2021 (9) TMI 948 - SC - Insolvency and Bankruptcy

Supreme Court grants liberty to pursue remedies under IBC, emphasizes moratorium continuation

Anjali Rathi and Others and Varun Gupta and Others Versus Today Homes & Infrastructure Pvt. Ltd. and Others

Anjali Rathi and Others and Varun Gupta and Others Versus Today Homes & Infrastructure Pvt. Ltd. and Others - TMI Issues Involved:1. Delay in possession of apartments and abandonment of the project by the developer.2. Refund of money with interest as directed by the NCDRC.3. Execution proceedings under the Consumer Protection Act.4. Proceedings before the Delhi High Court and NCDRC.5. Initiation of corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC).6. Approval of the Resolution Plan by the Committee of Creditors (CoC) and National Company Law Tribunal (NCLT).7. Applicability of the moratorium under Section 14 of the IBC.8. Personal liability of the promoters of the Corporate Debtor.Detailed Analysis:1. Delay in Possession and Abandonment:The petitioners, home buyers in a group housing project named Canary Greens in Sector 73, Gurgaon, entered into agreements with the first respondent, which stipulated that possession of the apartments would be delivered within thirty-six months, i.e., by 2014. However, the project was abandoned by the developer, leading to the grievance of the petitioners.2. Refund of Money with Interest:The petitioners sought a refund of their money with interest and approached the National Consumer Dispute Redressal Commission (NCDRC). On 12 July 2018, the NCDRC directed the first respondent to refund the principal amount paid by the petitioners along with 12 percent interest from the date of deposit and costs within four weeks. The order provided for an enhanced interest rate of 14 percent if the amount was not paid within the stipulated period. This order attained finality.3. Execution Proceedings:The petitioners initiated execution proceedings under Sections 25 and 27 of the Consumer Protection Act, 1986. The NCDRC issued notice on 7 September 2018. However, the execution proceedings were adjourned multiple times, and certain settlement terms offered by the judgment debtor were not acceptable to the decree holders. Eventually, the Managing Director of the first respondent was directed to appear personally, which led to the first respondent challenging the order before the Delhi High Court. The Delhi High Court issued a direction that no coercive steps shall be taken against the Managing Director.4. Proceedings Before Delhi High Court and NCDRC:On 1 April 2019, the NCDRC directed the judgment debtor to refund the entire amount along with interest and costs within two weeks, failing which the Director would be taken into custody, and properties would be attached. This order was contingent upon the Delhi High Court's decision. The petitioners appealed to the Supreme Court against this final direction of the NCDRC.5. Initiation of CIRP under IBC:On 31 October 2019, proceedings were initiated against the first respondent before the National Company Law Tribunal (NCLT) under Section 9 of the Insolvency and Bankruptcy Code (IBC) by an operational creditor. The NCLT admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) and declaring a moratorium under Section 14 of the IBC. This led to a Special Leave Petition by certain homebuyers, alleging that the insolvency application was filed merely to stall the refund.6. Approval of Resolution Plan:The petitioners lodged their claims before the Resolution Professional (RP), and two Resolution Applicants came forth. The Committee of Creditors (CoC), consisting of home buyers, approved the Resolution Plan submitted by a consortium of home buyers by a vote of 96.93 percent. The RP filed an application for approval of the Resolution Plan before the Adjudicating Authority, which is pending decision.7. Applicability of Moratorium under Section 14 of IBC:The moratorium declared under Section 14 of the IBC prohibits the institution or continuation of suits or proceedings against the corporate debtor, among other restrictions. The Supreme Court clarified that while the moratorium applies to the corporate debtor, it does not prevent proceedings against the promoters of the corporate debtor.8. Personal Liability of Promoters:The petitioners argued that the promoters of the Corporate Debtor should be held personally liable to honor the settlements. However, the Supreme Court noted that since the Resolution Plan is still pending approval, it would not be appropriate to issue such a direction at this stage. The Court directed the NCLT to dispose of the approval application expeditiously.Conclusion:The Supreme Court disposed of the Special Leave Petitions and the civil appeal, granting liberty to the petitioners to pursue remedies available in law after the decision of the Adjudicating Authority on the approval application. Pending applications were also disposed of. The Court emphasized the continuation of the moratorium under Section 14 of the IBC and clarified the right of the petitioners to initiate proceedings against the promoters of the Corporate Debtor.