ANJALI RATHI AND OTHERSversusTODAY HOMES & INFRASTRUCTURE PVT. LTD. AND OTHERS

152                      [2021]REPORTS
               SUPREME COURT    9 S.C.R. 152                [2021] 9 S.C.R.


A                       ANJALI RATHI AND OTHERS
                                        v.
             TODAY HOMES & INFRASTRUCTURE PVT. LTD.
                          AND OTHERS
B                         (SLP (C) No. 12150 of 2019)
                              SEPTEMBER 8, 2021
       [DR DHANANJAYA Y CHANDRACHUD, VIKRAM NATH
                   AND HIMA KOHLI, JJ.]
             Insolvency and Bankruptcy Code, 2016: s.14 – Petitioners
C
      are home buyers in a group housing project – Possession of
      apartments were not handed as per the agreement – Petitioners filed
      consumer complaint before National Commission (NCDRC) –
      NCDRC directed refund of money with interest – Execution
      proceedings – First respondent challenged the order of NCDRC
D     before High Court and stay was granted in favour of first respondent
      – Pending execution, proceedings were initiated against the first
      respondent before NCLT by operational creditor – Adjudicating
      Authority admitted s.9 petition following which the corporate
      insolvency resolution process was initiated and a moratorium was
      declared under s.14 of the IBC – This order of NCLT resulted in
E
      filing of special leave petition by certain other homebuyers with
      grievance that application filed for initiation of corporate
      insolvency against the first respondent was merely to stall the refund
      of the amount due to the homebuyers in terms of order of NCDRC
      – Petitioners lodged their claims before the Resolution Professional
F     – CoC approved the Resolution Plan which was submitted by the
      consortium of homebuyers – Application was filed by the Resolution
      Professional for approval of the Resolution Plan before the
      Adjudicatory Authority and some objections were received – The
      proceedings are now pending before the Adjudicating Authority,
      awaiting its approval under s.31(1) of the IBC – If the petitioners
G
      have any objections to the Resolution Plan, they are to submit them
      before the Adjudicating Authority – NCLT is directed to ensure that
      the application for approval is disposed of expeditiously – Since
      the Resolution Plan is still to be approved by the Adjudicating
      Authority under the provisions of s.31(1) of the IBC, at this stage, it
H     is held not appropriate to issue a direction to attach personal
                                        152
ANJALI RATHI AND ORS. v. TODAY HOMES & INFRASTRUCTURE                    153
                  PVT. LTD. AND ORS.

properties of the promoters – After the Resolution Plan is approved      A
under the provisions of s.31(1), consequences emanating from the
statutory provision would ensue to the benefit of the home buyers –
Further, since the moratorium declared in respect of the first
respondent continues to operate under s.14 of the IBC, no new
proceedings can be undertaken or pending ones continued against
                                                                         B
the Corporate Debtor – Petitioners would not be prevented by the
moratorium under s.14 of the IBC from initiating proceedings against
the promoters of the first respondent in relation to honoring the
settlements reached before this Court – However, this Court cannot
issue such a direction relying on a Resolution Plan which is still
pending for approval before an Adjudicating Authority.                   C
     Disposing of the special leave petitions and appeal, the
Court
       HELD: 1. The conspectus of facts before this Court reveals
that the petitioners have participated in the proceedings before
the RP and later, the CoC. The Resolution Plan which has been            D
submitted by the consortium of home buyers stands approved by
the CoC and the proceedings are now pending before the
Adjudicating Authority, awaiting its approval under Section 31(1)
of the IBC. If the petitioners have any objections to the Resolution
Plan, they are to submit them before the Adjudicating Authority.         E
The NCLT is directed to ensure that the application for approval
is disposed of expeditiously and preferably within a period of six
weeks form the date of receipt of a certified copy of this order.[Para
12][159-G-H; 160-A]
       2. The petitioners urged that this Court should at the            F
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
                                                                         G
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. Further, since the
                                                                         H
154            SUPREME COURT REPORTS                        [2021] 9 S.C.R.


A     moratorium declared in respect of the first respondent Corporate
      Debtor continues to operate under Section 14 of the IBC, no
      new proceedings can be undertaken or pending ones continued
      against the Corporate Debtor.[Paras 13, 14][160-A-D]

            P. Mohanraj v. Shah Bros. Ispat (P) Ltd. (2021) 6 SCC
B           258 – relied on.

            3. 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
C     Corporate Debtor in relation to honoring the settlements reached
      before this Court. However, this Court cannot issue such a
      direction relying on a Resolution Plan which is still pending for
      approval before an Adjudicating Authority. [Para 15][162-B-C]

                             Case Law Reference
D
      (2021) 6 SCC 258               relied on                Para 15

           EXTRAORDINARY/APPELLATE JURISDICTION: SLP (C)
      No.12150 of 2019.

