SARANGA ANILKUMAR AGGARWALversusBHAVESH DHIRAJLAL SHETH & ORS.

                 [2025] 3 S.C.R. 325 : 2025 INSC 314

                    Saranga Anilkumar Aggarwal
                                 v.
                   Bhavesh Dhirajlal Sheth & Ors.
                      (Civil Appeal No. 4048 of 2024)
                               04 March 2025
            [Vikram Nath* and Prasanna B. Varale, JJ.]


                          Issue for Consideration
       Whether the execution of penalty orders passed by the NCDRC
       can be stayed under the interim moratorium provisions of s.96 of
       the Insolvency and Bankruptcy Code, 2016.

                                 Headnotes†
       Consumer Protection Act, 1986 – s.27 – Insolvency and
       Bankruptcy Code, 2016 – s.96 – The NCDRC imposed multiple
       penalties on the appellant for failing to deliver possession of
       residential units to home-buyers as per the agreed timeline –
       The appellant sought a stay on the penalty proceedings
       before the NCDRC, contending that an application u/s.95 of
       the IBC has been filed against them, triggering an interim
       moratorium u/s.96 of the IBC – The NCDRC vide the impugned
       order dated 07.02.2024 rejected this application, holding that
       consumer claims and the penalty imposed did not fall within
       the moratorium under the IBC – Correctness:
       Held: In the present case, the damages awarded by the NCDRC
       arise from a consumer dispute, where the appellant has been
       held liable for deficiency in service – Such damages are not
       in the nature of ordinary contractual debts but rather serve to
       compensate the consumers for loss suffered and to deter unethical
       business practices – Courts and tribunals, including the NCDRC,
       exercise their statutory jurisdiction to award such damages,
       and these are distinct from purely financial debts that may be
       subject to restructuring under the IBC – Since such damages
       are covered under "excluded debts" as per s.79(15) of the IBC,
       they do not get the benefit of the moratorium u/s.96 of the IBC,
       and their enforcement remains unaffected by the initiation of

* Author
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       insolvency proceedings – The penalties imposed by the NCDRC
       arise due to non-compliance with consumer protection laws and
       serve a regulatory function rather than constituting "debt recovery
       proceedings" – This distinction is crucial – The IBC is designed
       to deal with insolvency resolution and financial distress, whereas
       consumer protection laws exist to uphold consumer rights and
       ensure fair business practices – The penalties u/s. 27 of the CP
       Act are aimed at compelling compliance and cannot be equated
       with recovery of an outstanding debt – The appellant cannot claim
       that such penalties fall within the scope of a debt moratorium, as
       they do not constitute financial liabilities owed to a creditor but
       rather statutory obligations enforced to uphold consumer rights.
       [Paras 33, 35]

       Consumer Protection Act, 1986 – s.27 – Negotiable Instruments
       Act, 1881 – s.138 – Distinction between proceedings u/s.138
       of NI Act and s.27 of the CP Act:
       Held: There is distinction between proceedings u/s.138 of the
       NI Act and those u/s.27 of the CP Act – Proceedings u/s.138 of
       the NI Act pertain to dishonour of cheques and are criminal in
       nature, where the assumption of debt is inherent in the offence
       itself – The dishonour of a cheque indicates a failure to honour
       financial obligations, and the proceedings are initiated for the
       recovery of the debt in question – In contrast, s.27 of the CP
       Act deals with non-compliance with consumer protection orders,
       which are remedial in nature rather than criminal – The primary
       focus of proceedings u/s.27 of the CP Act is to enforce consumer
       rights and ensure that service providers fulfil their obligations –
       These proceedings do not assume the existence of a financial
       debt but rather deal with deficiencies in service and the failure to
       comply with consumer redressal mechanisms – Thus, the analogy
       drawn by the appellant between the moratorium on s.138, NI Act
       proceedings and s.27, CP Act proceedings is misconceived and
       legally untenable. [Para 36]

                                Case Law Cited
       State Bank of India v. V. Ramakrishnan & Anr. [2018] 10 SCR 974 :
       (2018) 17 SCC 394; Ajay Kumar Radheyshyam Goenka v. Tourism
       Finance Corporation of India Ltd. [2023] 4 SCR 986 : (2023) 10
[2025] 3 S.C.R.                                                         327

    Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.


