Summary
A flat buyers' association sought to execute NCDRC orders passed against a builder company (then under CIRP moratorium) against its directors/promoters. The Supreme Court upheld the NCDRC's refusal: the complaints had been admitted and decided only against the company, execution cannot go beyond the order, and no basis for personal liability or veil-piercing had been pleaded or adjudicated.
Issues
- Whether directors/promoters who were named in consumer complaints but against whom notice was declined and no adjudication took place can be proceeded against in execution of the order passed against the company.
- Whether this Court's earlier order of 17.01.2024, permitting execution to continue against the directors despite the IBC moratorium, fastened liability on them.
Provisions considered
- Section 14, Insolvency and Bankruptcy Code, 2016The moratorium shields only the corporate debtor and not its directors; but the appellant had not shown any guarantee or surety by the directors that would attract Section 14(3), and once the moratorium operated against the company, execution could not continue indirectly against non-judgment-debtors. (¶¶ 7, 14, 15, 20)
- Section 71, Consumer Protection Act, 2019The modes of executing a Commission's order against the judgment-debtor company stood interdicted by the moratorium, and could not be redirected against directors who were neither judgment-debtors nor guarantors. (¶ 15)
Held
- Execution must strictly conform to the decree; an executing forum may construe the order but cannot go beyond it, and execution cannot be used to shift or enlarge liability onto persons who were not parties to the decree or otherwise legally liable under it. (¶¶ 12, 13)
- Since the NCDRC had admitted the complaint only against the company, declined notice to the directors by an order that was never challenged, and recorded no pleadings, issues or findings against them, the final orders bound only the company and could not be executed against the directors. (¶¶ 10, 11, 17, 23)
- Where the judgment-debtor is a company, liability of its shareholders or promoters is confined to their shareholding or to guarantees or undertakings expressly given; the company is a distinct legal entity. (¶¶ 13, 14, 16)
- The adjudicatory process under the Consumer Protection Act (notice, pleadings, opportunity, evidence, findings) is a substantive safeguard; execution cannot serve as a surrogate forum to impose liability that was never adjudicated. (¶ 17)
- Lifting the corporate veil is exceptional and requires specific pleadings and a finding on merits that the corporate form was abused for fraud or dishonest purposes; absent such a determination, directors cannot be exposed to personal liability through execution. (¶ 18)
- The order of 17.01.2024 only held that the moratorium did not by itself bar execution against directors who were otherwise liable, and left their liability for the NCDRC to decide; it did not fasten liability on them, so the NCDRC's decision on executability was consistent with it. (¶¶ 20, 21, 22)
Result
Appeals (including the connected appeals) dismissed; appellant left free to pursue remedies against promoters/directors under the Companies Act, IBC or civil law if the statutory requirements are met; no order as to costs.