E           From the Judgment and Order dated 27.03.2019 of the High Court
      of Delhi at New Delhi in CM(M) No.494 of 2019.

            With

            Civil Appeal Nos.5231-5238 of 2019 and SLP (C) Diary No.45043
F     of 2019.

            Pawanshree Agrawal, Adv. for the Petitioners.

            Himanshu Satija, E. C. Agrawala, Manoj Yadav, Sushil Kaushik,
      Ranbir Singh Yadav, Mrs. Shally Bhasin, Ayush Sharma, Aditya Parolia,
G
      Piyush Singh, Nithin Chandran, Akshay Srivastava, Ms. Aditi Sinha,
      Rajesh Kumar, Gaurav Goel, Advs. for the Respondents.



H
ANJALI RATHI AND ORS. v. TODAY HOMES & INFRASTRUCTURE                           155
                  PVT. LTD. AND ORS.

      The Judgment of the Court was delivered by                                A
      DR DHANANJAYA Y CHANDRACHUD, J.
      1. 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        B
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.
      2. The grievance of the petitioners is that the project was
abandoned by the developer. As a result, they instituted proceedings 1
before the National Consumer Dispute Redressal Commission2 seeking              C
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        D
amount was not paid within the stipulated period. This order of the
NCDRC has attained finality.
      3. Execution proceedings3 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               E
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.                                                           F
       4. 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             G
1
  Consumer Complaint Nos 1242, 1243, 1245, 1246, 1248, 1249, 1250 and 1251 of
2017
2
  “NCDRC’’
3
  EA Nos 158, 159, 161-162, 164-166 and 168 of 2018
4
  “COPRA’’
5
  CM(M) No 1391 of 2018                                                         H
156               SUPREME COURT REPORTS                         [2021] 9 S.C.R.


A     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
B
      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.
C           5. On 1 April 2019, the NCDRC passed a further order in the
      course of the execution proceedings. Paragraph 14 of the order is
      extracted below:
               “As the Judgment Debtor has failed to refund the entire amount
               as directed by this Commission in its order dated 12th July, 2018,
D              we direct the Judgement Debtor to refund the entire amount along
               with interest and costs in terms of the order dated 12th July, 2018
               within two weeks from today failing which Mr. Ajay Sood, Director,
               shall be taken into custody and all the properties of the Judgment
               Debtor and the personal properties of the Judgment Debtor shall
E              be attached and the decretal amount shall be recovered from it.
               However, this order of taking into custody and attachment
               of property shall be given effect into only after the Hon’ble
               Delhi High Court decides the matter.”
                                                          (emphasis supplied)
F             Thus, the execution applications were disposed of. The order of
      the NCDRC has resulted in the filing of appeals before this Court, being
      Civil Appeal Nos 5231-5238 of 2019, by the petitioners/appellants for
      the limited purpose of challenging the final direction of the NCDRC, i.e.,
      that order of custody of the Managing Director of the first respondent
G     and attachment of properties of the first respondent shall only be given
      effect to once the Delhi High Court decides the first respondent’s petition.
             6. During the pendency of the proceedings before this Court, arising
      out of the order of the Delhi High Court, certain developments took
      place. On 1 July 2019, notice was issued in SLP (C) No 12150 of 2019
      6
H         CM(M) No 494 of 2018
ANJALI RATHI AND ORS. v. TODAY HOMES & INFRASTRUCTURE                          157
 PVT. LTD. AND ORS. [DR DHANANJAYA Y CHANDRACHUD, J.]

