its customer relationships — the physical assets are trivial. Cancel the registration and there is no going concern to resolve, no business for a resolution applicant to acquire, and the process collapses into a liquidation of furniture. The protection binds the regulator that brought the application in the first place.
Section 14 applies as it stands
Once the CIRP begins, the ordinary section 14 moratorium applies to the FSP. Read with Rule 4, which substitutes "financial service provider" for "corporate debtor" throughout, the familiar protections operate without modification — suits and proceedings are stayed, transfer or disposal of assets is barred, enforcement of security is barred and recovery of property from the FSP's occupation is barred.
Extension into liquidation
Where an FSP enters liquidation under Rule 7, the moratorium protections of section 14(1)(a) and section 14(1)(c) may be applied mutatis mutandis to the liquidation estate, consistent with the amendment to section 33 of the Code. In substance:
- 14(1)(a) — the stay on institution or continuation of suits and proceedings; and
- 14(1)(c) — the bar on enforcement of security interest over the FSP's property,
continue to protect the estate after the liquidation order. Without that continuity, the value preserved during the resolution attempt could be dismantled by enforcement action in the days after it failed.
What the interim moratorium does not reach
Rule 10 carves out third-party assets. Rule 5(b) and section 14 do not apply to any third-party assets or properties in the custody or possession of the financial service provider, including funds, securities and other assets required to be held in trust for the benefit of third parties.
The Administrator still takes control and custody of those assets — but only for the purpose of dealing with them in the manner the Central Government notifies under section 227. Client money and client securities are not part of the estate and are not available to the FSP's creditors.
The moratorium timeline for an FSP
| Stage | Protection |
|---|---|
| Application filed by the appropriate regulator | Interim moratorium begins; licence protected |
| Admission | Section 14 moratorium; licence still protected |
| Liquidation under Rule 7 | Section 14(1)(a) and (c) applied mutatis mutandis to the liquidation estate; licence not to be suspended or cancelled without hearing the liquidator |
| Throughout | Third-party assets outside the moratorium under Rule 10 |
Common mistakes
- Applying the ordinary rule that protection begins on admission — for an FSP the interim moratorium begins on filing.
- Assuming the regulator can cancel the registration once the process has started.
- Treating client funds and securities as caught by the moratorium and available to creditors.
- Assuming all moratorium protections lapse on a liquidation order.