… which is related to the housing project being developed by the respondent observed that moratorium under Insolvency & Bankruptcy Code, 2016 applies only to Corporate Debtors not to its promoters which is defined under Section 14 of The Insolvency and Bankruptcy Code, 2016 which read as follows:
“14. Moratorium.—(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely— (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.”
Facts of the Case
In this particular case, the petitioners are home buyers in a group housing project, Canary Greens in Sector 73, Gurgaon, which were being developed by the respondent. Both the Parties were entered into an agreement related to the buying of the concerned property where Clause 21 of the agreements said 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.
Meanwhile, the project was abandoned by the developer. As a result of this, the petitioners have instituted a proceeding before the National Consumer Dispute Redressal Commission seeking a refund of their moneys with interest, which was allowed by the NCDRC.
The first respondent challenged this order of the NCDRC related to the personal presence of the Managing Director before the High Court of Delhi which was stayed with the direction that no coercive steps shall be taken against the Managing Director by the same Court.
Whether the moratorium Under Section 14 of The Insolvency and Bankruptcy Code, 2016 applies to the promoters or not?
The decision of the Supreme Court
The order of the NCDRC has resulted in the filing of appeals before the Supreme Court that order of custody of the Managing Director of the first respondent and attachment of properties of the first respondent shall only be given effect to once the Delhi High Court decides the first respondent’s petition. Where the Supreme Court issued a notice in Special Leave Petition and the order of the Delhi High Court was stayed.
In the meantime, on 31 October 2019, proceedings were initiated against the first respondent before the National Company Law Tribunal under Section 9 of 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 and the order of the NCLT resulted in the filing of Special Leave Petition before the Supreme Court with the grievances that the first respondent was merely to stall the refund of the amount due to the homebuyers in terms of order of NCDRC. in this context, the bench observed that:
“At this juncture, we must however clarify the right of the petitioners to move against the promoters of the first respondent Corporate Debtor, even though a moratorium has been declared under Section 14 of the IBC. 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.” [Para 15]
The Supreme Court clarified that the moratorium under IBC applies only to the corporate debtor not to its promoters