National Consumer Disputes Redressal
Ajith Thomas Abraham vs Cherukat Vijayakumar & 3 Ors. on 7 June, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI APPEAL EXECUTION NO. 58 OF 2022 (Against the Order dated 21/03/2022 in Complaint No. 49/2017 of the State Commission Kerala) 1. AJITH THOMAS ABRAHAM AJITH THOMAS ABRAHAM, 65, MONTIETH ROAD, EGAMORE, CHENNAI-600008 ...........Appellant(s) Versus 1. CHERUKAT VIJAYAKUMAR & 3 ORS. NO.26/27,TASAMI PARK, SINGANALLUR, COIMBATORE-641005 2. JAYASREE VIJAKUMAR, NO.26/27, TASAMI PARK SINGANALLUR, COIMBATORE-641005 3. SOUTHERN INVESTMENT PRIVATE LIMITED 65, MONTIETH ROAD,EGMORE, CHENNAI-600008,REPRESENTED BY IT'S DULY APPOINTED INTERIM RESOLUTION PROFESSIONAL ,MR.Y.N. RAMACHNDRAN RESIDENT OF 68-F1/C-175 SECOND AVENUE, ASHOK NAGAR, CHENNAI-600083 4. RAINTREE HEIGHTS APARTMENT OWNERS WELFARE ASSOCIATION SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 HAVING ITS REGISTEDED OFFICE AT BUILDING NUMBER 17/1161A, PULLIKAPARKAMBAL HOUSE, PO PUTHIRIAYA, KOZHIKODE ...........Respondent(s)
BEFORE: HON'BLE MRS. JUSTICE DEEPA SHARMA,PRESIDING MEMBER
FOR THE APPELLANT : MR.ARSHIT ANAND, ADVOCATE
MR.HIMANSHU SATIJA, ADVOCATE
MR.HARSH SAXENA, ADVOCATE FOR THE RESPONDENT : MS.ANUBHA AGRAWAL, AMICUS CURIAE
Dated : 07 June 2023 ORDER
JUSTICE DEEPA SHARMA, PRESIDENT (OFFICIATING)
1. This order shall dispose of the Execution Petition No. 58 of 2022 and RA No. 336 of 2022. Vide the Appeal Execution, the Appellant has challenged the order dated 21.03.2022 in Execution Petition No. 49 of 2017 whereby the State Commission pursuant to the directions of the High Court of Kerala dated 04.01.2022 in OP ( C) 1381 of 2021 heard the parties on the issue " to consider the question of law raised, in view of Section 14 (1) (a) of the Insolvency and Bankruptcy Code, 2016 and thereafter rejected the contentions of the Appellant that no Execution Proceedings can be held against him who is the Managing Director of M/s Southern Investments Pvt. Ltd. ( hereinafter referred to as 'Company') only because the Company was facing insolvency proceedings under IBC Act. All the other contentions raised by the Appellant were also rejected by the State Commission vide the impugned order.
2. This Commission on 25.11.2022 issued the following directions:
"When the Case has been taken up, nobody has appeared on behalf of the Appellant. However, Ms. Anubha Agrawal, learned Amicus Curiae, is present for Respondents No. 1 and 2. She states that Mr. Ajith Thomas Abraham, the Appellant herein, is the Managing Director of Southern Investment Pvt. Ltd. Even the Company has gone in liquidation/winding up, still in view of the decision of the Hon'ble Supreme Court in SLP (C) No. 12150 of 2019 (Anjali Rathi & Ors. Vs. Today Homes & Infrastructure Pvt. Ltd. & Ors.) and other connected matters, the proceedings can continue against the Managing Director of the Company.
In this view of the matter, the Order dated 25.04.2022, staying the further proceedings in Execution Petition No. 49 of 2017, is modified and it is clarified that the Execution proceedings can continue against Mr. Ajith Thomas Abraham, who is the Managing Director of the Company, at this stage.
List on 07.02.2023."
