Supreme Court: Home Buyers not be prevented by the moratorium under Section 14 of the IBC

Supreme Court: Home Buyers who hold a decree of refund of money on account of non possession of apartment would not be prevented by the moratorium under Section 14 of the IBC from initiating proceedings against the promoters of the Developer (Corporate Debtor)

Anjali Rathi &  Ors. Vs Today Homes & Infrastructures Pvt. Ltd. & Ors.; SLP(C) 12150/2019;Supreme Court; 08.09.2021

Facts and issue:

Petitioners being the home buyers in a group project, Canary Greens in sector 73, Gurgaon, being developed by the respondent company are aggrieved as the project was abandoned by the developer. 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.

When the Petitioners approached the National Consumer Dispute Redressal Commission seeking refund of their moneys with interest, the NCDRC granted the said relief directing the respondent company to refund the principal amount paid by the petitioners together with 12 % interest from the date of deposit within 4 weeks and enhancement of interest to 14% if the amount was not paid within stipulated period. The order of NCDRC attained finality.

During execution proceedings before the NCDRC, certain orders were passed by the NCDRC 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 Delhi, and by an order dated 19 November 2018, the order of the NCDRC dated 23 October 2018 was stayed by the Delhi High Court. The execution proceedings initiated by the petitioners were adjourned by the NCDRC. Settlement opportunities were explored between the Judgment debtor(Respondent) and the Decree Holders (Petitioners and other home buyers). Eventually, on 11 March 2019, since no settlement was arrived at, the Managing Director of the first respondent was directed to appear personally.

The respondent challenged the said order requiring personal presence of the Managing Director before the Delhi High Court (DHC) . Vide 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 respondent in terms of the order dated 11 March 2019 passed by the NCDRC. The said order by the DHC, was challenged before the Hon’ble Supreme Court.

Further, in the meanwhile, the NCDRC disposed of the execution petitions stating that since the Judgment Debtor had failed to refund the entire amount as directed by commission, the said Judgment Debtor was directed 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 Honble Delhi High Court decides the matter.

The order of NCDRC resulted in filing of appeals before the Hon’ble Supreme Court.

During the pendency of hearing before the Supreme Court, certain developments took place. First, notice was issued in SLP (C) No 12150 of 2019 and the order of the Delhi High Court was stayed and proceedings were initiated against the respondent company before the National Company Law Tribunal under Section 9 of the Insolvency and Bankruptcy Code 2016 by an operational creditor. The
Adjudicating Authority admitted the petition, following which the corporate insolvency resolution process was initiated and a moratorium was declared under Section 14 of the IBC. This order of the NCLT resulted in the filing of a Special Leave Petition before the Hon’ble Supreme 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 insolvency against the respondent company 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.

The aforesaid petitions and civil appeals were taken up and heard by the bench of justice DY Chandrachud, Justice Vikram Nath and Justice Hima Kohli.

The Petitioners participated in the proceedings before the Resolution Professional and Committee of Creditors. 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.

Held:

•  If the petitioners have any objections to the Resolution Plan, they are to submit them before the Adjudicating Authority. The NCLT was directed 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.
•  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.
• In the judgment in P. Mohanraj v. Shah Bros. Ispat (P) Ltd.12, a three judge Bench of this Court held that 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.
•  Therefore it was clarified that the Petitioners (Home Buyers) would not be prevented by the moratorium under Section 14 of the IBC from initiating proceedings against the promoters of the respondent Corporate Debtor in relation to honoring the settlements reached before the Supreme Court.