Personal Liability Must Be Determined Before Executing NCDRC Decree Against Builder’s Directors/Promoters: Supreme Court
Kiran Raj
The Supreme Court Division Bench of Justice Dipankar Datta and Justice Augustine George Masih dismissed a homebuyers’ plea seeking to enforce a consumer decree against the directors and promoters of a real estate company, holding that execution cannot be used to fasten personal liability on individuals when the decree was passed only against the builder company. The Court said that unless the original proceedings contain pleadings, adjudication and a specific finding fixing liability on the directors or promoters, they cannot be proceeded against at the execution stage merely because of their association with the judgment-debtor company. In doing so, the Bench affirmed that an executing forum must act within the decree and cannot expand it to bind non-liable persons, while leaving open other remedies available in law.
The appeals arose from execution proceedings initiated by a flat buyers’ association and individual allottees against a real estate developer company in relation to delayed possession of residential flats. The buyers had entered into flat buyer agreements under which the developer undertook to hand over possession within a stipulated period. Upon failure to deliver possession within the promised timeframe, consumer complaints were filed before the National Consumer Disputes Redressal Commission.
At the stage of admission of one of the complaints, the Commission consciously directed that proceedings would continue only against the developer company and declined to issue notice to its directors and promoters. The complainants amended the memo of parties accordingly, and subsequent complaints were also filed only against the company.
The consumer complaints were ultimately allowed, directing completion of the project and delivery of possession with interest, or alternatively refund of the amounts deposited with interest. When the developer failed to comply, execution applications were filed. During execution, insolvency proceedings were initiated against the company, resulting in a statutory moratorium. Execution proceedings were adjourned and later revived following intervention by the Supreme Court.
Upon revival, execution was pressed against the directors and promoters personally. The National Commission dismissed the execution applications insofar as they sought enforcement against those individuals, holding that the original consumer orders were executable only against the company. This led to the present appeals.
The Court noted that at the admission stage of the consumer complaint, the Commission had “consciously admitted the complaint… only qua the respondent no.1… while declining to issue notice to the directors and promoters” and that the said order had “attained finality”.
It observed that thereafter “no pleadings were directed to be filed against, nor issues framed in relation to the directors or promoters, and no findings came to be recorded against them at any stage of the adjudicatory process”. The Court recorded that once the lis stood confined to the company, “the adjudication culminated in an order binding exclusively [the company] and none else”.
The Bench stated that the consumer forum’s final order “neither records any determination of liability against the respondents 2 to 9 nor contains any direction requiring them to perform or refrain from performing any act”, and therefore “the essential foundation for fastening liability upon the respondents 2 to 9 is plainly lacking”.
Reiterating settled principles of execution law, the Court recorded that “execution must strictly conform to the decree” and that “a decree cannot, by process of execution, be employed to shift or enlarge liability so as to bind persons who were neither parties to the decree nor otherwise legally liable thereunder”.
On the effect of insolvency proceedings, the Court observed that once a moratorium was declared against the company, “execution proceedings cannot… be permitted to continue indirectly against the respondents 2 to 9, who are neither judgment debtors nor guarantors”.
The Court further recorded that invocation of the doctrine of lifting the corporate veil was “wholly unwarranted”, noting that such an exercise requires “specific pleadings and a determination on merits”, which were absent.
Addressing reliance on the earlier Supreme Court order permitting continuation of execution, the Bench clarified that the order merely held that moratorium protection does not automatically extend to directors, but “did not determine or declare any personal liability” and expressly left the issue of executability to be decided in accordance with law.
The Court directed: we are of the considered view that the NCDRC committed no error of law or jurisdiction in declining to execute the order against persons who were admittedly not parties to the complaints. The order binds only ACIPL. Appellant did not challenge the order dated 25th January, 2018 of the NCDRC declining to issue notice to the respondents 2 to 9 and directing it to file amended memo of party with ACIPL as the sole respondent and cannot now enlarge the order through execution. Hence, in our opinion, the appeals must fail.”
“This dismissal will not preclude the appellant from pursuing any remedy available in law against the promoters/directors, including proceedings under the Companies Act, IBC, or civil law, should the statutory requirements therefor be satisfied. There shall be no order as to costs”.
With respect to the connected appeals the Court directed that: “These appeals involve similar questions of fact and law as raised in the lead appeals and for the reasons aforementioned, the same too stand dismissed.”
Advocates Representing the Parties
For the Petitioners: Mr. Bishwajit Bhattacharyya, Sr. Adv. Mr. Chandrachur Bhattacharyya, Adv. Mr. Sahil Tagotra, AOR
For the Respondents: Mr. Jayant Bhushan, Sr. Adv. Mr. Sanjay Jain, AOR Mr. Vikas Agarwal, Adv. Mr. Jayant Chawla, Adv.
Case Title: Ansal Crown Heights Flat Buyers Association (Regd.) v. M/s Ansal Crown Infrabuild Pvt. Ltd. & Ors.
Neutral Citation: 2026 INSC 51
Case Numbers: Civil Appeal Nos. 8465–8466 of 2024 and connected matters
Bench: Justice Dipankar Datta, Justice Augustine George Masih
