Dr Dhananjaya Y Chandrachud, J
1 The petitioners are home buyers in a group housing project, Canary Greens in
Sector 73, Gurgaon, being developed by the first respondent. Home buyer agreements
were entered into between the eleven petitioners and the first respondent. Clause 21 of
the agreements envisaged that possession of the apartments would be delivered within
a period of thirty-six months, which in almost all cases was to be in 2014.
2 The grievance of the petitioners is that the project was abandoned by the
developer. As a result, they instituted proceedings1 before the National Consumer
Dispute Redressal Commission2 seeking refund of their moneys with interest. On 12
July 2018, the NCDRC allowed their claim by directing the first respondent to refund the
principal amount paid by the petitioners together with 12 per cent interest from the date
of deposit along with costs within four weeks. There was a provision in the order for
interest being enhanced to 14 per cent if the amount was not paid within the stipulated
period. This order of the NCDRC has attained finality.
3 Execution proceedings3 under Sections 25 and 27 of the Consumer Protection
Act 19864 were instituted by the petitioners. The NCDRC issued notice on 7 September
2018. In the meantime, certain orders were passed by the NCDRC on 23 October 2018
1 Consumer Complaint Nos 1242, 1243, 1245, 1246, 1248, 1249, 1250 and 1251 of 2017 2 “NCDRC” 3 EA Nos 158, 159, 161-162, 164-166 and 168 of 2018 4 “COPRA”
in separate execution proceedings pertaining to other home buyers in the same housing
project. The first respondent challenged this order of the NCDRC before the High Court
of Delhi5, and by an order dated 19 November 2018, the order of the NCDRC dated 23
October 2018 was stayed by the Delhi High Court.
4 The execution proceedings initiated by the petitioners were adjourned by the
NCDRC on 13, 25 and 26 February 2019. Certain settlement terms were offered by the
judgment debtor on 27 February 2019, which were not acceptable to the decree
holders. On 5 March 2019, the proceedings were again adjourned to explore the
proposals furnished by the first respondent. Eventually, on 11 March 2019, since no
settlement was arrived at, the Managing Director of the first respondent was directed to
appear personally. The first respondent filed a petition6 before the Delhi High Court to
challenge the order of the NCDRC requiring the personal presence of the Managing
Director. By an order dated 27 March 2019, the Delhi High Court issued notice to the
petitioners and also issued a direction that no coercive steps shall be taken against the
Managing Director of the first respondent in terms of the order dated 11 March 2019
passed by the NCDRC. That has given rise to the first in the batch of Special Leave
Petitions before this Court, namely, SLP (C) No 12150 of 2019.
5 On 1 April 2019, the NCDRC passed a further order in the course of the
execution proceedings. Paragraph 14 of the order is extracted below:
5 CM(M) No 1391 of 2018 6 CM(M) No 494 of 2018
“As the Judgment Debtor has failed to refund the entire amount as
directed by this Commission in its order dated 12th July, 2018, we
direct the Judgement Debtor to refund the entire amount along with
interest and costs in terms of the order dated 12th July, 2018 within
two weeks from today failing which Mr. Ajay Sood, Director, shall be
taken into custody and all the properties of the Judgment Debtor and
the personal properties of the Judgment Debtor shall be attached
and the decretal amount shall be recovered from it. However, this
order of taking into custody and attachment of property shall be
given effect into only after the Hon'ble Delhi High Court decides
the matter.”
Thus, the execution applications were disposed of. The order of the NCDRC has
resulted in the filing of appeals before this Court, being Civil Appeal Nos 5231-5238 of
2019, by the petitioners/appellants for the limited purpose of challenging the final
direction of the NCDRC, i.e., that order of custody of the Managing Director of the first
respondent and attachment of properties of the first respondent shall only be given
effect to once the Delhi High Court decides the first respondent’s petition.
6 During the pendency of the proceedings before this Court, arising out of the order
of the Delhi High Court, certain developments took place. On 1 July 2019, notice was
issued in SLP (C) No 12150 of 2019 and the order of the Delhi High Court was stayed.
On 11 September 2019, the Court was informed that seven petitioners have settled
their dispute and that a settlement with the others was likely.
