During the CD moratorium, is it possible to take legal action against the corporate debtor’s directors and promoters?
Ansal Crown Heights Flat Buyers Association (Regd.) vs. Ansal Crown Infrabuild Pvt. Ltd. & Ors. Civil Appeal No(S). 4480 & 4481 of 2023: [Date: 17th January, 2024].
The case Ansal Crown Heights Flat Buyers Association (Regd.) vs. Ansal Crown Infrabuild Pvt. Ltd. (Civil Appeal Nos. 4480 & 4481 of 2023) revolved around whether the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) extends to the directors and officers of a corporate debtor.
Facts of the Case:
The National Consumer Disputes Redressal Commission (NCDRC) had issued a decree against Ansal Crown Infrabuild Pvt. Ltd. to hand over possession of flats to homebuyers. However, the execution was paused due to a moratorium under Section 14 of the IBC, which halts proceedings against corporate debtors during insolvency.
The Flat Buyers Association argued that this moratorium should not shield the company’s directors and officers, asserting that liabilities against them could still be pursued. They relied on precedents like P. Mohanraj vs. Shah Bros. Ispat and Anjali Rathi vs. Today Homes, where liability was not entirely shielded under the IBC’s moratorium.
Judgment:
The Honorable Supreme Court dismissed the appeal and maintained the position that, even if the company is liable to a moratorium under section 14 of the IBC, the directors’ and officers’ responsibility, if any, shall continue.