2024 (2) TMI 23 - SC - Insolvency and Bankruptcy

CIRP - Moratorium against the company has been ordered - Home Buyers sought direction to 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 - submission of appellants is 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 - HELD THAT - The National Commission has not made any adjudication on the question whether the opposite party Nos. 2 to 9(the respondent Nos. 2 to 9) in the execution application were under an obligation to abide by the directions issued against the company. This issue has not been considered at all by the National Commission. There is no finding recorded by the National Commission that in view of any particular provision of the IBC, moratorium will apply to the directors/officers of the company. 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(the respondent Nos. 2 to 9) for execution, provided that they are otherwise 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 impugned judgments and orders set aside - the execution application remitted to the National Commission - appeal allowed in part.

Summary

Issues involved: Interpretation of the provisions of the Insolvency and Bankruptcy Code, 2016 regarding the liability of directors/officers of a company under moratorium.

Summary:
1. The National Consumer Disputes Redressal Commission directed a developer to complete a project and hand over possession to homebuyers, with an option for refund. Appellants sought execution of this order against the company and individuals.

2. The National Commission held that the decree could not be executed against the company due to the moratorium under Section 14 of the IBC. It declined to proceed against the individuals as they were not parties in the main complaint.

3. Appellants argued that there is no prohibition in the IBC against proceeding against directors/officers of a company under moratorium.

4. Citing the IBC provisions and relevant case laws, appellants contended that the National Commission's view was erroneous.

5. Respondents argued that the individuals were not liable as per the order sought to be executed and referenced a previous case allowing action against promoters due to a settlement.

6. The National Commission did not address whether the individuals were obligated to comply with the directions against the company.

7. Referring to previous judgments, the Supreme Court held that the moratorium under Section 14 of the IBC does not prevent proceedings against directors/officers if they are liable to comply with the order against the company.

8. The impugned judgments were set aside, and the execution application was remitted to the National Commission to proceed against the individuals.

9. The individuals could raise objections and present evidence on their liability, which would be decided by the National Commission.

10. The appeals were partly allowed, and pending applications were disposed of.