Setting aside judgements and orders and remitting an execution application to national consumer disputes redressal commission (NCDRC), the Supreme Court (SC) clarified that protection of the moratorium will not be available to the directors or officers of the company undergoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC).
In an order last month, the division bench of justice Abhay S Oka and justice Ujjal Bhuyan said, "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 nos2 to 9 (the respondent nos2 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 and officers of the company."
The apex court was hearing an execution application filed by Ansal Crown Heights Flat Buyers Association, challenging an order passed by NCDRC. The Flat Buyers Association sought to execute the directions of NCDRC not only against Ansal Crown Infrabuild Pvt Ltd but also against several directors and officials of the company.
In its order, NCDRC directed Ansal Crown Infrabuild to complete the project in all respects and hand over the possession of the allotted flats or apartments to the members of the Association of homebuyers within the time specified. In case the homebuyers were not interested in waiting any more to take possession of the allotted apartment and they wanted a refund of their deposited amount, the developer was asked to refund the entire deposited amount along with interest at 9%pa (per annum) within six weeks and pay a cost of Rs25,000 to each member of the Flat Buyers Association.
In the orders, NCDRC also held that the decree could not be executed against Ansal Crown Infrabuild due to the operation of the moratorium under Section 14 of the IBC. After that, NCDRC observed that, in view of the moratorium against the company, it would not be appropriate to proceed in the same execution against the directors and officials of Ansal Crown Infrabuild. Another observation was made by NCDRC that other opposite parties were not parties in the main complaint.
Counsel for the Flat Buyers Association submitted that, under the provisions of the IBC, there is no prohibition on proceeding against the directors and officers of the company which is the subject matter of moratorium under Section 14 of the IBC.
Counsels for the directors and officials of Ansal Crown Infrabuild submitted that under the order that is sought to be executed, there is no liability fastened on them, and NCDRC held that they were not parties to the main complaint.
However, SC observed that NCDRC had not made any adjudication on the question of whether the directors and officials of Ansal Crown Infrabuild 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 NCDRC. There is no finding recorded by NCDRC that in view of any particular provision of the IBC, the moratorium will apply to the directors and officers of the company."
While remitting the execution application to NCDRC, the apex court says it is open for directors and officials of Ansal Crown Infrabuild to raise a contention that they are not bound to implement the order sought to be executed. They are entitled to file additional objections along with documents raising the issue of executability against them, it added.
SC also clarified that NCDRC will also decide as per the law, the issue of whether directors and officials of Ansal Crown Infrabuild to the execution are otherwise liable.