Case Note & Summary
The dispute involved home buyers who had entered into agreements with a developer for a housing project, with possession due in 2014. The developer abandoned the project, leading the home buyers to file consumer complaints before the National Consumer Dispute Redressal Commission (NCDRC). On 12 July 2018, the NCDRC allowed their claim, directing refund of principal with interest, which order attained finality. Execution proceedings were initiated under the Consumer Protection Act, 1986, but were stayed by the Delhi High Court in November 2018. Subsequently, on 31 October 2019, an operational creditor initiated corporate insolvency resolution process (CIRP) against the developer under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), leading to a moratorium under Section 14 IBC. This moratorium stayed all pending suits and execution proceedings, including the NCDRC order. During CIRP, a Resolution Plan submitted by a consortium of home buyers was approved by the Committee of Creditors (CoC) with 96.93% vote, and an application for its approval was pending before the National Company Law Tribunal (NCLT) under Section 31(1) IBC. The core legal issues were whether the Supreme Court should direct attachment of promoters' personal properties based on a clause in the Resolution Plan holding promoters liable for pre-CIRP liabilities, and how to address the execution of the NCDRC order in light of the IBC moratorium. The petitioners argued that promoters should be held personally liable to honour settlements, citing the Resolution Plan clause. The respondents, including the Resolution Professional and other home buyers, participated in the proceedings. The court analyzed that the IBC moratorium under Section 14 stayed all execution proceedings, making the NCDRC order unenforceable during CIRP. It held that the Resolution Plan's approval is within the purview of the NCLT under Section 31(1) IBC, and any objections, including those regarding personal liability of promoters, must be raised before the NCLT. The court directed the NCLT to dispose of the approval application expeditiously, preferably within six weeks, but declined to issue directions on attachment of personal properties, leaving it to the NCLT's consideration during the approval process. The decision primarily favored the respondents by upholding the IBC framework and referring matters to the NCLT.
Headnote
A) Consumer Law - Execution of Orders - Stay Due to Moratorium - Consumer Protection Act, 1986, Sections 25, 27 - Home buyers obtained refund order from NCDRC but execution was stayed by Delhi High Court and later by IBC moratorium - Court noted execution proceedings were subject to moratorium under Section 14 IBC, preventing enforcement - Held that execution could not proceed due to moratorium, directing NCLT to expedite approval of Resolution Plan (Paras 2-5, 7). B) Insolvency Law - Corporate Insolvency Resolution Process - Moratorium Effect - Insolvency and Bankruptcy Code, 2016, Sections 9, 14 - Operational creditor initiated CIRP against developer, leading to moratorium under Section 14 IBC - Moratorium prohibited continuation of suits and execution of judgments against corporate debtor - Court upheld moratorium's effect, staying all pending proceedings including NCDRC execution (Paras 7-9). C) Insolvency Law - Resolution Plan Approval - Role of Adjudicating Authority - Insolvency and Bankruptcy Code, 2016, Section 31(1) - Resolution Plan by home buyers' consortium approved by CoC, pending NCLT approval under Section 31(1) - Court directed NCLT to dispose of approval application expeditiously within six weeks - Held that objections to Resolution Plan must be raised before NCLT, not Supreme Court at this stage (Paras 9, 12). D) Insolvency Law - Personal Liability of Promoters - Resolution Plan Stipulations - Insolvency and Bankruptcy Code, 2016 - Resolution Plan clause stated promoters remain liable for pre-CIRP liabilities - Petitioners sought attachment of promoters' personal properties based on this clause - Court declined to issue directions, stating personal liability issues are for NCLT to consider during approval of Resolution Plan under IBC (Paras 11-13).
Issue of Consideration
Whether the Supreme Court should direct attachment of personal properties of promoters based on a Resolution Plan pending approval under the Insolvency and Bankruptcy Code, 2016, and how to address execution of a consumer forum order in light of IBC moratorium
Final Decision
Court directed NCLT to dispose of application for approval of Resolution Plan expeditiously, preferably within six weeks, and declined to issue directions on attachment of personal properties, referring such issues to NCLT during approval process
Law Points
- Moratorium under Section 14 of the Insolvency and Bankruptcy Code
- 2016 (IBC) stays all pending suits and execution proceedings against the corporate debtor
- Execution of consumer forum orders is subject to IBC moratorium
- Resolution Plan approved by Committee of Creditors under IBC must be considered by Adjudicating Authority for approval under Section 31(1)
- Personal liability of promoters under a Resolution Plan is to be adjudicated by the Adjudicating Authority during approval process
- Settlements between parties during litigation do not override IBC proceedings
