IBC Moratorium Does Not Shield Promoters and Directors from Consumer Complaints, Rules Supreme Court

A Division Bench of the Supreme Court held that a Section 14 moratorium protects only the corporate debtor, allowing homebuyers' NCDRC complaint to continue against co-respondents.

The Supreme Court has held that the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates strictly against the corporate debtor and cannot be stretched to protect its promoters, directors, or associated companies from consumer proceedings. A Division Bench of Justice Vikram Nath and Justice Sandeep Mehta set aside an order of the National Consumer Disputes Redressal Commission that had adjourned a homebuyers' consumer complaint sine die against all respondents—including promoters and landowners—merely because a moratorium had been declared against the developer under the IBC. The Court found that the NCDRC had pre-emptively foreclosed a factual inquiry it had not yet conducted, and directed the Commission to proceed with the complaint against the non-corporate-debtor respondents.

Apartments Promised by December 2018, Delivered Never

The appellants are homebuyers who booked residential apartments in the “Mantri Manyata Energia” project being developed by Mantri Technology Constellations Private Limited—now known as Buoyant Technology Constellations Private Limited—which is Respondent No. 1. Construction agreements and agreements for sale of undivided shares in the project land were executed between the appellants and Respondent No. 1 in 2016. Possession was contractually due by 31 December 2018.

When possession was not delivered, the appellants and other homebuyers filed Consumer Case No. 13 of 2023 before the NCDRC, alleging deficiency in service and unfair trade practices against Respondent Nos. 1 to 7. The seven respondents comprised Respondent No. 1 (the developer), Respondent No. 2 (Mantri Developers Pvt. Ltd., allegedly associated with the project), Respondent Nos. 3 to 5 (alleged promoters and directors of the two companies), and Respondent Nos. 6 and 7 (the landowners).

While the complaint was pending, the National Company Law Tribunal, Bengaluru Bench admitted an application under Section 9 of the IBC against Respondent No. 1 on 23 August 2024, initiating the Corporate Insolvency Resolution Process. A moratorium under Section 14 of the IBC thereby came into force against Respondent No. 1.

NCDRC Adjourns the Entire Complaint, Not Just the Corporate Debtor's Part

Following the NCLT order, the appellants filed I.A. No. 14200 of 2024 before the NCDRC, placing the NCLT order on record and praying that the consumer complaint be allowed to continue against Respondent Nos. 2 to 7, notwithstanding the moratorium against Respondent No. 1. They subsequently filed I.A. No. 15656 of 2024 seeking rehearing of the earlier application and reiterating the same prayer.

The NCDRC rejected both applications by its order dated 20 January 2025. The Commission reasoned that the alleged deficiency in service was attributable only to Respondent No. 1 since all construction and sale agreements were between the appellants and Respondent No. 1. On that basis, it held that proceedings could not be split up to continue against the remaining respondents, and adjourned the complaint sine die.

The appellants challenged that order before the Supreme Court in Civil Appeal Nos. 4289–4290 of 2025.

Section 14 Protects the Corporate Debtor Alone — Statute Cannot Be Enlarged

The Court opened its analysis by restating the purpose of the moratorium: to preserve the assets of the corporate debtor during the resolution process and to facilitate an orderly resolution. That statutory object, the Court said, does not translate into an indefinite shield for every party connected to the corporate debtor.

The Court was emphatic that the scope of Section 14 is statutory and fixed. It held that it is not open to the adjudicating authority or to a court to enlarge the moratorium's ambit beyond what the statute contemplates. A plain reading of the provision, the Court said, makes clear that the moratorium operates against the corporate debtor alone. No subsidiary company, manager, director, or personal guarantor falls within its protective sweep unless specifically provided by the Code.

The Court drew on three precedents. In P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258, it had been held, in the context of Section 138 of the Negotiable Instruments Act, 1881, that Section 14 applied only to the corporate debtor and that natural persons remained liable. In Ansal Crown Heights Flat Buyers Association v. Ansal Crown Infrabuild Pvt. Ltd., (2024) 5 SCC 745, a consumer complaint against developers, the Court had specifically held that a moratorium against the corporate debtor does not protect its promoters and directors, and that proceedings could continue against them. In Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., 2025 INSC 314, though arising in the context of Section 96 of the IBC, the Court had held that the protective sweep of a moratorium must remain within the four corners carved out by the statute and “ought not be expanded in a manner that stultifies remedies envisaged under the Consumer Protection Act.”

NCDRC Answered the Merits While Professing Not To

The Court identified a deeper error in the NCDRC's reasoning. The Commission had itself observed that the liability arising from the allegations of deficiency in service was yet to be determined. Yet in the same order it concluded that the alleged deficiency was attributable only to Respondent No. 1, because all agreements were with Respondent No. 1. The Court found this self-contradictory.

The question before the NCDRC at the interlocutory stage was not whether Respondent Nos. 2 to 7 were actually liable. The question was only whether, in the absence of any moratorium operating in their favour, the consumer complaint could proceed against them. By pre-emptively holding that deficiency was attributable solely to Respondent No. 1, the Commission effectively answered—at the threshold—the very question it had said remained to be adjudicated. The Court held that it was not open to the Commission to foreclose that inquiry at the interlocutory stage.

Since no independent moratorium or independent statutory protection operated in favour of Respondent Nos. 2 to 7, the NCDRC had no legal basis to reject the appellants' prayer to continue the complaint against those respondents.

Court Declines to Rule on Merits, Leaves That for NCDRC

Counsel for the appellants urged the Court to proceed further and allow the consumer complaint outright, granting the reliefs claimed. The Court declined. Respondent Nos. 2 to 7 had raised several objections before the NCDRC—including absence of privity of contract, maintainability of the complaint, and the absence of any independent obligation under the agreements. None of those objections had yet been decided by the Commission. The Court said it would not be appropriate to undertake that exercise for the first time in an appellate proceeding, and accordingly expressed no opinion on the merits of the rival contentions.

Outcome

The Court set aside the impugned NCDRC order dated 20 January 2025 and partly allowed the civil appeals. I.A. No. 15656 of 2024 and I.A. No. 14200 of 2024 were allowed. The NCDRC was directed to proceed to hear Consumer Complaint No. 13 of 2023.

The Court clarified that proceedings against Respondent No. 1 shall continue to remain governed by the moratorium under Section 14 of the IBC. The NCDRC is required to dispose of the complaint insofar as Respondent Nos. 2 to 7 are concerned, in accordance with law.