In a drug company's insolvency resolution the licence and trial permission continue on payment of current dues, and the data retention clocks keep running

When a pharmaceutical or biotechnology company enters the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (the Code), its drug manufacturing licence and clinical trial permission are not suspended or terminated on the ground of insolvency while current dues are paid, under the Explanation to section 14(1) inserted in 2020. Neither the Drugs Rules, 1945 nor the New Drugs and Clinical Trials Rules, 2019 (NDCT Rules) transfers either grant, and their record retention periods keep running through the process. Section 31(5), in force since 26 May 2026, protects a licence tied to an approved resolution plan. Patents are intangible assets that belong in the information memorandum and the valuation under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), while trial data has no named place in either.

What does the moratorium stop, and what does it leave alone?

Section 14(1) of the Code requires the Adjudicating Authority, the National Company Law Tribunal, to declare a moratorium on commencement. It bars suits and execution against the company, disposal of its assets, enforcement of security, and recovery of property by an owner or lessor. Under section 14(4) it runs to the completion of the process, ending earlier on approval of a plan under section 31(1) or an order of liquidation.

The Explanation to section 14(1), inserted by Act 1 of 2020 with effect from 28 December 2019, supplies the rule: notwithstanding any other law, a "licence, permit, registration, quota, concession, clearance or a similar grant or right" given by a government, a local authority, a sectoral regulator or any other authority "shall not be suspended or terminated on the grounds of insolvency", subject to there being no default in payment of current dues arising for the use or continuation of the grant during the moratorium. The protection is against one ground only, so on its words a licensing authority can still act for breach of a licence condition.

Which dues keep a drug licence alive?

The Code does not define current dues. A licence in Form 28 for drugs in Schedules C and C(1), which include sera and vaccines, remains valid under rule 77 only if the licensee deposits a licence retention fee before the end of every succeeding five years from issue. A late payment carries two per cent of the licence fee for every month or part of a month up to six months, after which the licence is "deemed to have been cancelled".

On the words of the Explanation, a fee falling due inside the moratorium is a current due for the continuation of the licence. A licence deemed cancelled earlier ended by the rule, not for insolvency.

What does section 14(2A) add for the supply chain?

Section 14(2) protects essential supplies, which regulation 32 of the CIRP Regulations limits to electricity, water, telecommunication and information technology services. Section 14(2A), inserted in 2020, adds that where the interim resolution professional or resolution professional considers the supply of goods or services "critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern", the supply "shall not be terminated, suspended or interrupted" during the moratorium, except where the company has not paid dues arising from that supply during the moratorium or in circumstances as may be specified. Since 26 May 2026 section 14(1) is expressly subject to sub-section (2A), under section 9 of the 2026 Amendment Act. The CIRP Regulations as amended to 30 October 2026 do not use the word "critical" and specify no further circumstances.

What happens to the clinical trial permission?

Under rule 22 of the NDCT Rules the Central Licencing Authority grants permission to conduct a clinical trial in Form CT-06. Rule 25 attaches seventeen conditions to the permission, among them reporting a serious adverse event within fourteen days, compensation for injury or death, and that the sponsor and investigator "shall maintain the data integrity of the data generated during clinical trial".

Rule 30 allows suspension or cancellation for non-compliance, and insolvency is not a ground. The Rules contain no provision transferring a permission to another sponsor. The nearest they come is rule 49(xi), which requires a bioavailability and bioequivalence centre to intimate a change in its constitution or ownership within thirty days.

Which record-keeping clocks keep running?

The retention periods run from events in the trial or the batch, so the process does not pause them. Rule 78(c)(ii) of the Drugs Rules makes a Form 28 licensee keep the records of tests on each batch of raw material and finished product for two years from the expiry of a fixed potency date, or five years from manufacture where there is none, and rule 78(m) makes it keep reference samples for three months beyond expiry. Paragraph 3 of the Fourth Schedule makes the sponsor keep the records of tests showing that a batch meets a bioequivalence requirement for five years after the study or two years after the batch expires, whichever is later, and rule 49(xii) holds a study centre to the same period.

What does the timeline look like?

An illustration. The company, licence, permission, batch, fee, study and every date below are hypothetical. They are not a forecast.

