In a significant legal development, the Supreme Court addressed the interplay between the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) and the liability of company directors. This issue arose from a dispute involving Association of the Homebuyers, and Ansal Crown Infrabuild Private Limited NCDRC had directed the Developer, to complete the housing project. The Commission also gave liberty to homebuyers to claim refund of their deposited amount if they are not interested to wait further for taking possession of the Apartment, and the Developer shall refund along with interest, and in case of delay, with penal interest.
In the meantime, CIRP proceedings u/s 9 of IBC started against the Developers. However, the homebuyers sought to execute the direction(s) of the NCDRC against the company as well as against the individual directors. The NCDRC ruled that the decree could not be executed against the company due to the operation of the moratorium under Section 14 of the IBC and deemed it inappropriate to proceed against the individual directors in the same execution application. Aggrieved by this order, the homebuyers appealed to the Hon’ble Supreme Court.
While deciding the appeal, the issue before the Hon’ble Supreme Court was whether action against the directors/ officers of a company undergoing CIRP can be continued despite the moratorium u/s 14 of IBC.
The Hon’ble Supreme Court while partly allowing the appeal, set aside the impugned judgment/order and held that notwithstanding the moratorium under IBC, the liability, if any, of the directors/officers will continue even though moratorium under section 14 of IBC is in operation against the company.
The Hon’ble Apex Court’s decision in the present case clarifies the legal position regarding the applicability of moratorium u/s 14 of IBC to the directors/officers of the defaulting company.
Ansal Crown Heights Flat Buyers Association (Regd.) vs. Ansal Crown Infrabuild Pvt. Ltd. & Ors.
(2021) 6 SCC 258
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