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Supreme court decides on Moratorium’s scope: Individuals are held liable along with Director

CASE TITLE- Ansal Crown Heights Flat Buyers Association (Regd.) Vs M/S. Ansal Crown Infrabuild Pvt. Ltd. & Ors.

CASE NUMBER- Civil Appeal No(S). 4247 Of 2023

DATED ON- 17.01.2024

QUORUM- Honourable Justice Abhay S. Oka and Honourable Justice Ujjal Bhuyan

FACTS OF THE CASE

A complaint was filed by the homebuyers before the National Consumer Disputes Redressal Commission against the Developer and NCDR directed the developer to complete the project in all respects and handover the possession of the allotted flats/apartments to the members of the Association of the homebuyers within the time specified. A direction was issued giving an option to the homebuyers, that if they are not interested to wait any more for taking possession of the allotted Apartment and they want refund of their deposited amount with interest @9% p.a. The appellants sought to execute the directions of the National Commission not only against the company but also against the several individuals. By the impugned orders, the National Commission held that the decree cannot be executed against the company due to the operation of the moratorium under Section 14 of the IBC. Thereafter, the National Commission observed that in view of moratorium against the company, it would not be appropriate to proceed in the same execution against the opposite party Nos. 2 to 9. The other opposite parties were not parties in the main complaint. Therefore, the present appeal was sought.

ISSUE RAISED

Whether opposite party Nos. 2 to 9 (the respondent Nos. 2 to 9) to the execution are otherwise liable?

LEGAL PROVISIONS

Section 9 of the Insolvency and Bankruptcy Code, 2016

Section 14 of the Insolvency and Bankruptcy Code, 2016

CONTENTIONS OF THE APPELLANT

The learned counsel for the appellant contented that under the provisions of the IBC, there is no prohibition on proceeding against the directors/officers of the company, which is the subject-matter of moratorium under Section 14 of the IBC. A reliance is placed by the appellant on the second proviso to sub-Section (1) of Section 32A of the IBC and a decision of this Court in the case of P. Mohanraj vs. Shah Bros. Ispat (P) Ltd and Anjali Rathi and others vs. Today Homes and Infrastructure Pvt. Ltd. And Others. Therefore, the view taken by the National Commission is erroneous.

CONTENTIONS OF THE RESPONDENT

The learned counsel for the respondent contented that there is no liability fastened on the opposite party Nos. 2 to 9. It is submitted that the National Commission has held that the opposite parties were not parties to the main complaint. Referring to the case of Anjali Rathi, the Court permitted the appellants to proceed against the promoters of the company, which was subject to moratorium only because there was a settlement arrived at between them before this Court. He further submitted that these opponents cannot be held liable. National Commission has not made any adjudication on the question whether the opposite parties in the execution application were under an obligation to abide by the directions issued against the company. There is no finding recorded by the National Commission that moratorium will apply to the directors/officers of the company.

COURT’S ANALYSIS AND JUDGEMENT

The court analyzed that, only because there is a moratorium under Section 14 of the IBC against the company, it cannot be said that no proceedings can be initiated against the opposite party Nos. 2 to 9 for execution, they are also liable to abide by and comply with the order, which is passed against the company. The protection of the moratorium will not be available to the directors/officers of the company. The appeal was partly allowed and the court set aside the impugned judgments and orders and remit the execution application to the National Commission.

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Judgement Reviewed By- Shreyasi Ghatak

Click here to read the Judgement