IBC Moratorium Against Company Doesn't Bar Consumer Complaints Against Promoters, Directors : Supreme Court

The Supreme Court on Monday (July 27) observed that an operation of a moratorium under the Insolvency & Bankruptcy Code, 2016, against a residential project development company would not be a ground to reject the consumer complaints against its promoters/directors. “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.”, observed a bench of Justice Vikram Nath and Justice Sandeep Mehta, while setting aside the National Consumer Dispute Redressal Commission (“NCDRC”) order which rejected the Appellant's application seeking the continuance of the consumer complaint proceedings against the other respondents. The Court said that since the moratorium was in operation against the Respondent no. 1-company, it would not bar the continuation of a consumer complaint against other respondents. [See Saranga Anilkumar Aggarwal, 2025 LiveLaw (SC) 284] “The question was whether, in the absence of any moratorium operating in their favour, the consumer complaint could proceed against them. 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 Court observed. Accordingly, the appeal was allowed, with a direction to the NCDRC to hear the Appellant's Consumer Complaint against other respondents.BackgroundThe case arose from complaints filed by homebuyers who had booked apartments in the Mantri Manyata Energia project being developed by Mantri Technology Constellations Pvt. Ltd. The buyers alleged that despite paying substantial consideration, possession of the flats was not handed over within the agreed timeline of December 31, 2018. They approached the NCDRC alleging deficiency in service and unfair trade practices against the developer, associated entities, promoters, directors and landowners.During the pendency of the complaint, the National Company Law Tribunal (NCLT), Bengaluru, admitted insolvency proceedings against the developer company and imposed a moratorium under Section 14 of the IBC. The homebuyers thereafter sought continuation of the consumer complaint against the remaining respondents, contending that the moratorium protected only the corporate debtor. The NCDRC rejected their applications and adjourned the complaint indefinitely.Allowing the appeal in part, the Supreme Court held that the NCDRC had wrongly extended the protection of the moratorium to respondents who were not corporate debtors.The Bench found fault with the NCDRC for effectively deciding, at the interlocutory stage, that the alleged deficiency in service was attributable only to the developer company, even while acknowledging that liability had yet to be determined.The Court held that there was no legal bar preventing the NCDRC from adjudicating the complaint against the other respondents and determining, after considering their objections, whether any liability could ultimately be fastened on them.However, it clarified that proceedings against the developer company would continue to remain subject to the moratorium under Section 14 of the IBC, while the complaint against Respondent Nos. 2 to 7 should be decided in accordance with law.Reference was also made to the judgments in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., Ansal Crown Heights Flat Buyers Association v. Ansal Crown Infrabuild Pvt. Ltd., and Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth.Cause Title: TEJAS J. SHAH & AMISHA T. SHAH & ORS. VERSUS MANTRI TECHNOLOGY CONSTELLATIONS PVT.LTD. (NOW KNOWN AS BUOYANT TECHNOLOGY CONSTELLATIONS PVT.LTD.) & ORS.Citation : 2026 LiveLaw (SC) 723Click here to download judgmentRead more IBC reports hereAppearance: For Appellant(s) : Mr. Chandrachur Bhattacharyya, Adv. Mr. Sahil Tagotra, AOR Ms. Shreya Kasera, Adv. For Respondent(s) : Mr. D. Seshadri Naidu, Sr. Adv. Mr. Shekhar G Devasa, Sr. Adv. Mr. Sajan Poovayya, Sr. Adv. Mr. Ashutosh Dubey, AOR Mr. Ashutosh Dubey, Adv. Mr. Abhishek Chauhan, Adv. Mr. Amit P Shahi, Adv. Mr. Anirban Tripathi, Adv. Mrs. Rekha Chaudhary, Adv. Mr. Anjan Datta, Adv. Mr. Rahul Sethi, Adv. Mr. Abhishek Puri, Adv. Mr. Govind Kashyap, Adv. Mr. Manish Tiwari, Adv. Mrs. Thashmitha Muthanna, Adv. Mr. Rakesh Kini, Adv. Mr. Shashi Bhushan Nagar, Adv. M/S. Devasa & Co., AOR Mr. Pratibhanu Singh Kharola, Adv. Mr. Chandrashekhar A. Chakalabbi, Adv. Mr. Sriharikiran ...

IBC Moratorium Against Company Doesn't Bar Consumer Complaints Against Promoters, Directors : Supreme Court

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IBC Moratorium Against Company Doesn't Bar Consumer Complaints Against Promoters, Directors : Supreme Court

Yash Mittal

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