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September 22, 2021

Moratorium under IBC will apply only to Corporate Debtors

Moratorium under IBC will apply only to Corporate Debtors

Fact and Issue of the case

The petitioners are home buyers in a group housing project, Canary Greens in Sector 73, Gurgaon, being developed by the first respondent. Home buyer agreements were entered into between the eleven petitioners and the first respondent. Clause 21 of the agreements envisaged 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.

The grievance of the petitioners is that the project was abandoned by the developer. As a result, they instituted proceedings1 before the National Consumer Dispute Redressal Commission2 seeking refund of their moneys with interest. On 12 July 2018, the NCDRC allowed their claim by directing the first respondent to refund the principal amount paid by the petitioners together with 12 per cent interest from the date of deposit along with costs within four weeks. There was a provision in the order for interest being enhanced to 14 per cent if the amount was not paid within the stipulated period. This order of the NCDRC has attained finality.

Execution proceedings under Sections 25 and 27 of the Consumer Protection Act 19864 were instituted by the petitioners. The NCDRC issued notice on 7 September 2018. In the meantime, certain orders were passed by the NCDRC on 23 October 2018 in separate execution proceedings pertaining to other home buyers in the same housing project. The first respondent challenged this order of the NCDRC before the High Court of Delhi5, and by an order dated 19 November 2018, the order of the NCDRC dated 23 October 2018 was stayed by the Delhi High Court

The execution proceedings initiated by the petitioners were adjourned by the NCDRC on 13, 25 and 26 February 2019. Certain settlement terms were offered by the judgment debtor on 27 February 2019, which were not acceptable to the decree holders. On 5 March 2019, the proceedings were again adjourned to explore the proposals furnished by the first respondent. Eventually, on 11 March 2019, since no settlement was arrived at, the Managing Director of the first respondent was directed to appear personally. The first respondent filed a petition6 before the Delhi High Court to challenge the order of the NCDRC requiring the personal presence of the Managing Director. By an order dated 27 March 2019, the Delhi High Court issued notice to the petitioners and also issued a direction that no coercive steps shall be taken against the Managing Director of the first respondent in terms of the order dated 11 March 2019 passed by the NCDRC. That has given rise to the first in the batch of Special Leave Petitions before this Court, namely, SLP (C) No 12150 of 2019.

Observation of the Court

In view of these developments, by an order dated 8 July 2021, this Court directed that a meeting of the Committee of Creditors11 be convened within a period of two weeks so that a final decision could be taken on whether any of the Resolution Plans are acceptable to it. The CoC consists only of representatives of the home buyers, no financial institutions being involved. The Court has been apprised, by Mr Himanshu Satija, counsel appearing on behalf of the RP, that by a vote of 96.93 per cent, the CoC approved the Resolution Plan which was submitted by the consortium of home buyers. On 21 August 2021, an application was filed by the RP for approval of the Resolution Plan before the Adjudicating Authority and some objections have been received. The Adjudicating Authority is yet to decide on this application for approval.

Mr Pawanshree Agarwal, counsel appearing on behalf of the petitioners submitted that during the course of the proceedings before this Court, settlements were arrived at and hence the promoters of the Corporate Debtor, namely, the first respondent should be held liable personally to honour the settlements, particularly having regard to the order dated 1 April 2019, which was passed by the NCDRC in the course of the execution proceedings. In this context, reliance has been placed on paragraph 10(g) of the Resolution Plan which has been approved by the CoC.

Counsel for the petitioners urged that this Court should at the present stage direct that the personal properties of the promoters be attached in view of the provisions contained in the Resolution Plan which have been extracted earlier. The Resolution Plan is still to be approved by the Adjudicating Authority under the provisions of Section 31(1) of the IBC. Hence, at this stage, when the Resolution Plan awaits approval, it would not be appropriate for this Court to issue a direction of that nature. After the Resolution Plan is approved under the provisions of Section 31(1), consequences emanating from the statutory provision would ensue to the benefit of the home buyers. Hence, we have already directed that the NCLT shall dispose of the approval application filed on 21 August 2021, within a period of six weeks from the date of receipt of a certified copy of this order.

The Court thus clarify that the petitioners would not be prevented by the moratorium under Section 14 of the IBC from initiating proceedings against the promoters of the first respondent Corporate Debtor in relation to honoring the settlements reached before this Court. However, as indicated earlier, this Court cannot issue such a direction relying on a Resolution Plan which is still pending approval before an Adjudicating Authority.

In view of the above directions, SLP (C) No 12150 of 2019 and SLP (C) Diary No 45043 of 2019 shall stand disposed of as well as the civil appeal, being Civil Appeal Nos 5231-5238 of 2019. Liberty is granted to the petitioners to take recourse to the remedies which are available in law after the decision of the Adjudicating Authority on the approval application under Section 31(1), and subject to the consequence thereafter.


Hence the court ruled in favour of the petitioner and disposed of the case

Read the full order from below


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