     SCC 545; Manish Kumar v. Union of India and Another [2021]
     14 SCR 895 : (2021) 5 SCC 1; Sheetal Gupta v. National Spot
     Exchange Limited and Ors., 2023 SCC OnLine Bom 3095; P.
     Mohanraj and Others v. Shah Brothers Ispat Private Limited [2021]
     14 SCR 204 : (2021) 6 SCC 258; Kaushalya Devi Massand v.
     Roopkishore Khore [2011] 3 SCR 879 : (2011) 4 SCC 593;
     Kunhayammed & Ors. v. State of Kerala & Anr. [2000] Supp.
     1 SCR 538 : (2000) 6 SCC 359; Khoday Distilleries Limited &
     Ors. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Limited,
     Kollegal [2019] 3 SCR 411 : (2019) 4 SCC 376; Satyawati v.
     Rajinder Singh and Another [2013] 3 SCR 471 : (2013) 9 SCC
     491; Vijay Madanlal Chaudhary & Ors. v. Union of India, 2021
     SCC OnLine SC 1048 – referred to.

                               List of Acts
     Consumer Protection Act, 1986; Insolvency and Bankruptcy Code,
     2016; Negotiable Instruments Act, 1881.

                            List of Keywords
     Section 27 of Consumer Protection Act, 1986; Section 138 of
     Negotiable Instruments Act, 1881; Section 96 of Insolvency and
     Bankruptcy Code, 2016; Execution proceeding; Stay of execution;
     Penalty; Consumer claims; Consumer rights; Moratorium; Criminal
     proceedings.

                           Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4048 of 2024
     From the Judgment and Order dated 07.02.2024 of the National
     Consumers Disputes Redressal Commission, New Delhi in EA
     No. 140 of 2019

                        Appearances for Parties
     Advs. for the Appellant:
     K. Parmeshwar, Sr. Adv., Vipul Jai, Aamir Siraj, Vinam Gupta,
     Puneet Singh Bindra.
     Advs. for the Respondents:
     Shashwat Parihar, Dhruva Vig, Deepanshu Badiwal, Shashwat
     Anand.
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                  Judgment / Order of the Supreme Court

                                   Judgment

       Vikram Nath, J.

1.     The present appeal has been filed against the final judgment
       and order passed by the National Consumer Disputes Redressal
       Commission1, wherein multiple penalties (27 in total) were imposed
       on the appellant for failing to deliver possession of residential units to
       homebuyers as per the agreed timeline. The appellant seeks a stay
       on the penalty proceedings before the NCDRC, contending that an
       application under Section 95 of the Insolvency and Bankruptcy Code,
       20162 has been filed against them, triggering an interim moratorium
       under Section 96 of the IBC.
2.     This Court is called upon to adjudicate whether execution proceedings
       under Section 27 of the Consumer Protection Act, 19863, can also
       be stayed during an interim moratorium under Section 96 of the IBC.
       The present matter arises from an application filed by the appellant,
       who is the proprietor of proforma respondent no. 3 – East & West
       Builders (RNA Corp. Group Co.), in an execution application filed
       by respondent nos. 1 and 2 before the NCDRC, challenging the
       execution of multiple penalty orders imposed by the NCDRC during
       the pendency of insolvency proceedings against the Corporation.
       The appellant contends that the imposition and execution of these
       penalties should be stayed due to the pendency of insolvency
       proceedings initiated under Section 95 of the IBC.
3.     The appellant is engaged in real estate development and has several
       pending consumer complaints before the NCDRC filed by homebuyers
       alleging delay in possession, deficiency in service, and breach of
       contractual obligations. The NCDRC, in its final judgment dated
       10.08.2018 in CC/1362/2017 along with other connected matters,
       allowed the complaints and directed the appellant to complete
       construction, obtain the requisite occupancy certificate, and hand over
       possession and imposed 27 penalties on the appellant for deficiency


