Author: Shalmali Vijay Kelkar
1. INTRODUCTION-
What happens if the consumer complaint against the Developer Company is pending before the NCDRC, and the promoters, directors, and the landowners are the parties to the complaint, but the company enters into the Corporate Insolvency Resolution Process (CIRP) when the consumer proceeding was pending? The (CIRP) will stop the consumer proceeding since the Protection of the Moratorium granted to the promoters, directors, and the landowners like the Corporate Debtor? The answers to those questions were given by the Supreme Court of India in the recent decision at Tejas J. Shah & Amisha T. Shah and Ors. v. Mantri Technology Constellations Pvt. Ltd. and Ors. (2026) ibclaw.in 508 SC. On 27th July 2026.
In the present case, the Supreme Court simply explained that the moratorium begins under Section 14 of the Insolvency and Bankruptcy Code 2016; it cannot automatically extend a shield of Moratorium to a person other than the Corporate Debtor. The Judgment provides significant explanation on the scope of Section 14 of the Insolvency and Bankruptcy Code, 2016. Consumer Protection is important for ensuring remedies or solutions for the consumer who already suffers from poor service and unfair trade practice, other hand, IBC (Insolvency and Bankruptcy Code) laws deal with maintaining the value of the finances of the Corporate Debtor for securing effective remedies towards Creditors. The interplay between both becomes remarkable when a consumer complaint is initiated against the company, and that company enters into the Corporate Insolvency Resolution Process (CIRP).
This article examines decision of the Supreme Court in Tejas J. Shah & Amisha T. Shah and Ors. v. Mantri Technology Constellations Pvt. Ltd. and Ors. Moreover, sheds light on the ambit of section 14 of the IBC (Insolvency and Bankruptcy Code), proceeding with the consumer proceeding against the corporate debtor with directors, promoter, and others.
2. BACKGROUND –
1. The Appellants are the homebuyers of the respondent No. 1 Company, and they executed construction and sale agreements in 2016. As per the agreement, the respondent promised to hand over possession in the year 2018.
2. The respondent No.1 failed to deliver possession of the property to the Appellants; thus, they approached the National Consumer Dispute Redressal Commission ( NCDRC) in the year 2023 against the respondent No.1 along with the Associate Company, Promoter and Director and Landowners of the project site.
3. In the Course of pendency of the National Consumer Dispute Redressal Commission ( NCDRC) proceedings, the Corporate Insolvency Resolution Process (CIRP) was initiated by the developer company (Respondent No.1) under section 9 of the IBC and immediately imposed the moratorium under Section 14 of the Insolvency and Bankruptcy Code2016.
4. After the initiation of the Moratorium on the developer company (Corporate Debtor), the Appellants filed an application asking that the moratorium commence on Respondent No.1, who is a developer company and corporate debtor; therefore, continuing the consumer case against other non- corporate debtors. But such application was rejected by the National Consumer Dispute Redressal Commission ( NCDRC), via an order in the year 2025, stating that, since Respondent No. 1 was under the shield of the moratorium, the pending consumer proceeding was not at all continued against the respondents. Thus, the Appellants challenged the order of NCDRC before the Supreme Court.
The main Legal Issue arises as to whether the moratorium under section 14 of the IBC protects a corporate debtor; does it also extend towards non-corporate debtors (other respondent) or not?
On this legal issue, the Supreme Court strongly opposed the decision of the NCDRC and declared that the moratorium only operates in favour of a corporate debtor who is Respondent No.1. The shield of the Moratorium cannot automatically extend towards the non-corporate debtors. Thus, the consumer proceeding against non-corporate debtors can be continued, and their liability should be decided by the NCDRC. Pursuant to the Companies Act, a company if different legal person and differs from directors and promoters. Along with the principle of corporate legal personality, the company goes under CIRP and Moratorium begin to the corporate debtor (Company); that doesn’t mean other than corporate debtor like directors and promoters, along with landowners automatically receive the protection under Moratorium.
3. MORATORIUM –
Corporate Insolvency Resolution Process is a mechanism for legal recovery when a debtor defaults in making payments to creditors. CIRP intends to maximise the value of the company’s assets and reconstruct the debts of the company, via an insolvency resolution plan.
The moratorium is fundamentally a legal stop. A moratorium is a legal concept where a legal shield or protection is providing to a corporate debtor when it has entered into CIRP under section 14 of the IBC. In a moratorium, it restricts any proceeding or action against the corporate debtor. The intention behind the moratorium is to prevent individual proceedings from disturbing the CIRP and to save the assets of the company. This concept clearly declares that any pending suits and proceedings against the corporate debtor come to a stop. This concept confirms that the corporate debtor has already economically suffered a lot, so the moratorium provides the breathing space to him. In the Tejas J. Shah case, the moratorium concept was used broadly; the benefit of the Moratorium not extended instinctively towards directors, promoters, and landowners because the IBC provides the moratorium only for the corporate debtor. Thus, the IBC does not create a bar on consumer proceedings against the person not covered as a corporate debtor.
