Execution Cannot Extend Liability Beyond Decree; Directors Not Liable Where Not Adjudicated, Supreme Court Holds

A bench of Justices Dipankar Datta and Augustine George Masih heard consolidated appeals arising from execution applications filed by an association of flat buyers against the promoters and directors of a developer. The appeals challenged an order of the National Consumer Disputes Redressal Commission (NCDRC) which dismissed execution proceedings against the individual directors/promoters of M/s. Ansal Crown Infrabuild Pvt. Ltd. (ACIPL) on the ground that the original consumer complaints had been finally prosecuted only against the company.

The Court dismissed the appeals and upheld the NCDRC's conclusion that the decree bound only the judgment-debtor company and could not be executed against persons who were not parties to, nor adjudicated under, the original complaints. The Court emphasized that execution must strictly conform to the decree and that liability could not be enlarged by execution into a forum for imposing personal responsibility on directors where no prior adjudication had occurred. The Court, in its reasoning, observed: "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. Where the judgment debtor is a company, the liability of its shareholders or joint venture partners remains confined to the extent of their shareholding or to such guarantees or undertakings as may have been expressly furnished by them." The judgment also reproduced earlier observations that, while a moratorium under Section 14 of the IBC "shields only the corporate debtor and does not extend to directors/promoters," the limited order of January 17, 2024 left open the question of personal liability to be adjudicated by the NCDRC.

Background The dispute arose after an association of flat buyers entered into agreements with ACIPL for units in the Ansal Crown Heights project; possession was not delivered within the contractual period. The buyers filed two consumer complaints (CC/2600/2018 and CC/86/2018). The NCDRC, by order dated 25 January 2018, admitted one complaint only against ACIPL and directed amendment of the memo of parties so that the company alone was the respondent; no notice was issued to the individual directors/promoters and no pleadings, evidence or findings were recorded against them. On 28 February 2022 the NCDRC allowed the complaints, directed completion of the project or refund with interest at 9% per annum (12% for default) and ordered possession or repayment to the allottees.

When ACIPL entered insolvency proceedings and a moratorium under the IBC was declared, the NCDRC adjourned execution proceedings sine die on 18 May 2023, observing that "If the decree cannot be executed against opposite party No.1 due to moratorium under Section 14 of the IBC, it would not be appropriate to proceed in same execution against opposite party Nos.2 to 9." The association obtained interim relief from this Court on 17 January 2024, which set aside the sine die adjournment and held that the moratorium did not automatically protect directors/promoters; the matter was remitted to the NCDRC with liberty to the directors to raise objections to executability.

On revival, the association pursued execution against the directors/promoters, but the NCDRC dismissed those execution applications on the ground that the final orders had been rendered only against ACIPL and there was no adjudicated personal liability against the individuals. The Supreme Court agreed, holding that, in absence of pleadings, evidence, findings or any guarantee/surety from the promoters, execution could not be used to enlarge liability or disregard corporate personality. The Court rejected invocation of the corporate veil doctrine in the present facts, noting that lifting the veil required specific pleadings and a determination on merits of fraud or misuse. The appeals were dismissed, with a clarification that the dismissal did not preclude the association from pursuing other remedies under the Companies Act, IBC or civil law if statutory prerequisites were met. There was no order as to costs.

Case Details: Case No.: 2026 INSC 51; Civil Appeal Nos. 8465-8466 of 2024 (lead) with Civil Appeal No. 8539 of 2024; Civil Appeal Nos. 10874-10877 of 2024; Civil Appeal No. 10878 of 2024 Case Title: Ansal Crown Heights Flat Buyers Association (Regd.) v. M/s Ansal Crown Infrabuild Pvt. Ltd. & Ors. Appearances: For the Petitioner(s): Counsel not specified in the reported judgment For the Respondent(s): Counsel not specified in the reported judgment