1    NCDRC
2    IBC
3    CP Act
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     Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.


      in service by failing to deliver possession within a reasonable time.
      The respondent no.1 and 2, as decree holders, subsequently filed
      execution applications seeking execution of the abovementioned order
      of the NCDRC as the appellant failed to comply with the directions
      of the NCDRC.
4.    Subsequently, the appellant, facing insolvency proceedings before the
      National Company Law Tribunal4 under the IBC, moved an application
      before the NCDRC seeking a stay of execution proceedings. The
      appellant in the application before the NCDRC sought to contest the
      execution on various grounds, including financial distress, adverse
      market conditions in the real estate sector, and its ongoing insolvency
      proceedings. The appellant contended that it had entered into
      settlement agreements with several decree holders and had already
      made significant payments, satisfying a substantial portion of the
      execution claims. Specifically, the appellant stated that pursuant to
      entering into respective settlement agreements, it had made entire
      payments in the matters of seven homebuyers, thereby fully satisfying
      seven execution petitions, leaving only thirteen execution petitions
      pending out of a total of twenty. It further stated that a total amount
      of Rs. 11,57,34,925/- had been paid in execution proceedings.
      However, some instalment payments were delayed due to reasons
      beyond its control, particularly adverse economic conditions in the
      real estate sector. The appellant also contended that it was one of
      the personal guarantors to credit facilities extended to A.A. Estates
      Pvt. Ltd. by the State Bank of India (SBI). Due to an alleged default
      in repayment, insolvency proceedings under Section 7 of the IBC
      were initiated against A.A. Estates Pvt. Ltd. before the NCLT, Mumbai
      Bench. Additionally, SBI initiated proceedings under Section 95 of the
      IBC against the appellant, the proprietor of the Judgment Debtor –
      proforma respondent no.3. Consequently, an interim moratorium was
      triggered against the appellant as per Section 96 of the IBC, which
      the appellant claimed barred further legal proceedings, including the
      ongoing execution proceedings before the NCDRC.
5.    The NCDRC vide the impugned order dated 07.02.2024 rejected this
      application, holding that consumer claims and the penalty imposed
      did not fall within the moratorium under the IBC.


4    NCLT
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6.     The NCDRC relied on this Court’s decision in State Bank of India
       v. V. Ramakrishnan & Anr.,5 which clarified that Sections 96 and
       101 of the IBC provide a distinct moratorium applicable to personal
       guarantors, separate from the moratorium under Section 14 applicable
       to corporate debtors. The NCDRC emphasized that the stay under
       Sections 96 and 101 extends only to proceedings concerning the debt
       and does not necessarily shield the guarantor from all legal actions.
7.     Additionally, the NCDRC placed significant reliance on this Court’s
       ruling in Ajay Kumar Radheyshyam Goenka v. Tourism Finance
       Corporation of India Ltd.6. In that case, this Court reaffirmed that
       criminal proceedings against directors or signatories of a company
       do not abate merely because the corporate debtor is undergoing
       insolvency resolution. This Court, referring to Manish Kumar v.
       Union of India and Another,7 held that individuals associated with
       the corporate debtor remain liable for their acts, and the company’s
       dissolution does not absolve them of personal liability under statutes
       like the Negotiable Instruments Act, 18818.
8.     Furthermore, the NCDRC rejected the applicant’s reliance on the
       Bombay High Court’s decision in Sheetal Gupta vs. National Spot
       Exchange Limited and Ors.,9 wherein the Bombay High Court had
       directed stay of criminal proceedings under Section 138 of the NI Act
       against the concerned persons representing the corporate debtors.
       The Commission noted that while this Court had dismissed an appeal
       against this ruling in SLP (Criminal) No. 4727 of 2023 in order dated
       28.04.2023, the dismissal was by a brief and non-speaking order,
       without any discussion on legal principles. Given that this Court’s
       judgment in Ajay Kumar Radheyshyam Goenka (supra) was
       pronounced in the interim and was not considered in the summary
       dismissal of the appeal, the NCDRC deemed the earlier Bombay
       High Court ruling as per incuriam.
9.     Accordingly, for the reasons stated above the NCDRC concluded
       that the interim moratorium under Section 96 of the IBC did not bar


