Gold Crown Flat Buyers Association (herein after referred to as 'Flat Buyers Association') is a registered Association of Residential Flat Buyers in respect of the flats promoted and constructed by Gold Crown Developers

CS Professional · Insolvency - Law and Practice · PYQS · December 2024
Gold Crown Flat Buyers Association (herein after referred to as 'Flat Buyers Association') is a registered Association of Residential Flat Buyers in respect of the flats promoted and constructed by Gold Crown Developers Private Limited (herein after referred as the "Developer Company") in the city of Pune. Besides the location of the project being in the heart of the city, planned and developed with a host of amenities including compliance with Vasthu Sashtra, many home buyers invested in the Project and eventually formed the aforesaid association. Unfortunately, the Developer Company was not able to complete the project due to various reasons and crossed various timelines fixed by them. Despite various attempts made by the Flat Buyers Association requesting the Management of the Company for earliest completion of the project, it was all in vain and the project got further delayed. In view of the above situation, as most of members expressed their dissatisfaction over the delay, the Flat Buyers Association filed a complaint before the National Consumer Disputes Redressal Commission (the National Commission). After hearing the parties of their submissions, an order was made by the National Commission directing the Developer Company to complete the project in all respects and handover the possession of the allotted flats to the members of the Association of the homebuyers within the time specified. In the meantime, one of the Operational Creditors of the Developer Company, filed an application under Section 9 of the IBC, 2016 and the said application was admitted by the Honourable NCLT. The National Commission, by its order, held that a decree cannot be executed against the Developer Company in view of the operation of Moratorium granted under Section 14 of the IBC, 2016. The National Commission also observed that in view of the moratorium against the Developer Company, it would not be appropriate to proceed in the same execution against the Directors and Officers of the Company. Also, there was no finding recorded by the National Commission that in view of the provisions of the IBC, 2016, moratorium will apply to the directors and officers of the company. Aggrieved by the Order of the National Commission, the Flat Buyers Association filed an appeal before the Honourable Supreme Court of India with an understanding that just because there is a moratorium against the company, it cannot be said that no proceedings can be initiated against the opposite party for execution, provided they are otherwise liable to abide by and comply with the order, which is passed against the company. In the light of the provisions of the IBC, 2016 and the decided case laws state whether the Flat Buyers Association will succeed in their appeal who are aggrieved by the order of the National Commission with respect to Directors and Officers of Corporate Debtor to take protection of the moratorium?

Answer & Explanation:

The case given in the question is similar to the case of Ansal Crown Heights Flat Buyers Association (Regd.) v. Ansal Crown Infrabuild Pvt. Ltd. and Ors. decided on January 17, 2024, by the Supreme Court. The Supreme Court held that 'we may note here that the National Commission has not made any adjudication on the question whether the opposite party Nos. 2 to 9 (the respondent Nos. 2 to 9) in the execution application were under an obligation to abide by the directions issued against the company. This issue has not been considered at all by the National Commission. There is no finding recorded by the National Commission that in view of any particular provision of the IBC, moratorium will apply to the directors/officers of the company. The Hon'ble Supreme Court approved the view taken in the case of P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. that notwithstanding moratorium, the liability, if any, of the directors/officers will continue. The Hon'ble Court, therefore, permitted the appellants to expressly proceed against the promoters of the company though there was a moratorium under Section 14 of the IBC affecting the company. Only because there is a moratorium under Section 14 of the IBC against the company, it cannot be said that no proceedings can be initiated against the opposite party Nos. 2 to 9 (the respondent Nos. 2 to 9) for execution, provided that they are otherwise liable to abide by and comply with the order, which is passed against the company. The protection of the moratorium will not be available to the directors/officers of the company. The Hon'ble Court set aside the impugned judgments and orders and remitted the execution application to the National Commission. The execution will continue against the opposite party Nos. 2 to 9 (the respondent Nos. 2 to 9) in the execution application. Accordingly, in the given case, the Flat Buyers Association will succeed in their appeal.

Topics: Corporate Insolvency Resolution Process (CIRP)

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