Directors remain liable for execution of orders despite company's Section 14 IBC moratorium protection SC held that moratorium under Section 14 of IBC against a company does not extend protection to its directors/officers. In a case where home buyers sought ...
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Directors remain liable for execution of orders despite company's Section 14 IBC moratorium protection
SC held that moratorium under Section 14 of IBC against a company does not extend protection to its directors/officers. In a case where home buyers sought direction for project completion and possession handover, the court ruled that proceedings can be initiated against directors/officers for execution of orders passed against the company, provided they are otherwise liable to comply. The National Commission failed to adjudicate whether directors were obligated to abide by directions issued against the company. The impugned orders were set aside and execution application remitted back to National Commission.
Issues involved: Interpretation of the provisions of the Insolvency and Bankruptcy Code, 2016 regarding the liability of directors/officers of a company under moratorium.
Summary: 1. The National Consumer Disputes Redressal Commission directed a developer to complete a project and hand over possession to homebuyers, with an option for refund. Appellants sought execution of this order against the company and individuals.
2. The National Commission held that the decree could not be executed against the company due to the moratorium under Section 14 of the IBC. It declined to proceed against the individuals as they were not parties in the main complaint.
3. Appellants argued that there is no prohibition in the IBC against proceeding against directors/officers of a company under moratorium.
4. Citing the IBC provisions and relevant case laws, appellants contended that the National Commission's view was erroneous.
5. Respondents argued that the individuals were not liable as per the order sought to be executed and referenced a previous case allowing action against promoters due to a settlement.
6. The National Commission did not address whether the individuals were obligated to comply with the directions against the company.
7. Referring to previous judgments, the Supreme Court held that the moratorium under Section 14 of the IBC does not prevent proceedings against directors/officers if they are liable to comply with the order against the company.
8. The impugned judgments were set aside, and the execution application was remitted to the National Commission to proceed against the individuals.
9. The individuals could raise objections and present evidence on their liability, which would be decided by the National Commission.
10. The appeals were partly allowed, and pending applications were disposed of.
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