Whether an interim moratorium under Section 96 of the Insolvency and Bankruptcy Code (IBC) should stay execution proceedings and penalties issued by the National Consumer Disputes Redressal Commission (NCDRC). The appellant, a real estate developer, argued that the IBC’s moratorium on “debt” should cover these penalties, which arose from delays in delivering residential units. However, the NCDRC and subsequently the Supreme Court found that these regulatory penalties for non-compliance with consumer protection laws are distinct from financial “debt” and thus are not subject to the IBC moratorium, particularly as they fall under “excluded debts” in Section 79(15) of the IBC. The Court emphasized that allowing such a stay would undermine consumer protection laws and encourage evasion of statutory liabilities. Ultimately, the Supreme Court dismissed the appeal, directing the appellant to comply with the NCDRC’s penalties.
Consumer Protection Act, 1986, Section 27 – Insolvency and Bankruptcy Code, 2016, Section 95 Consumer – No benefit of moratorium under Insolvency and Bankruptcy Code – Whether the execution of penalty orders passed by the NCDRC can be stayed under the interim moratorium provisions of Section 96 of the IBC? – Damages awarded by the NCDRC arise from a consumer dispute, where the appellant has been held liable for deficiency in service – Such damages are not in the nature of ordinary contractual debts but rather serve to compensate the consumers for loss suffered and to deter unethical business practices – Courts and tribunals, including the NCDRC, exercise their statutory jurisdiction to award such damages, and these are distinct from purely financial debts that may be subject to restructuring under the IBC – Since such damages are covered under “excluded debts” as per Section 79(15) of the IBC, they do not get the benefit of the moratorium under Section 96 of the IBC, and their enforcement remains unaffected by the initiation of insolvency proceedings
(Para 11, 33 and 40)
Saranga Anilkumar Aggarwal V. Bhavesh Dhirajlal Sheth
Supreme Court: 2025 INSC 314: (DoJ 04-03-2025)