4. SUPREME COUR’S ANALYSIS –
The Supreme Court in the above case previously examined the ambit of section 14 of the IBC. The moratorium only saves the assets of the company that is the corporate debtor during the corporate insolvency process, and it is only limited to the alone corporate debtor. The present shield is not part and parcel in relation to the other members that are not corporate debtors. The court emphasises that the jurisdiction of the moratorium is strictly statutory and it cannot go beyond what is the intention of Parliament and what Parliament said.
The company is a corporate debtor in the CIRP process, and as per the statute of company law, the company is a separate legal entity. Now this is the core principle for the view of the present case. The directors, promoters and the company are two different, separate entities from each other, and that is the sole reason the moratorium is not extended to the non- corporate debtor.
It is very important to note that the Supreme Court set aside the order passed by the NCDRC, and allowed the consumer complaint proceeding to continue, but did not directly say that the non-corporate debtor, like promoters and directors and landowners, are individually liable for the act of corporate debtor or for not handing over the possession to the appellants (homebuyers). Significantly, it also highlights that the consumer proceeding is not at all continuing against the corporate debtor but against the other respondents. They said that the liability part is not the subject matter of the present appeal; it will be decided by the NCDRC on the merits. The Supreme Court just rejects the default extension of the moratorium.
The Court relied upon the case law, namely A.P.Mohanraj v. Shah Brothers Ispat Pvt.Ltd, in this case, the company faced CIPR, and the Proceeding under Section 138 of the NI act initiated. Thus, the question arises whether the moratorium prevents non-corporate debtors from proceeding? And another is, B. Ansal Crown Heights Flat Buyers Association v. Ansal Crown Infrabuild Pvt. Ltd, the substantial question arose whether, during the execution of the proceeding, the company faced insolvency process; then other person also get protection by the moratorium? In both cases, the judiciary interpreted that the moratorium does not automatically suspend the liability of a natural person when there is a company that is already a corporate debtor and the moratorium applied to them after the introduction of the CIRP.
In the view of the homebuyers (appellants), the entire consumer case is paused because the CIRP was introduced. The consumer proceeding just stops when there are other non-corporate debtors as parties to the complaint, and it was not decided by the NCDRC whether they are personally liable or not. However, the directors and promoters are not liable individually just because the company faced insolvency and they are promoters or directors of the company.
Although the Supreme Court discusses the scope of section 14 of the IBC, the judgment still leaves one important question: whether there is a prima facie contractual obligation made between the homebuyers and the company, but the company faced CIRP; under these circumstances, on what basis should the consumer proceeding be continued against the non- corporate debtor?
Here, the ‘Privity of Contract’ comes into force. As per the privity of contract, the homebuyers and the developer company enter into a contract. The absence of the privity, a question arises the whether the obligation can be enforced against the person.
Now, supreme court not have a question about non corporate debtors are individually liable or not; the only legal question in front of the supreme court is whether moratorium protects non corporate debtor or not?. It is the duty of the NCDRC to check whether a person other than a corporate debtor has an independent statutory obligation or they personally commit any actionable conduct; after examining such things, the NCDRC decides whether the non-corporate debtor will have individual liability towards the homebuyers.
It is significant that the Supreme Court, in the present case, resolved the procedural barrier that was generated by section 14 of the IBC; however, the Supreme Court never determined or decided the significant liability of the non-corporate debtor. This is a practical gap related to the effective remedy provided by the consumer forum where the principal contractual obligations were established with a corporate debtor’s Insolvency process.
5. CONCLUSION –
The promoters, directors and landowners are not individually liable because the company signed the agreement with the homebuyers. Notwithstanding that non-corporate debtors not a party to the contract is not automatically end the individual liability, because the RERA can impose independent obligation on them.
The ruling of the Supreme Court in the present case is significant for clarifying the ambit of the Moratorium under section 14 of the IBC, 2016. The Court directly differentiate the corporate debtor and other persons related to it, By deciding that the moratorium does not extend automatically to promoters, directors, associate companies, and landowners. The said judgement not said moratorium does extend to non-corporate debtors by default, personally liable for the activity of the corporate debtor.
The Supreme Court opens the doors for homebuyers to continue the consumer proceeding against the non-corporate debtor parties, but not specifically against the developer company that is the corporate debtor.
