The Supreme Court ruled that the moratorium under the provisions of the Insolvency and Bankruptcy Code (IBC) which restricts the opening of any new proceedings or the abandonment of existing proceedings applies only to the debtor company but does not protect the promoters of the company in difficulty.
The court’s observation came from an order related to the dispute between builders and home buyers resulting from the incomplete housing project.
A bench of Justices DY Chandrachud, Vikram Nath and Hima Kohli allowed homebuyers to challenge the developers of the first defendant debtor company (Today Homes and Infrastructure Pvt Ltd), even though a moratorium was declared under the Article 14 of the IBC.
The court, while referring to a verdict rendered earlier this year, said that court ruled that proceedings under the Tradable Instruments Act against the debtor company would be covered by the standstill provision under the Article 14 of the IBC.
However, it (an earlier verdict) clarified that the moratorium only affected the debtor company and not the directors / officers of the debtor company, against whom the proceedings could continue, he said in his issued order. recently.
The court said: We thus clarify that the applicants (home buyers) would not be prevented by the moratorium under Article 14 of the IBC from taking legal action against the promoters of the first defendant debtor company in this regard. which concerns compliance with settlements reached before this Court.
She added that since the moratorium declared in respect of the debtor company continues to apply under Article 14 of the IBC, no new proceedings can be initiated and no pending proceedings continued. against the debtor company.
The bench noted that homebuyers have urged it to order the developers’ personal properties to be tied up in view of the provisions contained in the resolution plan.
He said the resolution plan has yet to be approved by the adjudicating authority (national company law court) under the provisions of Article 31 (1) of the IBC. Therefore, at this point, while the resolution plan awaits approval, it would not be appropriate for this Court to issue a direction of this nature.
The bench said that after approval of the resolution plan under the provisions of Article 31 (1), the consequences emanating from the legal provision would ensue for the benefit of home buyers.
Therefore, we have already ordered that the NCLT dispose of the application for approval filed on August 21, 2021, within six weeks from the date of receipt of a certified copy of this order. he declares.
A group of home buyers of a collective housing project, Canary Greens in Sector 73 of Gurgaon in Haryana, which is being developed by ‘Today Homes and Infrastructure Pvt Ltd’, has been aggrieved by the abandonment of the project by the manufacturer.
They claimed that according to their agreement with the real estate company, possession of the apartments had to be delivered within thirty-six months, which in almost all cases had to be in 2014. Homebuyers approached the National Consumer Dispute Redressal. Commission (NCDRC) requesting reimbursement of their money with interest.
On July 12, 2018, the NCDRC granted their request by ordering the real estate company to reimburse the principal amount paid by the applicants as well as 12% interest from the date of the deposit as well as the costs within a deadline. four weeks.
After the builder failed to pay the refunds according to the order, enforcement proceedings were initiated by the homebuyers before the NCDRC, which requested a response from the real estate company.
The company then approached the Delhi High Court in a separate proceeding also initiated by another group of home buyers, which in turn suspended the NCDRC order.
After that, certain terms of settlement were proposed by the real estate company which were not acceptable to the decree holders.
On March 11, 2019, the NCDRC ordered the managing director of the real estate company to appear in person.
On March 27, 2019, the Delhi High Court ordered that no enforcement action be taken against the CEO of the company in accordance with the order issued by the NCDRC.
The case then reached the highest court but during the pleadings proceeding on October 31, 2019, proceedings were initiated against the real estate company before the NCLT under Article 9 of the IBC by an operational creditor. .
The NCLT Authority granted the petition, as a result of which the corporate insolvency resolution process was initiated and a moratorium was declared under Article 14 of the IBC.
Another group of home buyers moved the Supreme Court, saying the company’s insolvency claim against the real estate company was simply aimed at blocking repayment of the amount owed to them.
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