and the order of the Delhi High Court was stayed. On 11 September              A
2019, the Court was informed that seven petitioners have settled their
dispute and that a settlement with the others was likely.
       7. In the meantime, on 31 October 2019, proceedings were initiated
against the first respondent before the National Company Law Tribunal 7
under Section 9 of the Insolvency and Bankruptcy Code 20168 by an              B
operational creditor. The Adjudicating Authority admitted the petition,
following which the corporate insolvency resolution process9 was initiated
and a moratorium was declared under Section 14 of the IBC. The specific
direction of the NCLT was as follows:
       “15. In the given facts and circumstances, the Operational Creditor     C
       has established the default on the part of Corporate Debtor in
       payment of the operational debt. The Petition filed under Section
       9 fulfills all the requirements of law. Therefore, the petition is
       admitted in terms of Section 9(5) of the IBC. Accordingly, the
       CIRP is initiated and moratorium is declared in terms of Section
       14 of the Code. As a necessary consequence of the moratorium            D
       in terms of Section 14(1) (a), (b), (c) & (d), the following
       prohibitions are imposed, which must be followed by all and sundry:
       “(a) The institution of suits or continuation of pending suits or
       proceedings against the corporate debtor including execution of
       any judgment, decree or order in any court of law, tribunal,            E
       arbitration panel or other authority;
       (b) Transferring, encumbering, alienating or disposing of by the
       corporate debtor any of its assets or any legal right or beneficial
       interest therein;
                                                                               F
       (c) Any action to foreclose, recover or enforce any security interest
       created by the corporate debtor in respect of its property including
       any action under the Securitization and Reconstruction of Financial
       Assets and Enforcement of Security Interest Act, 2002;
       (d) The recovery of any property by an owner or lessor, where
                                                                               G
       such property is occupied by or in the possession of the corporate
       debtor.””

7
  “NCLT’’/‘‘Adjudicating Authority’’
8
  “IBC’’
9
  “CIRP’’                                                                      H
158                 SUPREME COURT REPORTS                       [2021] 9 S.C.R.


A             This order of the NCLT resulted in the filing of a Special Leave
      Petition before this Court, being SLP (C) Diary No 45043 of 2019 by
      certain other homebuyers. The grievance raised in this petition is that
      the application filed for the initiation of corporate insolvency against the
      first respondent was merely to stall the refund of the amount due to the
      homebuyers, in terms of the order of the NCDRC dated 12 July 2018.
B
            8. Thereafter, the petitioners lodged their claims before the
      Resolution Professional10, though without prejudice to their contentions
      in the proceedings pending before this Court. The RP issued an
      Information Memorandum to prospective Resolution Applicants in terms
      of the IBC. Two Resolution Applicants came forth before the RP,
C     namely:(i) I & E Advertising Private Limited; and (ii) a consortium
      representing the home buyers. It appears that the developer had other
      projects as well, and the consortium represented the homer buyers of all
      the projects.
              9. In view of these developments, by an order dated 8 July 2021,
D     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
E     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.
F
            10. Mr Pawanshree Agarwal appears on behalf of the petitioners.
      Mr Himanshu Satija appears for the RP. Mr Manoj Yadav appears for
      second to sixth respondents, a group of home buyers. Mr Akshay
      Srivastava and Mr Ayush Sharma have intervened on behalf of other
      home buyers.
G
             11. 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

      10
           “RP’’
H     11
           “CoC’’
ANJALI RATHI AND ORS. v. TODAY HOMES & INFRASTRUCTURE                          159
 PVT. LTD. AND ORS. [DR DHANANJAYA Y CHANDRACHUD, J.]

Corporate Debtor, namely, the first respondent should be held liable           A
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, which contains the following stipulation:
                                                                               B
      “10(g). However, the erstwhile management, promoters (de jure
      or de facto), shareholders, managers, directors, officers,
      employees, workmen or other personnel who were in charge on
      or before CIRP commence date of THIPL shall continue to be
      liable for all the liabilities, claims, demand, obligations, penalties
      etc. arising out of any (i) proceedings, inquiries, investigations,      C
      orders, show causes, notices, suits, litigation etc. (including those
      arising out of any orders passed by the NCLT or any other court/
      department pursuant to the provisions of the Code or pursuant to
      any order passed/imposed by the SEBI), whether civil or criminal,
      pending before any authority, court, tribunal or any other forum         D
      prior to the acquisition of control by the Resolution Applicant over
      THIPL, or (ii) that may arise out of any proceedings, inquiries,
      investigations, orders, show cause, notices, suits, litigation etc.
      (including any orders that may be passed by the NCLT or any
      other court/department pursuant to the provisions of the Code),
      whether civil or criminal, that may be initiated or instituted post      E
      the approval of the Resolution Plan by the NCLT on account of
      any transactions entered into, or decisions or actions taken by,
      such existing management, promoters (de jure or de facto),
      shareholders, managers, directors, officers, employees, workmen
      or other personnel of THIPL, the new management of THIPL                 F
      and/or the Resolution Applicant shall at no point of time be, directly
      or indirectly, held responsible or liable in relation thereto.”
       12. The conspectus of facts before this Court reveals that the
petitioners have participated in the proceedings before the RP and later,
the CoC. The Resolution Plan which has been submitted by the consortium        G
of home buyers stands approved by the CoC and the proceedings are
now pending before the Adjudicating Authority, awaiting its approval
under Section 31(1) of the IBC. If the petitioners have any objections to
the Resolution Plan, they are to submit them before the Adjudicating
Authority. We direct the NCLT to ensure that the application for approval
                                                                               H
160            SUPREME COURT REPORTS                           [2021] 9 S.C.R.


