The hon’ble Supreme Court of India (Supreme Court) delivered a significant ruling in the matter Ansal Crown Heights Flat Buyers Association (Regd.) v. Ansal Crown Infrabuild Pvt. Ltd. (ACIPL) & Ors. addressing the complex interplay between insolvency proceedings and consumer complaints and affirmed that directors and officers of a company can still be held accountable during a moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC).
The case stemmed from a consumer complaint filed before the National Consumer Disputes Redressal Commission (NCDRC) against ACIPL. The NCDRC had directed the ACIPL to complete a project and handover possession to homebuyers within a specified timeframe. The order also provided the option for buyers to claim refund with interest if they chose not to take possession of their units.
However, execution proceedings were halted pursuant to an IBC petition having been admitted against ACIPL under section 9 of the IBC. The NCDRC ruled that proceedings could not continue against ACIPL or its directors due to the moratorium having been declared. It was also noted that the directors were not party in the initial consumer complaint.
Seeking to proceed with execution proceedings against the directors/officers of ACIPL, the appellant filed a civil appeal before the Supreme Court.
After considering the arguments from both sides, the Supreme Court relied upon the precedent set in P. Mohanraj v. Shah Bros. Ispat (P) Ltd. and concluded that directors and officers could still be held liable during an IBC moratorium. The Court stated, “only because there is a moratorium under Section 14 of the IBC against the company, it cannot be said that no proceedings can be initiated against the opposite party for execution, provided that they are otherwise liable to abide by and comply with the order passed against the company.”
This decision is likely to have far-reaching implications, providing clarity on the extent of liability of directors and officers during insolvency proceedings and ensuring accountability in corporate governance.