CONSUMER COMPLAINT PENDING MORATORIUM UNDER IBC

Under the provisions of the Insolvency and Bankruptcy Code, once the application filed for the initiation of corporate insolvency resolution process by a financial creditor or operational creditor or corporate applicant itself, the Adjudicating Authority, after deciding the application is complete in all aspect, will admit the application. The CIRP will commence from the date of admission of the application. The Adjudicating Authority appoints an Interim Resolution Professional to call for claims from the creditors of the corporate debtor and to constitute the Committee of Creditors. On admission of the application, the Adjudicating Authority also declares a moratorium under Section 14 of the Code which bars the continuation of the court cases against the corporate debtor from the commencement date.

In Tejas J. Shah & Amisha T. Shah & Ors. Versus Mantri Technology Constellations Pvt. Ltd. (Now Known As Buoyant Technology Constellations Pvt. Ltd.) & Ors. - 2026 (7) TMI 1787 - Supreme Court, the appellants are homebuyers. They booked residential apartments in a project namely ‘Mantri Manyata Energia’ developed by Respondent No. 1.  The Respondent No. 2, Mantri Developers Private Limited is a company alleged to have been associated with the development of the said project. Respondent Nos. 3 to 5 are alleged to be the promoters/ directors of Respondent No. 1 and 2 companies, while Respondent No.6 and 7 are the landowners of the project land.           

The required agreements were entered into between the appellant and the respondent No. 1. As per the agreement the apartment should be handed over to the appellant on or before 31.12.2018. The respondent No. 1 did not handover the apartment within the stipulated date to the appellant, despite the required payment has been made to the respondent No.1. The appellants, along with other home buyers, being aggrieved against the action of the respondent No.1 filed a consumer complaint before the National Commission, New Delhi alleging deficiency in service and unfair trade practices by the Respondents.

During the pendency of the complaint before National Commission, one operational creditor of respondent filed an application under Section 9 of the Code before the National Company Law Tribunal for initiation of corporate insolvency resolution process against the respondents. The National Company Law Tribunal admitted the application and declared a moratorium under Section 14 of the Code.

Since the moratorium was in force, the complainants urged that the consumer case could not be continued by the National Commission. However, the appellant filed an interim application before the National Commission with the prayer to continue the proceedings under Consumer Protection Act against the respondent Nos. 2 to 7. The National Commission rejected the application filed by the appellant holding that the that the liability of Respondent Nos. 2 to 7 could not be independently examined at that stage in view of the moratorium operating against Respondent No.1, and consequently adjourned the consumer complaint sine die.

The appellants assailed the above said order of National Commission before the Supreme Court. The Supreme Court heard the submissions of both the appellant and the respondent. The Supreme Court considered the issue to be decided by it is as to whether the National Commission was rejecting the application filed by the appellant. The National Commission observed that the liability arising from the allegations of deficiency in service was yet to be determined. At the same time, it held that the alleged deficiency pertained only to Respondent No.1 since all agreements for construction and sale were entered into between the appellants and respondent No.1. As a result of which, the proceedings could not be split up to continue against the remaining respondents. The Supreme Court considered the said decision of National Commission as erroneous.

The Supreme Court observed the moratorium operates only the Respondent no.1 only. The Supreme Court held that 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 National Commission was not justified in rejecting appellants’ prayer to proceed with the complaint against the rest of the respondents.

The Supreme Court further observed that the National Commission, having itself observed that the liability arising from deficiency in service are yet to be determined, it could not have simultaneously concluded that the alleged deficiency was attributable only to Respondent No. 1 and therefore no complaint could proceed against the rest. In the absence of any moratorium operating in their favour, the consumer complaint could proceed against the respondent Nos. 2 to 7. In the absence of any such statutory bar, the National 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.

At the same time the Supreme Court did not accept the submissions of the appellants that the Supreme Court may proceed to allow the complaint and to grant the reliefs as prayed by the appellants. The respondents have raised several objections, including absence of privity of contract, maintainability of the complaint and the absence of any independent obligation under the agreements. Since all the objections are yet to be decided by the National Commission the Supreme Court was refrained from expressing any opinion on the merits of the rival contentions.

The Supreme Court held that the proceedings against Respondent No.1 shall continue to remain governed by the moratorium under Section 14 of the IBC. The National Commission shall dispose of the complaint, insofar as Respondent Nos. 2 to 7 are concerned, in accordance with law.