Licence in Form 28 issued 10 June 2022; permission in Form CT-06 issued
12 March 2026; patent filed 20 September 2016; an earlier bioequivalence
study completed 31 March 2026

15 Feb 2027  Commencement; moratorium begins. Licence and permission
             continue; the professional pays current dues, and supplies
             judged critical cannot be cut off (section 14(2A))
 1 Mar 2027  Batch made, label expiry 28 Feb 2029. Test records to 28 Feb
             2031 (rule 78(c)(ii)); reference samples to 28 May 2029
             (rule 78(m))
21 May 2027  Day 95: information memorandum due (regulation 36(1))
10 Jun 2027  Retention fee due (rule 77(1)). On a licence fee of INR
             1,00,000: if paid 20 Jun, INR 1,02,000; if paid 5 Sep, INR
             1,06,000; if unpaid when the six months of late fee run out
             in Dec 2027, the licence is deemed cancelled (most payable
             before then, INR 1,12,000)
15 Nov 2027  Plan approved; moratorium ceases (section 14(4)). Section
             31(5) protects the licence for its remaining period if its
             obligations are met; section 31(4) requires approvals under
             other laws by 15 Nov 2028, or within any longer period
             those laws give. Were the change of control a change in the
             constitution of the firm, condition 4 of the Form 28 licence
             would keep it valid for three months from that change (to
             15 Feb 2028 if control passes on approval) unless a fresh
             licence is taken
31 Mar 2031  Bioequivalence test records (Fourth Schedule, paragraph 3)
             for the earlier study on a batch expiring 30 Jun 2027: five
             years after the study is 31 Mar 2031, two years after expiry
             is 30 Jun 2029; the later date governs
20 Sep 2036  Patent term ends (section 53(1)) if renewal fees are paid

Without the licence, section 18(c) of the Drugs and Cosmetics Act, 1940 bars manufacture for sale.

What does an approved plan bind, and what does section 32A leave?

Section 31(1) binds an approved plan on creditors, including any Government or local authority owed dues under any law. That clause is about dues. Grants are reached by section 31(5), inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 and in force since 26 May 2026. A licence, permit, registration or similar grant associated with the plan is not suspended or terminated during its remaining period, subject to sub-section (6), if the company, or the person whose plan is approved, complies with the obligations for that period. Section 31(6)(a) extinguishes pre-approval claims under other laws unless the plan provides otherwise. An Explanation deems sub-sections (5) and (6) to apply to every plan approved since the Code commenced, except matters that have attained finality.

Section 32A(1) ends the company's liability for an offence committed before the process, and bars its prosecution from approval, if the plan changes management or control to a person who was not a promoter, in management or control, or a related party of such a person, and was not a person the investigating authority has reason to believe abetted or conspired in the offence and has reported to the authority or court. A prosecution instituted during the process stands discharged. Section 32A(2) bars attachment, seizure, retention and confiscation of property covered by the plan, on the same condition.

How are patents and trial data treated as assets?

The interim resolution professional takes control of an asset over which the company has ownership rights as recorded in its balance sheet or a registry, and section 18(f)(iv) lists "intangible assets including intellectual property". Regulation 36(2) of the CIRP Regulations requires the information memorandum, due by the ninety-fifth day, to carry assets and liabilities with their description, material litigation, joint development and co-development arrangements, and a company overview of value as a going concern beyond the assets.

A patent's value depends on a recurring payment. It runs for twenty years from filing (section 53(1) of the Patents Act, 1970), ceases to have effect if a renewal fee is not paid within the prescribed or extended period (section 53(2)), and on cessation its subject matter loses protection (section 53(4)). Restoration needs an application within eighteen months (section 60(1)). Regulation 35 values the company through registered valuers, one for each asset class, with a coordinating valuer who computes fair value after the synergies among the assets.

Trial data is harder to place. Section 18(f) names intellectual property, not data, and the Third Schedule requires the protocol to state the ownership of data without allocating it. The retention duties attach to the licensee and the permission holder.

What remains unsettled?

Whether a clinical trial permission is a grant within the Explanation to section 14(1) and section 31(5). Both name a permit, clearance or similar grant, but neither names permissions.

What current dues cover. The retention fee fits the words, but compensation owed to a trial subject under rule 25 may be a due for continuing the permission or a claim in the process.

Whether a change of control under a plan is a change in the constitution of the firm, since condition 4 of the Form 28 licence speaks of a firm and sits beside sections 31(4) and 31(5).

How far sections 31(6)(a) and 32A reach the regulatory consequences of earlier non-compliance. Section 32A speaks of prosecution and property, and suspension or cancellation under rule 85 of the Drugs Rules is neither on its words.

Who owns trial data when the sponsor is insolvent, since the Code and the Rules leave it to the protocol and the contracts.