5    (2018) 17 SCC 394
6    (2023) 10 SCC 545
7    (2021) 5 SCC 1
8    NI Act
9    2023 SCC OnLine Bom 3095
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    Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.


     the continuation of criminal proceedings under Section 27 of the CP
     Act, against the applicant in her personal capacity as a guarantor.
10. The appellant is before us challenging this order of the NCDRC.
11. The primary question of law before this Court is whether the execution
    of penalty orders passed by the NCDRC can be stayed under the
    interim moratorium provisions of Section 96 of the IBC.
12. The appellant argues that all debts and all proceedings relating to
    debt are automatically stayed under Section 96 of the IBC. The
    respondents, on the other hand, contend that the penalties imposed
    by NCDRC are distinct from “debt recovery” proceedings and should
    not fall within the ambit of the interim moratorium.
13. The appellant contended that Section 96 of the IBC creates an
    absolute bar on any proceedings against the debtor relating to any
    debt once an interim moratorium is in place. It is submitted that the
    penalties imposed by the NCDRC arise out of financial obligations or
    debts and must, therefore, be stayed. The appellant submits that as
    per Section 96 of the IBC when an application is filed under Section
    94 or Section 95 of the IBC, an interim moratorium shall commence
    on the date of the application, in relation to all debts. In the present
    case the application under Section 95 of the IBC was filed against
    the appellant on 20.01.2022 and therefore, as per the provisions of
    Section 96 of the IBC, the interim moratorium commenced against the
    appellant from 20.01.2022 and thus the proceedings under Section 27
    of the CP Act pending before the NCDRC shall be deemed to have
    been stayed since as per Section 96(1)(b)(i) of the IBC during the
    interim moratorium period, “any legal action or proceedings, pending
    in respect of any debt, shall be deemed to have been stayed.”
14. The appellant further submitted that the proceedings under Section
    27 of the CP Act are effectively recovery proceedings. Respondent
    No. 1 and 2 in their execution application have primarily sought for
    an award of Rs. 1,55,00,000/- while abandoning the other prayers or
    reliefs granted in the Consumer Complaint. Therefore, the execution
    proceedings initiated by the Respondent Nos. 1 and 2 are proceedings
    to recover the amounts under the garb of seeking an award. Since,
    the interim moratorium has commenced against the appellant, the
    appellant is estopped from undertaking any preferential payments,
    as such the continuation of the execution proceedings against the
    appellant would constitute an act of double jeopardy.
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15. The appellant cited P. Mohanraj and Others v. Shah Brothers
    Ispat Private Limited,10 where it was held that proceedings under
    Section 138 of the NI Act are covered under “any legal action or
    proceeding pending” even though they are quasi-criminal in nature,
    thus also staying criminal proceedings against the corporate debtor.
    The principle that insolvency proceedings should take precedence
    over all other claims is reiterated, and the appellant seeks similar
    protection under Section 96 of the IBC for interim moratoriums
    applicable to personal guarantors and individuals. It is argued that
    unless such a stay is granted, the insolvency process will be frustrated,
    and the appellant will be subjected to conflicting proceedings across
    multiple fora.
16. The appellant also relied upon the judgment of this Court in the
    matter of SBI V. V.Ramakrishnan (supra), wherein it was held
    that when an application is filed under Part III of the IBC, an interim
    moratorium or a moratorium is applicable in respect of any debt due
    and that the protection under Section 96 of the IBC is far greater
    than that under Section 14 of the IBC. Reliance was also placed
    on the judgment of this Court in Kaushalya Devi Massand vs.
    Roopkishore Khore,11 holding that the gravity of complaint under
    the NI Act cannot be equated with an offence under the provisions
    of the Indian Penal Code, 186012 or other criminal offences and that
    an offence under Section 138 of the NI Act is almost in the nature
    of civil wrong which has been given criminal overtones. Thus, it
    has been submitted, similarly the penal provisions under the CP
    Act cannot be equated to offences under the IPC. Since these are
    also recovery proceedings in nature, they would also fall within the
    ambit of Section 96 of the IBC.
17. It was thus the submission of the appellant that a bare perusal of the
    aforementioned judgments, would leave no scope of interpretation
    that the definition of the term ‘debt’ is wide enough to not only include
    quasi-criminal proceedings but also recovery proceedings. Therefore,
    it is abundantly clear that the NCDRC erred in dismissing the
    application filed by the appellant. Furthermore, in view of the settled



