IBC Moratorium Operates Against Corporate Debtor Alone; No Bar On Deciding Consumer Complaint Against Directors: Supreme Court

The Apex Court further held that there was no bar on deciding the consumer complaint against the Promoters, Directors when there was no moratorium operating in their favour.

The Apex Court was considering the civil appeals filed against the judgment of the National Consumer Disputes Redressal Commission whereby the NCDRC rejected the applications seeking continuation of consumer complaint against the Respondents in view of the moratorium imposed against the first Respondent under Section 14 of the Insolvency and Bankruptcy Code, 2016, and adjourning the complaint sine die.

The Division Bench of Justice Vikram Nath and Justice Sandeep Mehta held, “The scope of the moratorium is statutory. It is not open either to the adjudicating authority or the Court to enlarge its ambit beyond what the statute contemplates. A plain reading of the provision makes it clear that the moratorium operates against the corporate debtor alone. No other category, whether it be any subsidiary company, any managers/ directors, personal guarantors etc. can be added to it unless specifically provided.”

“In our view, this approach is erroneous. In the present case, Respondent No.1 alone is the corporate debtor against whom the CIRP has been initiated. No independent moratorium or independent protection operates in favour of Respondent Nos. 2 to 7. In the absence of any legal bar against continuation of proceedings qua the said respondents, the NCDRC was not justified in rejecting appellants’ prayer to proceed with the complaint against the rest of the respondents”, it added.

Advocate Chandrachur Bhattacharyya represented the Appellant while Senior Advocate Sajan Poovayya represented the Respondent.

Factual Background

The appellants are homebuyers who had booked residential apartments in a project namely ‘Mantri Manyata Energia’ which was being developed by the first Respondent, Mantri Technology Constellations Private Limited (Buoyant Technology Constellations Private Limited). The second Respondent, Mantri Developers Pvt. Ltd. is a company alleged to have been associated with the development of the said project. Respondents 3 to 5 were alleged to be the promoters/ directors of the Respondent companies, while Respondents 6 and 7 were the landowners of the project land. Pursuant to the transaction, construction agreements and agreements for sale in respect of undivided share in the project land were executed between the appellants and the first Respondent.

According to the appellants, despite substantial payment of the sale consideration coupled with repeated assurances regarding completion of the project, possession of the apartments was not delivered within the stipulated time. Aggrieved thereby, the appellants, along with other homebuyers, instituted a consumer case before NCDRC alleging deficiency in service and unfair trade practices against Respondents 1 to 7. During the pendency of the consumer complaint, the National Company Law Tribunal admitted an application under Section 9 of the IBC against the first Respondent and initiated the Corporate Insolvency Resolution Process (CIRP) as a result of which a moratorium under Section 14 of the IBC came to be imposed against the Respondent.

In view of the subsequent development, the appellants approached NCDRC praying that notwithstanding the moratorium operating against the first Respondent, the consumer complaint be reheard and proceeded with against Respondents 2 to 7. The NCDRC rejected the applications holding that the liability of Respondents 2 to 7 could not be independently examined at that stage in view of the moratorium operating against the first Respondent and consequently adjourned the consumer complaint sine die. Challenging the same, the Appellant approached the Apex Court.

Reasoning

Referring to Section 14 of the IBC, the Bench explained that the statute provides that once the insolvency process has begun and a moratorium is declared, among other things, the continuation of pending suits and proceedings against the corporate debtor, including execution proceedings, comes to an automatic halt. “The object of this moratorium is to preserve the assets of the corporate debtor during the insolvency resolution proceedings and to facilitate an orderly resolution”, it added.

The Bench was of the view that the question which should have fallen for consideration while deciding the interlocutory applications was whether, in the absence of any moratorium operating in their favor, the consumer complaint could proceed against the respondent. As per the Bench, in the absence of any such statutory bar, the Commission was required to adjudicate the complaint against the said respondents and determine, upon consideration of the rival pleadings and objections, whether any liability could ultimately be fastened upon them. “It was not open to the Commission to foreclose that inquiry at the interlocutory stage. The impugned order cannot be sustained as it declines to undertake the said exercise”, the Bench stated.

Thus, partly allowing the appeals, the Bench we set aside the rejection of the applications. “The NCDRC shall proceed to hear the Consumer Complaint No.13 of 2023”, it ordered.

Cause Title: Tejas J. Shah & Amisha T. Shah v. Mantri Technology Constellations Pvt. Ltd. & Ors. (Neutral Citation: 2026 INSC 746)

Appearance

Appellant: Advocate Chandrachur Bhattacharyya, AOR Sahil Tagotra, Advocate Shreya Kasera

Respondent: Senior Advocate Sajan Poovayya, AOR Ashutosh Dubey, Advocates Rajshri, Abhishek Chauhan, Amit P Shahi, Anirban Tripathi, Rekha Chaudhary, Anjan Datta, Rahul Sethi, Abhishek Puri, Govind Kashyap, Pratibhanu Singh Kharola, Chandrashekhar Chaklabi, Sriharikiran Gottipati, Palash Maheshwari, AOR M/s Dharmaprabhas Law Associates, AOR M/S. Devasa & Co.

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