7 In the meantime, on 31 October 2019, proceedings were initiated against the first
respondent before the National Company Law Tribunal7 under Section 9 of the
7 “NCLT”/“Adjudicating Authority”
Insolvency and Bankruptcy Code 20168 by an operational creditor. The Adjudicating
Authority admitted the petition, following which the corporate insolvency resolution
process9 was initiated and a moratorium was declared under Section 14 of the IBC. The
specific direction of the NCLT was as follows:
“15. In the given facts and circumstances, the Operational Creditor
has established the default on the part of Corporate Debtor in
payment of the operational debt. The Petition filed under Section 9
fulfills all the requirements of law. Therefore, the petition is admitted
in terms of Section 9(5) of the IBC. Accordingly, the CIRP is initiated
and moratorium is declared in terms of Section 14 of the Code. As a
necessary consequence of the moratorium in terms of Section 14(1)
(a), (b), (c) & (d), the following prohibitions are imposed, which must
be followed by all and sundry:
"(a) The institution of suits or continuation of pending suits or
proceedings against the corporate debtor including execution of any
judgment, decree or order in any court of law, tribunal, arbitration
panel or other authority;
(b) Transferring, encumbering, alienating or disposing of by the
corporate debtor any of its assets or any legal right or beneficial
interest therein;
(c) Any action to foreclose, recover or enforce any security interest
created by the corporate debtor in respect of its property including
any action under the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002;
(d) The recovery of any property by an owner or lessor, where such
property is occupied by or in the possession of the corporate
debtor."”
This order of the NCLT resulted in the filing of a Special Leave Petition before this
Court, being SLP (C) Diary No 45043 of 2019 by certain other homebuyers. The
grievance raised in this petition is that the application filed for the initiation of corporate
8 “IBC” 9 “CIRP”
insolvency against the first respondent was merely to stall the refund of the amount
due to the homebuyers, in terms of the order of the NCDRC dated 12 July 2018.
8 Thereafter, the petitioners lodged their claims before the Resolution
Professional10, though without prejudice to their contentions in the proceedings pending
before this Court. The RP issued an Information Memorandum to prospective
Resolution Applicants in terms of the IBC. Two Resolution Applicants came forth before
the RP, namely: (i) I & E Advertising Private Limited; and (ii) a consortium representing
the home buyers. It appears that the developer had other projects as well, and the
consortium represented the homer buyers of all the projects.
9 In view of these developments, by an order dated 8 July 2021, this Court directed
that a meeting of the Committee of Creditors11 be convened within a period of two
weeks so that a final decision could be taken on whether any of the Resolution Plans
are acceptable to it. The CoC consists only of representatives of the home buyers, no
financial institutions being involved. The Court has been apprised, by Mr Himanshu
Satija, counsel appearing on behalf of the RP, that by a vote of 96.93 per cent, the CoC
approved the Resolution Plan which was submitted by the consortium of home buyers.
On 21 August 2021, an application was filed by the RP for approval of the Resolution
Plan before the Adjudicating Authority and some objections have been received. The
Adjudicating Authority is yet to decide on this application for approval.
10 “RP” 11 “CoC”
10 Mr Pawanshree Agarwal appears on behalf of the petitioners. Mr Himanshu
Satija appears for the RP. Mr Manoj Yadav appears for second to sixth respondents, a
group of home buyers. Mr Akshay Srivastava and Mr Ayush Sharma have intervened on
behalf of other home buyers.