10   (2021) 6 SCC 258
11   (2011) 4 SCC 593
12   IPC
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     legal position as enunciated hereinabove, the execution proceeding
     pending against the appellant must be stayed till the operation of
     interim moratorium under Section 96 of the IBC.
18. On the other hand, the respondent nos. 1 and 2, primarily homebuyers,
    contend that the penalties imposed by the NCDRC are not merely
    monetary claims but punitive measures to deter unfair trade
    practices. They argue that consumer protection proceedings serve
    a vital public function in ensuring compliance with orders protecting
    homebuyers, who are already vulnerable due to the developer’s
    delays. The respondents assert that staying such penalties would
    set a dangerous precedent where developers can indefinitely delay
    justice by invoking insolvency proceedings.
19. The respondents submitted that the moratorium imposed under
    Section 96 of the IBC does not extend to criminal proceedings
    under Section 27 of the CP Act. The respondents contend that the
    moratorium under Section 96 of the IBC is limited to recovery actions
    and civil proceedings against the debtor, with no applicability to
    criminal proceedings. It is submitted that Section 27 of the CP Act
    provides for punitive action against those who fail to comply with
    orders of the consumer forum, which is penal in nature and distinct
    from debt recovery proceedings. The NCDRC, by its order dated
    07.02.2024, has rightly held that the moratorium under IBC does not
    cover criminal proceedings, and such an interpretation is consistent
    with established judicial precedents. Additionally, the respondents
    contend that the nature of proceedings under Section 27 of the CP
    Act is inherently punitive, as it prescribes punishment, including
    imprisonment, for non-compliance with consumer forum orders. Unlike
    civil recovery proceedings, which aim at debt enforcement, Section
    27 of the CP Act serves a penal function by ensuring compliance with
    consumer rights and providing a deterrent against non-execution of
    forum orders. The regulatory and penal proceedings are distinct from
    civil claims and cannot be stalled due to insolvency moratoriums.
    Since Section 27 of the CP Act explicitly provides for imprisonment
    as a consequence of non-compliance, it cannot be considered a
    mere debt recovery mechanism and thus falls outside the scope of
    the IBC moratorium.
20. The appellant sought to rely on the Bombay High Court’s decision
    in Sheetal Gupta v. National Spot Exchange Ltd. & Ors. (supra),
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       and this Court’s subsequent dismissal of the challenge in National
       Spot Exchange Ltd. v. Sheetal Gupta & Anr. (supra). However, the
       respondents argued that since this Court’s order was a mere dismissal
       without any reasoning, it does not constitute a binding precedent.
       Citing Kunhayammed & Ors. v. State of Kerala & Anr. 13 and
       Khoday Distilleries Limited & Ors. v. Sri Mahadeshwara Sahakara
       Sakkare Karkhane Limited, Kollegal,14 the respondents submitted
       that a non-speaking dismissal does not decide any legal issue and,
       therefore, does not attract the doctrine of merger. In contrast, NCDRC
       correctly applied the ratio of Ajay Kumar Radheyshyam Goenka
       (supra), which distinguishes civil liability from criminal prosecution.
21. The respondents further argued that the moratorium under IBC is
    designed to protect the assets of the corporate debtor and the personal
    guarantor from alienation. However, not all debts are covered under
    this protection. Section 94 of the IBC clarifies that the moratorium
    applies only to debts that are not “excluded debts” under Section
    79(15) of the IBC. As per this provision, liabilities arising from fines
    imposed by courts or tribunals, damages for negligence or breach of
    obligation, maintenance liabilities, student loans, and other prescribed
    debts are excluded. Since the damages awarded by NCDRC and
    their execution fall under “excluded debts,” the moratorium under
    Section 96 of the IBC does not apply.
22. The respondents emphasize that Section 27 of the CP Act, imposes
    criminal liability, including imprisonment for non-compliance with
    consumer court orders. This Court in Satyawati v. Rajinder Singh
    and Another,15 highlighted the severe impact of delays in execution
    proceedings, observing that such delays deprive decree-holders of
    the fruits of litigation. Given that the NCDRC award falls within the
    category of “excluded debts,” the moratorium does not extend to
    criminal proceedings initiated for its enforcement, these proceedings
    are merely delay tactics on part of the appellant.
23. The respondents highlighted the prolonged hardship faced by the
    decree holders due to the appellant’s repeated delays in execution
    proceedings. Despite this Court’s ruling in Vijay Madanlal Chaudhary