3. A review Application RA No. 336 of 2022 has been filed by the Appellant for the review of this order.
4. Both the Review Application and the Appeal has been heard.
5. Counsels for both the parties are heard by me and I have perused the relevant record.
6. The admitted facts of the case are that a complaint no. 57 of 2016 had been filed by the respondents ( hereinafter referred to as 'Complainants') before the State Commission. This complaint was finally disposed of vide order dated 31.10.2016 and following directions were issued:
"Point No. 2 & 3Booking of the apartment by the complainants, execution of the agreements Ext.A3 and A4 and receipt of the amount are admitted. Agreed date of delivery was March 2014. When the case came up for evidence counsel for the opposite parties prayed that if some time is granted they will be able to complete the construction and hand over the apartment to the complainant. They requested for a time of one year which appears to be on the higher side. Therefore, opposite parties are directed to complete the construction of the apartment and hand over the same to the complainants within 6 months from this date failing which opposite party shall refund the amount paid by the complainants, ie. Rs.49,68,460/- with interest at the rate of 12% per annum from March 2014 till realization. If the opposite parties complete the construction and hand over the apartment to the complainants, complainants will be entitled to interest at the rate of 12% per annum on the amount paid from March 2014 till the date of delivery. Complainant is entitled to a cost of Rs.5000/- in this complaint."
7. In the array of parties before the State Commission in the complaint case, the present Appellant was also one of the opposite party. This order, therefore, binds him as well. It is apparent that when the possession as per the directions dated 31.10.2016, was not handed over to the complainants, the complainants opted for the refund of the amount to which they were entitled under the decree. The decree dated 31.10.2016 clearly specifies that if the opposite parties fails to complete the construction and hand over the apartment to the complainants within 6 months from the date of order, the opposite party is liable to refund the deposited amount to the complainants. It is not in dispute that the opposite parties including the Appellant could not complete the construction of the subject property within the stipulated period and, thereafter, the complainants filed the execution petition No. 49 of 2017 before the State Commission.
8. Vide the present Appeal, the Appellant has challenged impugned order in execution petition on the ground that the proceedings were continued contrary to the moratorium imposed by NCLT vide order dated 15.03.2021 and the impugned order is in violation of Section 14 (1) ( a) of the IBC. It is further argued on behalf of the Appellant that State Commission ought to have taken into consideration the fact that the project had been taken over vide an agreement dated 01.09.2018 by the association of all the allottees, land owners and since the decree holders were also member of the said association, proceedings against the Appellant does not lie and amounts to clear abuse of process. It is submitted that in view of agreement dated 01.09.2018, all the claims stand settled and closed. It is further submitted that nothing survives in the order dated 31.03.2016 passed in complaint no. CC No. 57/2016 which needs to be executed. It is the duty of the Association under the Agreement to complete the construction and hand over the same to the allottees and also if they fail to do so, it is their obligation to refund the money. My attention is brought to the various documents to prove that the decree holders are covered under the agreement executed between the Association and the Appellant. It is submitted that Minutes of General Body Meeting held on 03.06.2018 at 4.00 p.m. clearly shows that all the allottees of the flats listed out in annexure-A were the members of the Raintree Heights Apartment Owners Welfare Association who has taken over the construction of the entire project under the agreement dated 01.09.2018. It is further argued that this arrangement had been made pursuant to the directions of the Hon'ble Supreme Court in the Writ Petition. On these contentions, it is argued that since the entire project has been taken over by the Raintree Heights Apartment Owners Welfare Association and the Decree Holder are also one of the allottees, their remedy lies with Association and decree under execution has become infructuous since it cannot be executed against the present Appellant. It is submitted that this entire arrangement had been done as a part of the resolution.
9. It is, however, contented on behalf of the complainants that as per the decree dated 31.10.2016, it was the appellant who had undertaken to complete the construction of the subject property within 6 months and hand over the possession and also agreed to refund the deposited money in case of failure to hand over the possession within 6 months. At that time no Insolvency proceedings were pending against the Company. It is also submitted that at the time when on account of inability of the Judgment Debtors to complete the construction and hand over the possession within 6 months as per the decree, complainants filed execution petition, no moratorium had been issued. It is submitted that decree is a valid decree passed as per the statement and undertaking of Judgment Debtor.
10. It is further contended that arguments of the learned counsel for the Appellant that agreement entered into between the Raintree Heights Apartment Owners Welfare Association and them is binding on the complainants is meritless. It is submitted that said agreement was binding only on the members who formed the Association and was not binding on all the allottees. It is submitted that Resolution dated 03.06.2018 itself says " that the members of the Raintree Heights Apartment Owners Welfare Association (Association) being all the allottees of the Flats listed out in Annexure A hereto". It is submitted that list annexure-A only shows list of allottees of the subject property and there is no dispute that he was also an allottee but he was not a member of Association.