A     is disposed of expeditiously and preferably within a period of six weeks
      form the date of receipt of a certified copy of this order.
             13. 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
B     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
C     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.
            14. Further, since the moratorium declared in respect of the first
D     respondent Corporate Debtor continues to operate under Section 14 of
      the IBC, no new proceedings can be undertaken or pending ones continued
      against the Corporate Debtor. Section 14(1) of the IBC reads as follows:
            “14. Moratorium.—(1) Subject to provisions of sub-sections (2)
            and (3), on the insolvency commencement date, the Adjudicating
E           Authority shall by order declare moratorium for prohibiting all of
            the following, namely—
            (a) the institution of suits or continuation of pending suits or
            proceedings against the corporate debtor including execution
            of any judgment, decree or order in any court of law, tribunal,
F           arbitration panel or other authority;
            (b) transferring, encumbering, alienating or disposing of by the
            corporate debtor any of its assets or any legal right or beneficial
            interest therein;
            (c) any action to foreclose, recover or enforce any security interest
G
            created by the corporate debtor in respect of its property
            including any action under the Securitisation and Reconstruction
            of Financial Assets and Enforcement of Security Interest Act,
            2002 (54 of 2002);

H
ANJALI RATHI AND ORS. v. TODAY HOMES & INFRASTRUCTURE                          161
 PVT. LTD. AND ORS. [DR DHANANJAYA Y CHANDRACHUD, J.]

          (d) the recovery of any property by an owner or lessor where         A
          such property is occupied by or in the possession of the corporate
          debtor.”
                                                     (emphasis supplied)
       15. At this juncture, we must however clarify the right of the
petitioners to move against the promoters of the first respondent Corporate    B
Debtor, even though a moratorium has been declared under Section 14
of the IBC. In the judgment in P. Mohanraj v. Shah Bros. Ispat (P)
Ltd.12, a three judge Bench of this Court held that proceedings under
Section 138 and 141 of the Negotiable Instruments Act 1881 against the
Corporate Debtor would be covered by the moratorium provision under            C
Section 14 of the IBC. However, it clarified that the moratorium was
only in relation to the Corporate Debtor (as highlighted above) and not in
respect of the directors/management of the Corporate Debtor, against
whom proceedings could continue. Speaking through Justice Rohinton F
Nariman, the Court held:
                                                                               D
          “102. Since the corporate debtor would be covered by the
          moratorium provision contained in Section 14 IBC, by which
          continuation of Sections 138/141 proceedings against the corporate
          debtor and initiation of Sections 138/141 proceedings against the
          said debtor during the corporate insolvency resolution process are
          interdicted, what is stated in paras 51 and 59 in Aneeta Hada        E
          [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5
          SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241]
          would then become applicable. The legal impediment contained
          in Section 14 IBC would make it impossible for such proceeding
          to continue or be instituted against the corporate debtor. Thus,     F
          for the period of moratorium, since no Sections 138/141
          proceeding can continue or be initiated against the
          corporate debtor because of a statutory bar, such
          proceedings can be initiated or continued against the
          persons mentioned in Sections 141(1) and (2) of the
          Negotiable Instruments Act. This being the case, it is clear         G
          that the moratorium provision contained in Section 14 IBC
          would apply only to the corporate debtor, the natural persons


12
     (2021) 6 SCC 258                                                          H
162              SUPREME COURT REPORTS                         [2021] 9 S.C.R.


A            mentioned in Section 141 continuing to be statutorily liable
             under Chapter XVII of the Negotiable Instruments Act.”
                                                        (emphasis supplied)
            We thus clarify that the petitioners would not be prevented by the
      moratorium under Section 14 of the IBC from initiating proceedings
B     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.
C            16. 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
D     approval application under Section 31(1), and subject to the consequence
      thereafter.
             17. Pending applications, if any, stand disposed of.


      Devika Gujral                                     SLPs and Appeal disposed of
E




F




G




H