13   (2000) 6 SCC 359
14   (2019) 4 SCC 376
15   (2013) 9 SCC 491
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      & Ors. v. Union of India,16 which held that orders granting “no
      coercive action” should not be treated as a stay of proceedings,
      the appellant has used such an order to stall the matter. Through
      a timeline of events the respondents sought to demonstrate the
      appellant’s continued non-compliance, starting from the booking of
      flats in 2011, the filing of consumer complaints in 2017, the NCDRC’s
      ruling in favour of the consumers in 2018, and the subsequent delays
      in execution proceedings. Non-bailable warrants were issued against
      Saranga Aggarwal in 2021 due to non-compliance, yet the appellant
      has failed to take steps to honour its obligations.
24. Lastly, the respondents counter the appellant’s argument that the
    execution petition’s prayer is defective. They submit that the prayer
    must be read holistically, as it seeks to enforce compliance under
    Section 27 of the CP Act. The execution petition was filed only after
    the appellant failed to pay compensation or resume construction
    as per the consumer court’s orders. Given these circumstances,
    the respondents contended that NCDRC’s order is legally sound
    and should be upheld, as the moratorium under IBC does not bar
    the continuation of criminal proceedings for non-compliance with
    consumer court awards.
25. In light of the above, the respondent submitted that the appeal against
    the NCDRC’s order is devoid of merit and should be dismissed. The
    judicial precedents, as well as the legislative intent behind the CP Act
    and the IBC, make it clear that the moratorium under Section 96 of
    the IBC is not meant to protect individuals from criminal prosecution.
    Accepting the appellant’s argument would lead to an anomalous
    situation where persons violating consumer rights could evade penal
    consequences merely by initiating insolvency proceedings, thereby
    frustrating the very purpose of consumer protection laws.
26. We have heard Mr. K. Parmeshwar, learned senior counsel appearing
    for the appellant and Mr. Shashwat Parihar, learned counsel appearing
    on behalf of respondent nos.1 and 2.
27. We find that there is a fundamental distinction between civil and
    criminal proceedings concerning a debt moratorium. While civil
    proceedings are generally stayed under IBC provisions, criminal


16   2021 SCC OnLine SC 1048
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       proceedings, including penalty enforcement, do not automatically
       fall within its ambit unless explicitly stated by law. The penalties
       imposed by the NCDRC are regulatory in nature and arise due to
       non-compliance with consumer protection laws. They are distinct
       from “debt recovery proceedings” under the IBC.
28. A moratorium under Section 96 of the IBC is distinct from a corporate
    moratorium under Section 14 of the IBC. Section 96 of the IBC applies
    to individuals and personal guarantors and provides that during the
    interim moratorium period, “any legal action or proceedings relating
    to any debt shall be deemed to have been stayed.” However, it is
    pertinent to note that this provision applies only to “debt” as defined
    under the IBC and not to regulatory penalties imposed for non-
    compliance with consumer protection laws. A careful reading of the
    statutory scheme of the IBC suggests that penalties arising from
    regulatory infractions are not covered under the ambit of “debt” as
    envisioned under the Code.
29. It is well settled that there exists a distinction between punitive actions
    and criminal proceedings. While a criminal proceeding is initiated by
    the State against an accused to determine guilt and impose penal
    consequences, punitive actions in the regulatory sphere, such as
    those imposed by the NCDRC, are meant to ensure compliance with
    the law and to act as a deterrent against future violations. Section
    27 of the CP Act empowers consumer fora to impose penalties to
    ensure adherence to consumer protection norms. These penalties
    do not arise from any “debt” owed to a creditor but rather from the
    failure to comply with the remedial mechanisms established under
    consumer law. Unlike a criminal prosecution, which requires the
    establishment of mens rea, the penalties imposed by NCDRC are
    regulatory in nature and aim to protect the public interest rather than
    to punish criminal behaviour.
30. Further, a distinction must be drawn between the moratorium
    applicable to a corporate debtor under Section 14 of the IBC and the
    interim moratorium applicable to individuals and personal guarantors
    under Section 96 of the IBC. The former is much broader in scope
    and stays all proceedings against the corporate debtor, including
    execution and enforcement actions. However, Section 96 of the IBC
    is more limited in its scope, staying only “legal actions or proceedings
    in respect of any debt.” Unlike corporate insolvency proceedings,
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    Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.