11. It is submitted that Association was formed by certain members / allottees. It is submitted that Raintree Heights Apartment Owners Welfare Association was formed under Registered Deed by the members who desired to form the Society under the Societies Act and the list of members attached with the registered deed does not contain the name of the complainants. It is submitted that complainants therefore were never the members of the Raintree Heights Apartment Owners Welfare Association and, therefore, were not effected by the agreement between the said Society and the Company. It is submitted that even otherwise they had a decree in their favour and their rights had been crystalized in the form of that decree much before formation of the Welfare society. Their right to claim refund of their money arises from decree much prior to the formation of the association and the starting of the proceedings under IBC against the company. It is further argued that it is the Company who is under the IBC and not its directors. It is argued that directors are also liable to comply with the directions in the decree.
12. I have given my thoughtful consideration to the arguments of the learned counsel. It is an admitted fact that when the complaint was filed and the decree in the said complaint was passed, no IBC proceedings were pending against the Company. It is also an admitted fact that the decree had been passed on the undertaking of the Judgment Debtor that they would complete the construction and hand over the possession within 6 months failing which they would be refunding the entire deposited amount. When 6 months had expired and possession was not handed over, execution petition was filed by the decree holders / complainants.
13. I have perused the record, attention to which has been drawn by counsel for both the parties i.e. formation of Raintree Heights Apartment Owners Welfare Association and agreement dated 01.09.2018 between Welfare Association and the Judgment Debtors. From the perusal of these documents, it is apparent that list of members who formed the Raintree Heights Apartment Owners Welfare Association does not contain the name of the decree holders. No doubt they had been shown as one of the allottees of the flat in the Registration Deed but they are not among the members who formed that association. It is also established that the complainants had a decree in his favour and had filed an execution before the said association was formed. Since the Decree Holders were not the member of the Association, agreement between the Raintree Heights Apartment Owners Welfare Association and that of the Judgment Debtor does not bind the complainants / decree holders.
14. It is also settled proposition of law that in case of moratorium against the Company, no proceedings can continue against the Company. However, order of moratorium against a Company does not act as a bar against the directors of the Company. Section 14 of the IBC only put bar on JD Company and not against its directors i.e. the Appellant who is also a JD. However, the Hon'ble Supreme Court in a case titled Anjali Rathi and Others Vs. Today Homes and Infrastructure Pvt. Ltd & Ors. ( 2021 ) SCC Online SC 729 has held that even if a decree had been passed against the Company and it is in moratorium, the execution can be filed against its directors. The Apex Court has held as under:
"15. At this juncture, we must however clarify the right of the petitioners to move against the promoters of the first respondent Corporate Debtor, even though a moratorium has been declared under Section 14 of the IBC. In the judgment in P. Mohanraj v. Shah Bros. Ispat (P) Ltd., a three judge Bench of this Court held that proceedings under Section 138 and 141 of the Negotiable Instruments Act 1881 against the Corporate Debtor would be covered by the moratorium provision under Section 14 of the IBC. However, it clarified that the moratorium was only in relation to the Corporate Debtor (as highlighted above) and not in respect of the directors/management of the Corporate Debtor, against whom proceedings could continue. Speaking through Justice Rohinton F Nariman, the Court held:
"102. Since the corporate debtor would be covered by the moratorium provision contained in Section 14 IBC, by which continuation of Sections 138/141 proceedings against the corporate debtor and initiation of Sections 138/141 proceedings against the said debtor during the corporate insolvency resolution process are interdicted, what is stated in paras 51 and 59 in Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] would then become applicable. The legal impediment contained in Section 14 IBC would make it impossible for such proceeding to continue or be instituted against the corporate debtor. Thus, for the period of moratorium, since no Sections 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Sections 141(1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act."
(emphasis supplied)
15. In the present case, the decree itself had been passed against the Appellant and the IBC proceedings against the Company does not in any way absolve him from his liability to comply with the decree. As per the decree, he was also liable to comply with the directions.
16. The Appeal as well as Review Application have no merit. Same are dismissed.
..............................J DEEPA SHARMA PRESIDING MEMBER