Supreme Court has held that the protection of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) does not extend to directors/officers of the Corporate Debtor and allows for the enforcement of orders against them. Thus the Moratorium under Section 14 of IBC does not bar to execute decree against directors/officers of the corporate debtor.
The Supreme Court two-judge bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan ruled that the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) applies only to the corporate debtor and not its directors/officers. The Supreme Court bench permitted execution proceedings against individual respondents, holding them liable to comply with the National Consumer Disputes Redressal Commission's (NCDRC) order. The Apex Court emphasized that the liability of directors/officers persists notwithstanding the moratorium, provided they are otherwise liable under the order against the company. The Bench clarified that the protection of the moratorium does not extend to directors/officers and allows for the enforcement of orders against them.
The Supreme Court reviewed a case concerning execution applications filed by appellants against a developer company and several individuals. These applications sought to enforce an order by the National Consumer Disputes Redressal Commission (NCDRC), directing the developer to either complete a project and hand over possession of apartments to homebuyers or refund their deposits with interest and costs. However, the developer was undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), leading to a moratorium on actions against it.
The NCDRC held that the decree couldn't be executed against the company due to the IBC's moratorium. It also declined to proceed against the individual respondents, citing their non-involvement in the original complaint.
The appellants argued that the IBC didn't prohibit actions against the directors/officers of the company during the moratorium. They cited provisions of the IBC and previous court decisions to support their claim.
In response, the respondents contended that they weren't liable under the NCDRC order as they weren't party to the original complaint. They referenced a previous case where the court allowed action against company promoters due to a settlement.
The Supreme Court noted that the NCDRC hadn't addressed whether the individual respondents were obligated to comply with the order against the company. It referred to previous judgments indicating that the moratorium under the IBC applied only to the corporate debtor and not its directors/officers.
Based on this, the Supreme Court bench set aside the NCDRC's decision and allowed the execution of applications against the individual respondents. It instructed the NCDRC to consider their liability in light of the law. The Court clarified that the individual respondents could raise objections to their liability, and the NCDRC would decide the matter accordingly.
Ultimately, the Apex Court partly allowed the appeals, directing the continuation of execution against the individual respondents and disposing of any pending applications.
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