Homebuyers Can Continue Consumer Proceedings Against Non-Corporate Debtor Parties Despite Developer’s CIRP; IBC Moratorium Protects Only the Corporate Debtor; Consumer Proceedings Can Continue Against Other Respondents: Supreme Court
Case Name: Tejas J. Shah & Amisha T. Shah & Ors. v. Mantri Technology Constellations Pvt. Ltd.
Date of Judgment: 27 July 2026
Citation: 2026 INSC 746
Bench: Justice Vikram Nath and Justice Sandeep Mehta
Held: The Supreme Court held that the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates only against the corporate debtor and cannot be judicially expanded to protect other persons or entities merely because they are co-respondents in the same proceedings. Unless specifically protected by statute, subsidiaries, managers, directors, promoters, personal guarantors or other respondents do not automatically receive the benefit of the corporate debtor’s moratorium. Accordingly, where only one respondent is undergoing CIRP, a consumer complaint may continue against the remaining respondents, with their actual liability to be independently determined on merits; the adjudicatory forum cannot foreclose that inquiry merely because proceedings against the corporate debtor itself are stayed.
Summary: The appellants were homebuyers in the “Mantri Manyata Energia” residential project and had entered into construction and sale agreements in 2016, with possession promised by 31 December 2018. Alleging failure to deliver possession despite substantial payment, they instituted Consumer Complaint No. 13 of 2023 before the NCDRC against the developer as well as another associated company, alleged promoters/directors and project landowners. During pendency of the complaint, the NCLT admitted insolvency proceedings against Respondent No. 1 and imposed a moratorium under Section 14 IBC.
The homebuyers requested the NCDRC to keep the proceedings stayed only against the corporate debtor but continue adjudication against Respondent Nos. 2 to 7. The NCDRC rejected the applications and adjourned the entire consumer complaint sine die, reasoning that the alleged deficiency in service principally arose from agreements entered into with Respondent No. 1 and that liability of the remaining respondents could not independently be examined while the moratorium continued.
The Supreme Court held that this approach impermissibly enlarged the scope of Section 14. Only Respondent No. 1 was the corporate debtor undergoing CIRP, and there was no independent moratorium or statutory protection in favour of Respondent Nos. 2 to 7. The Court relied on its earlier decisions to reiterate that a moratorium must remain within the “four walls” prescribed by the IBC and cannot be expanded in a manner that unnecessarily extinguishes remedies available under the Consumer Protection Act.
The Court also found that the NCDRC had effectively prejudged the merits when it concluded at the interlocutory stage that deficiency in service was attributable only to Respondent No. 1. Questions such as privity of contract, maintainability and whether any independent obligation or liability could be fastened upon the remaining respondents were matters requiring adjudication after hearing the parties, not grounds for indefinitely suspending the complaint.
Decision: The Supreme Court partly allowed the appeals, set aside the NCDRC’s rejection of the homebuyers’ applications and directed the NCDRC to proceed with Consumer Complaint No. 13 of 2023 against Respondent Nos. 2 to 7 in accordance with law. Proceedings against Respondent No. 1, the corporate debtor, would continue to remain subject to the Section 14 IBC moratorium. The Court expressly refrained from deciding whether the remaining respondents were ultimately liable, leaving all such objections and issues to the NCDRC.