2026 (1) TMI 846 - SC - Indian Laws

Execution of consumer decree against non-party directors and promoters found impermissible; no personal liability or guarantees proved.

Dominant issue-whether execution of a consumer decree could be enforced against persons who were not parties and against whom no personal liability was ... Execution of persons who were arrayed as respondents in the consumer complaints but ultimately against whom no notice was issued and the complaints did not proceed - execution on the premise that they were directors/promoters of the judgment-debtor company - HELD THAT:- It is trite that a decree cannot, by process of execution, be employed to shift or enlarge liability so as to bind persons who were neither parties to the decree nor otherwise legally liable thereunder. Where the judgment debtor is a company, the liability of its shareholders or joint venture partners remains confined to the extent of their shareholding or to such guarantees or undertakings as may have been expressly furnished by them - In the present case, the appellant has neither pleaded nor established that the respondents 2 to 9 had furnished any guarantee or surety in respect of the investment made in the project, nor has any material been placed on record to attract the application of Section 14(3) of the IBC. Once a moratorium has been declared against the judgment debtor company, i.e., ACIPL, the modes of execution contemplated under Section 71 of the Consumer Protection Act, 20196 including attachment and sale of movable or immovable property, attachment of bank accounts, or withdrawal of decretal amounts from the accounts of the judgment debtor, stand interdicted. Execution proceedings cannot, therefore, be permitted to continue indirectly against the respondents 2 to 9, who are neither judgment debtors nor guarantors, and against whom no independent liability under the order allowing the complaints has been established. The approach adopted by the NCDRC is completely agreed upon, that the CP Act envisages a complete adjudicatory process founded on service of notice, pleadings, opportunity to contest, leading of evidence, and recorded findings of fact and law. These are not mere procedural formalities but substantive safeguards that precede the fastening of liability. In the present case, no such adjudicatory exercise was undertaken qua the respondents 2 to 9. There are no pleadings attributing any personal role to them, no evidence led to establish individual culpability, and no findings returned fixing personal liability. In the absence of these foundational elements, execution proceedings cannot be utilised as a surrogate forum to impose liability where none has been adjudicated. Importantly, the order did not determine or declare any personal liability of the respondents 2 to 9. On the contrary, this Court expressly left it open to them to raise all objections as to executability and clarified that the question whether they are otherwise liable to comply with the order was required to be decided by the NCDRC in accordance with law. The order dated 17th January, 2024, therefore, merely removed the moratorium-related impediment and did not expand the scope of the order or fasten liability upon the directors. The impugned order of the NCDRC, which examines the issue of executability against the respondents 2 to 9 on its own merits and declines to proceed against them in the absence of any legal or factual basis for personal liability, cannot be said to be inconsistent with the order of this Court - the NCDRC committed no error of law or jurisdiction in declining to execute the order against persons who were admittedly not parties to the complaints. Appeal dismissed. Issues: (i) Whether execution of a decree passed exclusively against a company can be proceeded with against its directors/promoters who were not parties to the underlying adjudication and against whom no notice, pleadings, evidence or findings were recorded.Analysis: The adjudicatory process required for fastening personal liability includes service of notice, pleadings, opportunity to contest, leading of evidence and recorded findings; a decree binds only those against whom it is pronounced. Execution proceedings must strictly conform to the decree and cannot be used to enlarge liability or bind persons who were neither parties nor adjudicated as liable. Where a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates against the corporate judgment-debtor, modes of execution under Section 71 of the Consumer Protection Act, 2019 are interdicted against the corporate debtor; however, the moratorium does not, by itself, create personal liability of directors/promoters. Piercing the corporate veil is an exceptional remedy requiring specific pleadings and a reasoned determination of abuse, fraud or misuse of corporate personality; absent such pleadings or findings, execution cannot impose personal liability on directors/promoters. The prior confinement of the lis to the company by omission to issue notice to directors/promoters attained finality and cannot be enlarged by execution.Conclusion: Execution cannot be proceeded with against persons who were not parties to and against whom no adjudication was made in the original proceedings; therefore, the execution applications against the directors/promoters must be declined.