11 Mr Pawanshree Agarwal, counsel appearing on behalf of the petitioners
submitted that during the course of the proceedings before this Court, settlements were
arrived at and hence the promoters of the Corporate Debtor, namely, the first
respondent should be held liable personally to honour the settlements, particularly
having regard to the order dated 1 April 2019, which was passed by the NCDRC in the
course of the execution proceedings. In this context, reliance has been placed on
paragraph 10(g) of the Resolution Plan which has been approved by the CoC, which
contains the following stipulation:
“10(g). However, the erstwhile management, promoters (de jure or de
facto), shareholders, managers, directors, officers, employees,
workmen or other personnel who were in charge on or before CIRP
commence date of THIPL shall continue to be liable for all the
liabilities, claims, demand, obligations, penalties etc. arising out of
any (i) proceedings, inquiries, investigations, orders, show causes,
notices, suits, litigation etc. (including those arising out of any orders
passed by the NCLT or any other court/department pursuant to the
provisions of the Code or pursuant to any order passed/imposed by
the SEBI), whether civil or criminal, pending before any authority,
court, tribunal or any other forum prior to the acquisition of control by
the Resolution Applicant over THIPL, or (ii) that may arise out of any
proceedings, inquiries, investigations, orders, show cause, notices,
suits, litigation etc. (including any orders that may be passed by the
NCLT or any other court/department pursuant to the provisions of the
Code), whether civil or criminal, that may be initiated or instituted
post the approval of the Resolution Plan by the NCLT on account of
any transactions entered into, or decisions or actions taken by, such
existing management, promoters (de jure or de facto), shareholders,
managers, directors, officers, employees, workmen or other
personnel of THIPL, the new management of THIPL and/or the
Resolution Applicant shall at no point of time be, directly or indirectly,
held responsible or liable in relation thereto.”
12 The conspectus of facts before this Court reveals that the petitioners have
participated in the proceedings before the RP and later, the CoC. The Resolution Plan
which has been submitted by the consortium of home buyers stands approved by the
CoC and the proceedings are now pending before the Adjudicating Authority, awaiting
its approval under Section 31(1) of the under the IBC. If the petitioners have any
objections to the Resolution Plan, they are to submit them before the Adjudicating
Authority. We direct the NCLT to ensure that the application for approval is disposed of
expeditiously and preferably within a period of six weeks form the date of receipt of a
certified copy of this order.
13 Counsel for the petitioners urged that this Court should at the present stage
direct that the personal properties of the promoters be attached in view of the provisions
contained in the Resolution Plan which have been extracted earlier. The Resolution
Plan is still to be approved by the Adjudicating Authority under the provisions of Section
31(1) of the IBC. Hence, at this stage, when the Resolution Plan awaits approval, it
would not be appropriate for this Court to issue a direction of that nature. After the
Resolution Plan is approved under the provisions of Section 31(1), consequences
emanating from the statutory provision would ensue to the benefit of the home buyers.
Hence, we have already directed that the NCLT shall dispose of the approval
application filed on 21 August 2021, within a period of six weeks from the date of receipt
of a certified copy of this order.
14 Further, since the moratorium declared in respect of the first respondent
Corporate Debtor continues to operate under Section 14 of the IBC, no new
proceedings can be undertaken or pending ones continued against the Corporate
Debtor. Section 14(1) of the IBC reads as follows:
“14. Moratorium.—(1) Subject to provisions of sub-sections (2) and
(3), on the insolvency commencement date, the Adjudicating
Authority shall by order declare moratorium for prohibiting all of the
following, namely—
(a) the institution of suits or continuation of pending suits or
proceedings against the corporate debtor including execution of
any judgment, decree or order in any court of law, tribunal, arbitration
panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the
corporate debtor any of its assets or any legal right or beneficial
interest therein;
(c) any action to foreclose, recover or enforce any security interest
created by the corporate debtor in respect of its property including
any action under the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);
(d) the recovery of any property by an owner or lessor where such
property is occupied by or in the possession of the corporate
debtor.”
15 At this juncture, we must however clarify the right of the petitioners to move
against the promoters of the first respondent Corporate Debtor, even though a
moratorium has been declared under Section 14 of the IBC. In the judgment in P.
Mohanraj v. Shah Bros. Ispat (P) Ltd.12, a three judge Bench of this Court held that
12 (2021) 6 SCC 258
proceedings under Section 138 and 141 of the Negotiable Instruments Act 1881 against
the Corporate Debtor would be covered by the moratorium provision under Section 14
of the IBC. However, it clarified that the moratorium was only in relation to the
Corporate Debtor (as highlighted above) and not in respect of the
directors/management of the Corporate Debtor, against whom proceedings could
continue. Speaking through Justice Rohinton F Nariman, the Court held:
“102. Since the corporate debtor would be covered by the
moratorium provision contained in Section 14 IBC, by which
continuation of Sections 138/141 proceedings against the corporate
debtor and initiation of Sections 138/141 proceedings against the
said debtor during the corporate insolvency resolution process are
interdicted, what is stated in paras 51 and 59 in Aneeta Hada [Aneeta
Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 :
(2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] would then
become applicable. The legal impediment contained in Section 14
IBC would make it impossible for such proceeding to continue or be
instituted against the corporate debtor. Thus, for the period of
moratorium, since no Sections 138/141 proceeding can continue
or be initiated against the corporate debtor because of a
statutory bar, such proceedings can be initiated or continued
against the persons mentioned in Sections 141(1) and (2) of the
Negotiable Instruments Act. This being the case, it is clear that
the moratorium provision contained in Section 14 IBC would
apply only to the corporate debtor, the natural persons
mentioned in Section 141 continuing to be statutorily liable
under Chapter XVII of the Negotiable Instruments Act.”
