Case title: 

ANSAL CROWN HEIGHTS FLAT BUYERS ASSOCIATION (REGD.) v. M/S. ANSAL CROWN INFRABUILD PVT. LTD. & ORS

Date of Order: 

JANUARY 17, 2024

Bench: 

HON’BLE JUSTICE ABHAY S. OKA

HON’BLE JUSTICE UJJAL BHUYAN

Parties: 

APPELLANT ­– ANSAL CROWN HEIGHTS FLAT BUYERS ASSOCIATION (REGD.)

RESPONDENT - M/S ANSAL CROWN INFRABUILD PVT LTD & ORS

SUBJECT: In response to a complaint by homebuyers against M/S. Ansal Crown Infrabuild Pvt. Ltd. & Ors., the National Consumer Disputes Redressal Commission (National Commission) issued a directive. This order is at the heart of the case. It instructed the developer to complete the project, transfer possession of the designated apartments to the buyers, and offer a refund option with interest. Despite efforts by the appellant, Ansal Crown Heights Flat Buyers Association (Regd.), to enforce this order against the company and various individuals, the National Commission found that the implementation of this order was hindered by the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC). This case revolves around the question of whether the directive applies or not.

IMPORTANT PROVISIONS:

1. Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC): The provision related to the moratorium, which prevents the continuation of legal proceedings against a corporate debtor during the corporate insolvency resolution process.
2. Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC): Pertains to the initiation of insolvency proceedings against a corporate debtor.
3. Section 32A(1) of the Insolvency and Bankruptcy Code, 2016 (IBC): The second proviso to this section is referenced, which may have relevance to the liability of directors/officers.
4. Sections 138/141 of the Negotiable Instruments Act: The case makes reference to proceedings under these sections, suggesting that they may be relevant to the liability of individuals.

OVERVIEW: Members of the Ansal Crown Heights Flat Buyers Association put a case­ against M/S. Ansal Crown Infrabuild Pvt. Ltd. & Ors. They went to the National Consume­r Disputes Redressal Commission. The­ case was Civil Appeal No(S). 4480-4481 of 2023. The National Commission had a command. It wante­d the builder to finalize the­ project. They expe­cted him to give the apartme­nts to the buyers. There­ was another choice in the command. It was an option for a re­fund with interest. The appe­llant tried to apply this command. He targete­d each respondent and the­ company. But, the National Commission made a decision. It state­d that a break under Section 14 of the­ Insolvency and Bankruptcy Code, 2016 (IBC) blocked any action against the­ company.

ISSUES RAISED: Whether the directors and officers of M/S. Ansal Crown Infrabuild Pvt. Ltd. are subject to the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC), which stops the implementation of an order issued by the National Consumer Disputes Redressal Commission against the company and a number of individuals.

ARGUMENTS ADVANCED BY THE APPELLANT:

1. The appellant argued that legal actions against the directors or officers of a company under Section 14 moratorium are not expressly prohibited by the Insolvency and Bankruptcy Code, 2016 (IBC).
2. The appellant cited Section 32A of the IBC's second proviso to sub-Section (1), arguing that this clause might establish an exception or deal with directors' and officers' liability during the moratorium.
3. The appellant contended that the ruling in P. Mohanraj vs. Shah Bros. Ispat (P) Ltd. [1]supports the idea that directors' and officers' liability persists even after the company has imposed a moratorium.
4. Citing the Anjali Rathi and others vs. Today Homes and Infrastructure Pvt. Ltd. and Others[2]case, the appellant contended that this ruling established a precedent for circumstances similar to the one in which actions against a company's promoters were permitted during the moratorium.
5. It is possible that the appellant argued for a particular reading of IBC Section 14, stressing that directors and officers are not automatically covered by the moratorium.
6. Building on the analysis of pertinent legal provisions, the appellant have highlighted how directors' and officers' liability endures even after the moratorium. It is possible that the appellant challenged the National Commission's finding that opposition parties Nos. 2 through 9 were not parties to the primary complaint, contending that this did not absolve them of responsibility.
7. The appellant contended that the moratorium only applies to the corporate debtor, permitting actions against individuals, pointing out differences between the corporate debtor (business) and its directors/officers.

