Supreme Court Grants Relief to Homebuyers in Today Homes & Infrastructure Case

The Supreme Court recently delivered a crucial verdict in the case of Anjali Rathi & Others v. Today Homes & Infrastructure Pvt. Ltd., addressing the long-standing grievances of homebuyers in a stalled real estate project. The case revolved around the failure of the real estate developer to complete and hand over possession of flats to buyers in the Canary Greens project, located in Gurgaon.

The judgment underscores the legal rights of homebuyers and the responsibilities of developers under the Consumer Protection Act, 1986, as well as the Insolvency and Bankruptcy Code (IBC), 2016. The ruling also clarifies the interplay between consumer court proceedings and insolvency resolution mechanisms.

Background of the Case

The petitioners were homebuyers who had invested in a group housing project, Canary Greens, being developed by Today Homes & Infrastructure Pvt. Ltd. They had signed homebuyer agreements with the developer, which promised possession of their flats within 36 months. However, the project was abandoned, and possession was never granted.

Due to the abandonment of the project, homebuyers approached the National Consumer Dispute Redressal Commission (NCDRC) in 2017, seeking refunds with interest. On July 12, 2018, the NCDRC ruled in their favor, directing the developer to refund the amount paid by the petitioners with 12% interest. If the amount was not paid within four weeks, the interest rate would increase to 14%.

However, as the developer failed to comply with the NCDRC’s order, the homebuyers initiated execution proceedings to recover their refunds.

Legal Issues Considered

Whether the execution proceedings could proceed against the developer despite the initiation of insolvency proceedings under the IBC.
The impact of the moratorium imposed by the National Company Law Tribunal (NCLT) on consumer cases.
Whether the homebuyers could proceed against the directors of the company to enforce the consumer court order.

Arguments by the Petitioners (Homebuyers)

The homebuyers argued that the NCDRC’s refund order had attained finality and that the developer’s failure to comply warranted coercive action.
They contended that the initiation of insolvency proceedings under the IBC should not prevent the execution of the NCDRC’s ruling.
The petitioners submitted that the promoters and directors of the company should be held personally liable for fulfilling their commitments.
The homebuyers also highlighted that allowing the developer to use insolvency as a shield would set a dangerous precedent for defaulting real estate firms.

Arguments by the Respondents (Developer and Others)

The developer claimed that since insolvency proceedings had been initiated against the company under Section 9 of the IBC, all legal proceedings, including consumer cases, should be stayed as per the moratorium under Section 14 of the IBC.
The respondents contended that consumer cases and execution proceedings were barred once a corporate insolvency resolution process (CIRP) had begun.
The developer also argued that any enforcement action against its directors should be kept in abeyance until the resolution process was completed.

Supreme Court’s Observations

The Supreme Court, comprising Justices Dhananjaya Y. Chandrachud, Vikram Nath, and Hima Kohli, examined the matter in detail before delivering its ruling. The key observations were:

The Court reaffirmed that the moratorium under Section 14 of the IBC applies only to the corporate debtor and not to its promoters or directors.
The judgment in P. Mohanraj v. Shah Bros. Ispat (P) Ltd. was cited, which held that the moratorium bars legal proceedings against the corporate entity but does not extend to its directors or key personnel.
The Court noted that the homebuyers had actively participated in the insolvency proceedings and had filed claims before the Resolution Professional (RP) under the IBC.
The Court held that while the execution of the NCDRC’s order against the company was barred due to the ongoing insolvency proceedings, the homebuyers were free to proceed against the promoters and directors personally.
The Court directed that the application for the approval of the resolution plan filed before the NCLT should be disposed of expeditiously, preferably within six weeks.

Final Judgment

The Supreme Court disposed of the appeals with the following key directives:

The execution proceedings against Today Homes & Infrastructure Pvt. Ltd. were stayed due to the moratorium under Section 14 of the IBC.
The homebuyers were granted the liberty to initiate proceedings against the promoters and directors of the company.
The NCLT was directed to expedite the approval of the resolution plan to provide relief to the affected homebuyers.
The Court clarified that once the resolution plan is approved, the consequences under the IBC would follow, benefitting the homebuyers.

Conclusion

This judgment is a landmark decision that balances the rights of homebuyers with the legal framework of the IBC. While the Court acknowledged the moratorium on corporate debtors, it clarified that individuals responsible for a company’s failure cannot escape liability.

The ruling reinforces the protection of homebuyers under consumer laws while ensuring that insolvency proceedings are not misused as an excuse for non-compliance. The decision is expected to serve as a guiding precedent for future cases involving stalled real estate projects and consumer disputes.

Petitioner Name: Anjali Rathi & Others.
Respondent Name: Today Homes & Infrastructure Pvt. Ltd..
Judgment By: Justice Dhananjaya Y. Chandrachud, Justice Vikram Nath, Justice Hima Kohli.
Place Of Incident: Gurgaon, Haryana.
Judgment Date: 08-09-2021.

Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!

Download Judgment: anjali-rathi-&-other-vs-today-homes-&-infras-supreme-court-of-india-judgment-dated-08-09-2021.pdf

Directly Download Judgment: Directly download this Judgment

See all petitions in Company Law
See all petitions in Bankruptcy and Insolvency
See all petitions in Consumer Rights
See all petitions in Judgment by Dhananjaya Y Chandrachud
See all petitions in Judgment by Vikram Nath
See all petitions in Judgment by Hima Kohli
See all petitions in partially allowed
See all petitions in Stayed
See all petitions in supreme court of India judgments September 2021
See all petitions in 2021 judgments

See all posts in Corporate and Commercial Cases Category
See all allowed petitions in Corporate and Commercial Cases Category
See all Dismissed petitions in Corporate and Commercial Cases Category
See all partially allowed petitions in Corporate and Commercial Cases Category