Supreme Court: Insolvency shield is for firm, not promoters
The Supreme Court of India ruled that insolvency moratoriums protecting corporate debtors do not extend to the promoters and directors of those companies. This decision allows homebuyers to continue legal proceedings against real estate promoters despite ongoing insolvency processes for their firms.
Why it matters
This ruling provides significant legal recourse for consumers in the real estate sector, preventing promoters from using corporate bankruptcy as a shield against personal accountability.
NEW DELHI: Promoters of real estate companies use pending insolvency proceedings as a shield to protect themselves in court cases filed by homebuyers for not giving possession of flats, but Supreme Court on Monday clarified that a moratorium against the corporate debtor does not give protection to promoters and directors, and proceedings can continue against them.A bench of Justices Vikram Nath and Sandeep Mehta quashed an order passed by the National Consumer Disputes Redressal Commission by which a consumer complaint against promoters and directors of a Bengaluru-based real estate company was stayed in view of insolvency proceedings against the company.
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