Supreme Court Upholds NCDRC Decision: No Personal Liability for Directors in Ansal Crown Heights Case Supreme Court affirms that execution proceedings cannot impose liability on directors not party to original consumer complaints.
In a significant judgment, the Supreme Court of India has reinforced the principle that execution proceedings must adhere strictly to the decree, ruling that directors or promoters who were not parties to the original consumer complaints cannot be held liable during execution. The judgment was delivered in the case of Ansal Crown Heights Flat Buyers Association (Regd.) vs. M/s Ansal Crown Infrabuild Pvt. Ltd., where the appellants sought to hold the directors and promoters of the company accountable for non-compliance with a National Consumer Disputes Redressal Commission (NCDRC) order.
The case originated from complaints filed by flat buyers against M/s Ansal Crown Infrabuild Pvt. Ltd. (ACIPL) for failing to deliver possession of flats within the agreed timeframe. The NCDRC had directed ACIPL to either hand over possession of the flats with interest or refund the amounts paid by the buyers with interest. However, when ACIPL failed to comply, the flat buyers initiated execution proceedings. The issue of contention was whether the directors and promoters, who were not parties to the original complaints, could be made liable during execution.
The Supreme Court, in its judgment, clarified that the execution must conform to the decree and cannot be used to expand or shift liability onto individuals who were not part of the original adjudication. The Court highlighted that there were no pleadings, evidence, or findings against the directors/promoters during the adjudicatory process, and therefore, no liability could be imposed on them at the execution stage.
The Court also addressed the applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, stating that while it protects the corporate debtor, it does not automatically impose personal liability on directors/promoters unless established through adjudication.
Additionally, the doctrine of piercing the corporate veil was discussed, with the Court noting that it is an exceptional measure applied only when corporate personality is abused for fraudulent purposes, which was not the case here.
The judgment reaffirms the importance of following due legal processes and safeguards before imposing liability, underscoring the need for specific pleadings and adjudication when seeking to extend liability beyond the corporate entity.
Statutory provision(s): Consumer Protection Act, 2019, Section 71; Insolvency and Bankruptcy Code, 2016, Section 14; Corporate Law principles on piercing the corporate veil; Civil Law principles on execution of decree.