ARGUMENTS ADVANCED BY THE RESPONDENT:

1. The respondents contended that respondent Nos. 2 through 9 (individuals) were not expressly liable in the National Consumer Disputes Redressal Commission's order.
2. The respondents have argued that respondent Nos. 2 through 9 shouldn't have been held liable in the execution proceedings because they weren't involved in the original consumer complaint.
3. Citing the Anjali Rathi case as an example, the respondents could have set it apart by highlighting the fact that the current situation lacks a settlement, which is why the court permitted proceedings against the promoters.
4. The respondents contended that specific directors and officers of the company should not be automatically subject to the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).
5. The respondents claimed the National Consumer Disputes Redressal Commission did not decide whether respondent Nos. 2 through 9 had to follow the instructions against the company.
6. To differentiate their case from Anjali Rathi's, the respondents have emphasised that respondent Nos. 2 through 9 were not parties to any agreements or settlements.
7. The respondents argued that before the order can be executed against respondent Nos. 2 through 9, they should be required to obtain a ruling requiring them to comply with the order's provisions.

JUDGEMENT ANALYSIS:

1. IBC Provision Interpretation: - The Insolvency and Bankruptcy Code, 2016 (IBC), Section 14, which forbids lawsuits against corporate debtors during the bankruptcy process, was interpreted by the court.
2. Prosecution Against Firm: - The National Consumer Disputes Redressal Commission ordered a developer, M/S. Ansal Crown Infrabuild Pvt. Ltd., to complete a project and turn over possession to homeowners. The company's execution was stopped by the moratorium under Section 14 of the IBC.
3. The moratorium applies to directors and officers: The primary concern was whether the moratorium that applied to the entire company also covered the company's directors and officers. The court considered arguments regarding the respondent parties' (opposite party Nos. 2 through 9) liability in the execution proceedings. The appellant contended that it might affect the directors' and officers' liability during the moratorium by citing Section 32A of the IBC's Second Proviso to sub-Section (1).
4. Previous Cases-P. Mohanraj and Anjali Rathi:- The court referenced the decisions in P. Mohanraj vs. Shah Bros. Ispat (P) Ltd. and Anjali Rathi vs. Today Homes and Infrastructure Pvt. Ltd. to highlight the possibility that directors' and officers' liability may persist despite the moratorium.
5. National Commission observations: The National Commission noted that the decree could not be implemented against the company due to the moratorium and that it would not be appropriate to pursue legal action against individual respondents (opposite party Nos. 2 to 9).
6. Court's Conclusions and Recommendations: - The court concluded that the company's Section 14 of the IBC moratorium does not automatically preclude legal action against its directors or officers. The decision made it apparent that the moratorium does not apply to specific directors or officers.
7. Remittal to National Commission: Following the court's set aside of the contested judgements and orders, the execution application was forwarded to the National Consumer Disputes Redressal Commission. It was approved to carry out the execution against each of the individual respondents (opposite party Nos. 2 through 9).
8. Reaction against Opposing Parties Nos. 2 through 9: - The court gave opposition parties Nos. 2 through 9 an opportunity to argue why they should follow through on the order, as well as to submit further objections and corroborating evidence.

CONCLUSION:

This case reveals if a company's directors and officers are answerable to Section 14's freeze in the 2016 Insolvency and Bankruptcy Code (IBC). The court says, no, these folks don't automatically fall under this shield against legal action aimed at a business debtor. The decision tosses out a call by the National Consumer Disputes Redressal Commission, greenlighting legal action against individual opponents (party Nos. 2 to 9). It paints a clear picture of who the IBC freeze covers and confirms it doesn't automatically protect leaders from legal steps. It drives home an important point: judge each person's liability for a case by case, during the freeze. In summary, the decision gives clear rules for how the IBC's pause clauses and possible responsibilities of directors and officers work. It ensures a thoughtful and situation-specific approach to these complex legal issues.