Moratorium under IBC covers proceedings under NI Act against Corporate Debtor: Supreme Court

Read Judgment: Anjali Rathi and Others vs. Today Homes & Infrastructure Pvt. Ltd. and Others

Pankaj Bajpai

New Delhi, September 17, 2021: The Supreme Court has recently held that the moratorium ordered u/s 14 of the Insolvency and Bankruptcy Code (IBC) covers the proceedings u/s 138 & 141 of Negotiable Instruments Act,1881 against the Corporate Debtor but not in respect of the directors/management of the Corporate Debtor.

A three Judge Bench of Justice Dr. D.Y Chandrachud, Justice Hima Kohli and Justice Vikram Nath however observed that the petitioners would not be prevented by the moratorium u/s 14 of the IBC from initiating proceedings against the promoters of the first respondent Corporate Debtor in relation to honoring the settlements reached before this Court.

The background of the case was that the petitioners, who were home buyers in a group housing project, had approached the National Consumer Dispute Redressal Commission against Today Homes & Infrastructure Pvt. Ltd. seeking refund of their money with interest, which was allowed.

In the execution proceedings, NCDRC required the personal presence of the Managing Director, which came to be challenged before Delhi High Court, and a direction was passed for taking no coercive steps against the Managing Director.

Challenging this order of the High Court, the home buyers approached the Apex Court.

The conspectus of facts before this Court revealed that the petitioners had participated in the proceedings before the Resolution Professional (RP) and later, the Committee of Creditors (CoC).

The Top Court further found that the Resolution Plan which has been 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 u/s 31(1) of IBC.

If the petitioners have any objections to the Resolution Plan, they are to submit them before the Adjudicating Authority, added the Court.

The Top Court quoted the judgment in P. Mohanraj v. Shah Bros. Ispat (P) Ltd, wherein it was held that proceedings u/s 138 and 141 of the NI Act against the Corporate Debtor would be covered by the moratorium provision u/s 14 of the IBC.

However, in case of Shah Bros(supra), it was clarified that the moratorium was only in relation to the Corporate Debtor and not in respect of thedirectors/management of the Corporate Debtor, against whom proceedings could continue, added the Top Court.

Hence, the Apex Court refused to pass a direction relying on a resolution plan which is still pending for adjudication before the Adjudicating Authority.