Interim Moratorium under IBC Section 96 does not stay attachment proceedings under the MPID Act.

The Appellant, a proprietary concern of Smt. Kanta Gupta, is an accused in a case involving the National Spot Exchange Ltd. (NSEL) scam.

Respondent No. 1 (State) filed an application (MA/151/2020) under Section 8 of the MPID Act to attach the Appellant’s properties, alleging that about ₹13.60 Crores of investors' money was fraudulently transferred to the Appellant by M/s. PD Agro Processors Pvt. Ltd.

Meanwhile, the State Bank of India initiated insolvency proceedings against Smt. Kanta Gupta under Section 95(1) of the Insolvency and Bankruptcy Code (IBC).

The Appellant sought a stay on the MPID attachment proceedings, arguing that an interim moratorium under Section 96 of the IBC was in effect.

The Special MPID Court rejected this application on November 4, 2023, leading to this appeal.

The Court applied Section 96 of the IBC, which mandates an interim moratorium on "legal action or proceedings in respect of any debt".

It distinguished "debt" under Section 3(11) of the IBC from "deposit" under Section 2(c) of the MPID Act.

The Court relied on *K.K. Baskaran v. State of Tamil Nadu*, establishing that the MPID Act falls under State legislative competence (Entries 1, 30, and 32 of List II).

It further applied the principle of "civil forfeiture" as a public law remedy, citing *Biswanath Bhattacharya v. Union of India*.

It followed the Supreme Court's approval of the NSEL Committee report stating that MPID attachments are not debtor-creditor actions.

The Court reasoned that Section 96 of the IBC only stays proceedings "in respect of any debt".

It found no "debtor-creditor" relationship between the State and the Appellant; rather, the MPID proceedings are a "public law remedy" aimed at recovering "ill-gotten wealth" for defrauded investors.

The Court noted that the properties had already vested in the State via notifications in 2017-2018, long before the IBC application.

Furthermore, the Court held there is no repugnancy between the two acts because they operate in different fields: the MPID Act is a State subject (List II) focused on criminal/regulatory fraud, while the IBC is a Central subject (List III) focused on insolvency.

The moratorium under IBC cannot be used as a shield to protect assets tainted by crime or to frustrate the recovery of deposits under a specialized social welfare statute.

The Court found the Appellant's litigation to be a "dilatory tactic" to protract recovery for gullible investors and imposed a cost of ₹10,00,000/- to be paid to the Bar Council of Maharashtra and Goa.

The prayer for a stay on the judgment was rejected.