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CS Professional · Insolvency and Bankruptcy - Law and Practice · Fresh Start Process

Meena Iyer files a fresh start application on 3 March. A creditor, Sundaram Finance Ltd, has a recovery suit pending against her for one of her debts. What is the position from 3 March until the application is admitted or rejected?

The suit is deemed stayed. An interim-moratorium starts on the date the fresh start application is filed and covers all debts, staying pending proceedings and barring new ones, until the application is admitted or rejected.

  1. AThe suit continues, since a moratorium begins only on admission
  2. BThe suit is deemed stayed, because an interim-moratorium commences on the date of filing for all debtsCorrect
  3. CThe suit is stayed only if the Adjudicating Authority passes a specific order
  4. DThe suit is stayed only for debts above Rs 10,000

Explanation

When the application is filed, an interim-moratorium commences on the filing date in relation to all debts. Pending legal proceedings are deemed stayed and no creditor may start new ones. It ends on admission or rejection. Waiting for admission is wrong, as the interim-moratorium operates from filing.

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