     where the goal is a comprehensive resolution of the company’s
     liabilities, individual insolvency proceedings are designed primarily
     for restructuring personal debts and providing relief to the debtor. The
     legislative intent behind limiting the scope of the interim moratorium
     under Section 96 of the IBC must be respected, and a blanket stay
     on all regulatory penalties would result in defeating the objectives
     of consumer protection laws.
31. The moratorium under Section 96 of the IBC is intended to provide
    temporary relief to debtors by preventing certain proceedings against
    them during the resolution process. However, this protection is not
    absolute and does not extend to all categories of debts. The legislative
    intent behind the moratorium is to ensure that the debtor’s assets are
    preserved for an efficient resolution process and to prevent creditors
    from taking unilateral actions that may frustrate the objective of
    insolvency proceedings. However, the statutory scheme of the IBC
    makes it clear that the protection under the moratorium does not
    cover all forms of liabilities, particularly those classified as “excluded
    debts” under Section 79(15) of the IBC.
32. The respondents have rightly contended that Section 94(3) of the IBC
    explicitly limits the scope of the moratorium by carving out exceptions
    for certain categories of debts. Section 79(15) of the IBC defines
    “excluded debts” to include liabilities arising from fines imposed by
    courts or tribunals, damages for negligence or breach of obligation,
    maintenance liabilities, student loans, and other prescribed debts.
    This classification is based on the nature of such obligations, which
    are either statutory, penal, or personal in nature, and therefore, they
    do not form part of the insolvency estate that can be discharged
    under the resolution process.
33. In the present case, the damages awarded by the NCDRC arise from
    a consumer dispute, where the appellant has been held liable for
    deficiency in service. Such damages are not in the nature of ordinary
    contractual debts but rather serve to compensate the consumers for
    loss suffered and to deter unethical business practices. Courts and
    tribunals, including the NCDRC, exercise their statutory jurisdiction
    to award such damages, and these are distinct from purely financial
    debts that may be subject to restructuring under the IBC. Since such
    damages are covered under “excluded debts” as per Section 79(15)
    of the IBC, they do not get the benefit of the moratorium under
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       Section 96 of the IBC, and their enforcement remains unaffected
       by the initiation of insolvency proceedings.
34. Furthermore, the rationale behind excluding such liabilities from the
    moratorium is rooted in public policy considerations. If damages
    arising from legal violations, consumer protection claims, or penalties
    imposed by courts and tribunals were to be shielded under the
    moratorium, it would create an unfair advantage for errant entities and
    individuals, allowing them to evade their legal obligations under the
    guise of insolvency. The IBC, being a special law meant to balance
    the interests of all stakeholders, does not intend to provide relief to
    those who have been held liable for statutory breaches or misconduct.
35. The penalties imposed by the NCDRC arise due to non-compliance
    with consumer protection laws and serve a regulatory function rather
    than constituting “debt recovery proceedings.” This distinction is
    crucial. The IBC is designed to deal with insolvency resolution and
    financial distress, whereas consumer protection laws exist to uphold
    consumer rights and ensure fair business practices. The penalties
    under Section 27 of the CP Act are aimed at compelling compliance
    and cannot be equated with recovery of an outstanding debt. The
    appellant cannot claim that such penalties fall within the scope of a
    debt moratorium, as they do not constitute financial liabilities owed
    to a creditor but rather statutory obligations enforced to uphold
    consumer rights. Allowing the stay of such penalties would effectively
    enable businesses to flout consumer protection mandates by merely
    initiating insolvency proceedings, which would be an unintended and
    dangerous consequence of a misinterpretation of the law.
36. The distinction between proceedings under Section 138 of the NI Act
    and those under Section 27 of the CP Act must also be examined.
    Proceedings under Section 138 of the NI Act pertain to dishonour
    of cheques and are criminal in nature, where the assumption of
    debt is inherent in the offence itself. The dishonour of a cheque
    indicates a failure to honour financial obligations, and the proceedings
    are initiated for the recovery of the debt in question. In contrast,
    Section 27 of the CP Act deals with non-compliance with consumer
    protection orders, which are remedial in nature rather than criminal.
    The primary focus of proceedings under Section 27 of the CP Act is
    to enforce consumer rights and ensure that service providers fulfil
    their obligations. These proceedings do not assume the existence of
[2025] 3 S.C.R.                                                          339

    Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.


     a financial debt but rather deal with deficiencies in service and the
     failure to comply with consumer redressal mechanisms. Thus, the
     analogy drawn by the appellant between the moratorium on Section
     138, NI Act proceedings and Section 27, CP Act proceedings is
     misconceived and legally untenable.
37. If the appellant’s argument is accepted, homebuyers, who have
    already suffered immense delays and financial hardship, would be
    further deprived of relief. The legislative intent behind consumer
    protection laws is to safeguard the interests of consumers and ensure
    accountability from service providers. Permitting a stay on regulatory
    penalties under the guise of insolvency proceedings would undermine
    the very purpose of the CP Act and embolden errant developers to
    escape liability through insolvency proceedings. Homebuyers, many
    of whom invest their life savings in purchasing residential units, are
    already in a precarious position due to delays in possession and
    breaches of contractual obligations. Staying penalties that serve as
    deterrence against such unfair practices would render consumer
    protection mechanisms ineffective and erode trust in the regulatory
    framework.
38. Judicial precedents support the view that statutory penalties and
    regulatory actions do not automatically fall within the ambit of an
    insolvency moratorium. In P. Mohanraj (supra) this Court held that
    a moratorium under Section 14 of the IBC extends to proceedings
    under Section 138 of the NI Act. However, a distinction between
    debt recovery proceedings and punitive actions needs to be created,
    and therefore all criminal liabilities do not fall within the scope of the
    moratorium unless explicitly covered under the IBC. Consequently,
    penalties imposed by regulatory bodies in the public interest cannot
    be stayed merely because insolvency proceedings are ongoing.
39. The present case does not involve a mere financial dispute but
    concerns the enforcement of consumer rights through regulatory
    penalties. Given that the legislative intent behind the CP Act is to
    ensure compliance with consumer welfare measures, staying such
    penalties would be contrary to public policy. Further, the appellant
    cannot invoke insolvency proceedings as a shield to evade statutory
    liabilities. The objective of the IBC is to provide a mechanism for
    resolving financial distress, not to nullify obligations arising under
    regulatory statutes.
340                                                       [2025] 3 S.C.R.

                          Digital Supreme Court Reports


40. For the foregoing reasons, this Court finds no merit in the appellant’s
    arguments. The penalties imposed by the NCDRC are regulatory in
    nature and do not constitute “debt” under the IBC. The moratorium
    under Section 96 of the IBC does not extend to regulatory penalties
    imposed for non-compliance with consumer protection laws.
41. The appeal is accordingly dismissed, and the appellant is directed
    to comply with the penalties imposed by the NCDRC within a period
    of eight weeks from the date of this judgment.
42. Pending application(s), if any, shall stand disposed of.

       Result of the case: Appeal dismissed.



       †
           Headnotes prepared by: Ankit Gyan