NCDRC Decree Against Builder Company Can't Be Executed Against Directors/Promoters Without Personal Liability Fixed: Supreme Court

The Supreme Court on Monday (January 12) observed that the homebuyers cannot execute a decree, obtained solely against a builder company, against its directors or promoters personally, unless a specific finding of liability was made against them in the original proceedings. “It is trite 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.”, observed a bench of Justices Dipankar Datta and Augustine George Masih, while dismissing the homebuyer's plea, who sought enforcement of the decree against the directors and promoters of the building company. The appeals stemmed from the long-pending grievance of flat buyers in the 'Ansal Crown Heights' project in Gurugram. The builder, M/s Ansal Crown Infrabuild Pvt. Ltd. (ACIPL), failed to deliver possession. The National Consumer Disputes Redressal Commission (NCDRC) in 2022 passed an order directing only ACIPL to either complete the project or refund the invested amounts with interest. Subsequently, ACIPL entered the Corporate Insolvency Resolution Process (CIRP), triggering a moratorium under Section 14 of the IBC. This stalled execution against the company's assets. The homebuyers' association then sought to enforce the decree against the company's directors (Respondents 2 to 9) personally. Challenging the NCDRC's order refusing their plea, the homebuyers moved to the Supreme Court. Refusing to interfere with the impugned order, the judgment authored by Justice Datta observed that the decree cannot be enforced against persons who are not judgment-debtors. “Execution proceedings cannot, therefore, be permitted to continue indirectly against the respondents 2 to 9, who are neither judgment debtors nor guarantors, and against whom no independent liability under the order allowing the complaints has been established.”, the court said.“We are in complete agreement with the approach adopted by the NCDRC that the CP Act envisages a complete adjudicatory process founded on service of notice, pleadings, opportunity to contest, leading of evidence, and recorded findings of fact and law. These are not mere procedural formalities but substantive safeguards that precede the fastening of liability. In the present case, no such adjudicatory exercise was undertaken qua the respondents 2 to 9. There are no pleadings attributing any personal role to them, no evidence led to establish individual culpability, and no findings returned fixing personal liability. In the absence of these foundational elements, execution proceedings cannot be utilised as a surrogate forum to impose liability where none has been adjudicated.”, the court added. The appeal was dismissed, with the liberty to the Appellants to explore other legal options under the Companies Act against the Respondents.HeadnoteConsumer Protection Act, 2019 – Section 71 – Execution of Orders – Liability of Directors/Promoters – The Supreme Court held that an order passed by a Consumer Forum against a company (Corporate Debtor) cannot be executed against its Directors or Promoters if they were not parties to the original complaint and no specific findings of liability were recorded against them - Noted that execution must strictly conform to the decree and cannot be used to enlarge liability to bind persons who were not parties to the adjudicationInsolvency and Bankruptcy Code, 2016 – Section 14 – Moratorium – Liability of Natural Persons – While a moratorium under Section 14 shields the corporate debtor, it does not extend to its directors or promoters - the mere absence of a moratorium-related bar does not automatically make directors liable in execution proceedings unless their independent liability was established during the adjudicatory process - A company is a distinct legal entity from its shareholders and directors - The doctrine of "piercing the corporate veil" is an exceptional measure that requires specific pleadings and a determination of fraud or dishonest misuse of the corporate personality, which cannot be introduced for the first time at the execution stage. [Relied on Rajbir v. Suraj Bhan (2022) 14 SCC 609; Electronics Corpn. of India Ltd. v. Secy., Revenue Deptt., Govt. of A.P. (1999) 4 SCC 458; Paras 11-20]Cause Title: ANSAL CROWN HEIGHTS FLAT BUYERS ASSOCIATION (REGD.) VS. M/S ANSAL CROWN INFRABUILD PVT. LTD. & ORS. (and connected matters)Citation : 2026 LiveLaw (SC) 40Click here to download judgmentAppearance: For Appellant(s) : Mr. Bishwajit Bhattacharyya, Sr. Adv. Mr. Chandrachur Bhattacharyya, Adv. Mr. Sahil Tagotra, AOR For Respondent(s) :Mr. Jayant Bhushan, Sr. Adv. Mr. Sanjay Jain, AOR Mr. Vikas Agarwal, Adv. Mr. Jayant Chawla, Adv.

NCDRC Decree Against Builder Company Can't Be Executed Against Directors/Promoters Without Personal Liability Fixed: Supreme Court

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Yash Mittal

NCDRC Decree Against Builder Company Can't Be Executed Against Directors/Promoters Without Personal Liability Fixed: Supreme Court

Yash Mittal

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