We thus clarify that the petitioners would not be prevented by the moratorium under
Section 14 of the IBC from initiating proceedings against the promoters of the first
respondent Corporate Debtor in relation to honoring the settlements reached before this
Court. However, as indicated earlier, this Court cannot issue such a direction relying on
a Resolution Plan which is still pending approval before an Adjudicating Authority.
16 In view of the above directions, SLP (C) No 12150 of 2019 and SLP (C) Diary No
45043 of 2019 shall stand disposed of as well as the civil appeal, being Civil Appeal
Nos 5231-5238 of 2019. Liberty is granted to the petitioners to take recourse to the
remedies which are available in law after the decision of the Adjudicating Authority on
the approval application under Section 31(1), and subject to the consequence
thereafter.
17 Pending applications, if any, stand disposed of.
[Dr Dhananjaya Y Chandrachud]
[Vikram Nath]
[Hima Kohli] New Delhi; September 8, 2021.
ITEM NO.17 Court 4 (Video Conferencing) SECTION XIV
Petition(s) for Special Leave to Appeal (C) No.12150/2019
(Arising out of impugned final judgment and order dated 27-03-2019 in CM(M) No.494/2019 passed by the High Court of Delhi at New Delhi)
ANJALI RATHI & ORS. Petitioner(s)
VERSUS
(With appln.(s) for IA No.189907/2019 - APPLICATION FOR TRANSPOSITION, IA No.137917/2019 - APPROPRIATE ORDERS/DIRECTIONS, IA No.9475/2020 – CLARIFICATION/DIRECTION, IA No.112708/2019 DELETING THE NAME OF PETITIONER/RESPONDENT, IA No.78445/2019 EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT, IA No.90924/2019 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/ FACTS/ ANNEXURES, IA No.9466/2020 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES, IA No.78779/2019 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES, IA No.192354/2019 PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES, IA No.169275/2019 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ ANNEXURES, IA No.137927/2019 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES and IA No.109715/2019 - VACATING STAY)
WITH C.A. Nos.5231-5238/2019 (XVII-A) (With appln.(s) for IA No.81972/2019-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No.81971/2019-CONDONATION OF DELAY IN FILING APPEAL) Diary No.45043/2019 (XVII) (With appln.(s) for I.R. and IA No.192894/2019-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No.192892/2019PERMISSION TO FILE SLP and IA No.192974/2019-PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES)
Date : 08-09-2021 These matters were called on for hearing today.
CORAM :
For Petitioner(s)
Mr. Pawanshree Agrawal, AOR
For Respondent(s) Mr. Himanshu Satija, Adv.
Mr. E. C. Agrawala, AOR
Mr. Manoj Yadav, Adv.
Mr. Sushil Kaushik, Adv.
Mr. Ranbir Singh Yadav, AOR
Mrs. Shally Bhasin, AOR
Mr. Ayush Sharma, AOR
Mr. Aditya Parolia, Adv.
Mr. Piyush Singh, Adv.
Mr. Nithin Chandran, Adv.
Mr. Akshay Srivastava, Adv.
Ms. Aditi Sinha, Adv.
Mr. Rajesh Kumar, Adv.
Mr. Gaurav Goel, AOR
UPON hearing the counsel the Court made the following
O R D E R
1 Permission to file the Special Leave Petition is granted.
2 The Special Leave Petitions and the Civil Appeals are disposed of in terms of
the signed reportable judgment.
3 Pending applications, if any, stand disposed of.
A.R.-cum-P.S. Court Master
(Signed reportable judgment is placed on the file)