Moratorium under IBC & Section 27 of the Consumer Protection Act, 1986
The important question is whether execution proceedings under Section 27 of the Consumer Protection Act, 1986 can also be stayed during interim moratorium under Section 96 of IBC.
By the judgment dated 10.8.2018, the National Consumer Commission gave various directions and imposed 27 penalties for deficiency in service by failing to deliver possession within a reasonable time.
Respondent Nos.1 and 2 filed execution petitions.
The appellant facing insolvency proceedings filed an application for stay of the execution proceedings. The National Consumer Commission rejected the said application.
HELD that the penalties do not arise from any “debt” owed to a creditor but rather from the failure to comply with the remedial mechanisms under the consumer law. The penalties are regulatory in nature and aim to protect the public interest rather than to punish criminal behaviour.
The damages awarded by the Consumer Commission arise from a consumer dispute and they are not in the nature of contractual debts but rather serve to compensate the consumers for loss suffered. Such damages are covered under “excluded debts” as per section 79(15) of the IBC, they do not get the benefit of moratorium under section 96 and their enforcement remains unaffected by the initiation of insolvency proceedings.
The moratorium under section 96 IBC is intended to provide temporary relief to debtors by preventing certain proceedings against them during the resolution process.
Judgment dated 4.3.2025 of the Supreme Court of India in Civil Appeal No.4048 of 2024 of Saranga Anilkumar Aggarwal Versus Bhavesh Dhirajlal Sheth and others
