Introduction
In a significant ruling for homebuyers caught between builder insolvency and consumer litigation, the Supreme Court has held that a moratorium imposed on one corporate debtor under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be used to stall consumer proceedings against co-developers, promoters, directors, or landowners who are not themselves undergoing insolvency resolution. The judgment sets aside an order of the National Consumer Disputes Redressal Commission (NCDRC) that had adjourned an entire consumer complaint sine die merely because one of the seven respondents was under CIRP.
Background Facts
The appellants were homebuyers who had booked residential apartments in the project “Mantri Manyata Energia,” developed by Respondent No. 1, Mantri Technology Constellations Pvt. Ltd. (later renamed Buoyant Technology Constellations Pvt. Ltd.). Respondent No. 2, Mantri Developers Pvt. Ltd., was alleged to be associated with development of the project. Respondent Nos. 3 to 5 were alleged promoters/directors of Respondent Nos. 1 and 2, while Respondent Nos. 6 and 7 were the landowners of the project land.
Construction agreements and agreements for sale were executed between the appellants and Respondent No. 1 in 2016, with possession promised by 31.12.2018. Despite substantial payments and repeated assurances, possession was never delivered. The homebuyers filed Consumer Case No. 13 of 2023 before the NCDRC alleging deficiency in service and unfair trade practices against all seven respondents.
While the complaint was pending, the National Company Law Tribunal (NCLT), Bengaluru Bench, admitted a Section 9 IBC application against Respondent No. 1 on 23.08.2024, triggering the Corporate Insolvency Resolution Process (CIRP) and the consequent moratorium under Section 14 of the IBC.
The appellants moved I.A. No. 14200 of 2024 and I.A. No. 15656 of 2024 before the NCDRC, seeking to continue the complaint against Respondent Nos. 2 to 7 despite the moratorium against Respondent No. 1. By order dated 20.01.2025, the NCDRC rejected both applications, holding that the liability of Respondent Nos. 2 to 7 could not be examined independently at that stage, and adjourned the entire complaint sine die.
Issue Before the Supreme Court
Whether the NCDRC was justified in halting the consumer complaint against Respondent Nos. 2 to 7 solely because a moratorium under Section 14 IBC was operating against Respondent No. 1.
Legal Provisions and Precedents Considered
The Court reiterated that Section 14 of the IBC operates only against the corporate debtor — here, Respondent No. 1 — and cannot be judicially extended to cover any other person or entity, whether a subsidiary company, director, manager, or personal guarantor, unless the statute expressly says so.
The judgment relied on three earlier rulings:
- P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SC 258 — held that Section 14 applies only to the corporate debtor, and natural persons can still be held liable, in the context of proceedings under Section 138 of the Negotiable Instruments Act.
- Ansal Crown Heights Flat Buyers Association v. Ansal Crown Infrabuild Pvt. Ltd., (2024) 5 SCC 745 — held that a moratorium against a corporate debtor-developer does not protect its promoters and directors, against whom consumer proceedings can continue.
- Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., 2025 INSC 314 — while arising under Section 96 IBC, laid down that the protective scope of a moratorium must stay within its statutory boundaries and should not be expanded to defeat remedies available under the Consumer Protection Act.
What the Court Held
The Supreme Court found the NCDRC’s approach erroneous on two counts.
First, only Respondent No. 1 was the corporate debtor undergoing CIRP; no independent moratorium protected Respondent Nos. 2 to 7. In the absence of any statutory bar, the NCDRC was not justified in refusing to proceed against them.
Second, and more fundamentally, the NCDRC had pre-judged the very question it was meant to decide. By holding that the alleged deficiency in service was attributable only to Respondent No. 1, the Commission effectively determined liability at the interlocutory stage — even though it had itself acknowledged that the question of liability was yet to be decided. The Court clarified that the correct question before the NCDRC was never whether Respondent Nos. 2 to 7 were liable, but simply whether the complaint could proceed against them in the absence of any moratorium covering them. That preliminary question could not be used as a backdoor to decide the merits.
The Court declined the appellants’ request to decide the consumer complaint itself, noting that the respondents had raised objections including absence of privity of contract and maintainability, which remained to be adjudicated by the NCDRC in the first instance.
Final Order
- The appeals were partly allowed.
- The rejection of I.A. No. 15656 of 2024 and I.A. No. 14200 of 2024 was set aside, and both applications were allowed.
- The NCDRC was directed to proceed with and dispose of Consumer Complaint No. 13 of 2023 insofar as Respondent Nos. 2 to 7 are concerned, in accordance with law.
- Proceedings against Respondent No. 1 will continue to remain governed by the moratorium under Section 14 of the IBC.
Significance for Homebuyers and Practitioners
This ruling reinforces a homebuyer-protective reading of the interplay between the IBC and the Consumer Protection Act. Builders often operate through multiple group entities, promoters, and landowning partners in a single project. This judgment confirms that the insolvency of one such entity cannot be leveraged to freeze an entire consumer complaint, leaving aggrieved homebuyers without recourse against co-developers, directors, or landowners who remain solvent and outside the CIRP. Consumer fora must now proceed to examine claims against non-insolvent respondents on their own merits, rather than treating a moratorium against one party as grounds to shelve the whole proceeding.
Case Details:
Tejas J. Shah & Amisha T. Shah & Ors. v. Mantri Technology Constellations Pvt. Ltd. (now Buoyant Technology Constellations Pvt. Ltd.) & Ors. Supreme Court of India | Civil Appeal Nos. 4289-4290 of 2025 | 2026 INSC 746 | Decided on 27.07.2026 Bench: Justice Vikram Nath and Justice Sandeep Mehta
Click HERE for full Judgment
Lawcutor 