A) ABSTRACT / HEADNOTE

Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors. (Civil Appeal No. 4048 of 2024; judgment dated 04.03.2025) raises whether execution/enforcement of penalty orders passed by the National Consumer Disputes Redressal Commission under Section 27 of the Consumer Protection Act, 1986 can be stayed by an interim moratorium triggered under Section 96 of the Insolvency and Bankruptcy Code, 2016 (part III personal guarantor moratorium). The appellant a real estate developer and personal guarantor facing insolvency proceedings sought stay of 27 penalty orders and related execution actions on the ground that an application under Section 95 IBC had been filed and interim moratorium under Section 96 IBC had commenced.

The NCDRC refused the stay; this Court affirmed that consumer-forum penalties are regulatory/compensatory in nature, fall within the excluded debts ambit (see Section 79(15) IBC), and are distinct from debts subject to moratorium protection. The Court distinguished Section 138 NI Act proceedings (where dishonour presupposes debt) from Section 27 CP Act enforcement and relied on precedents such as State Bank of India v. V. Ramakrishnan and Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd. to hold that the interim moratorium under Section 96 does not automatically stay regulatory or penal enforcement under consumer law. Appeal dismissed; decree-holders to enforce penalties within eight weeks.

Keywords: Section 27 CP Act, Section 96 IBC, Section 95 IBC, excluded debts (Section 79(15) IBC), moratorium, consumer penalties, execution, regulatory v. recovery.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appeal originates from execution petitions instituted to enforce a multi-count order of the NCDRC that imposed 27 penalties on the appellant for failure to deliver possession of residential units and for deficiency of service. The appellant, a real-estate developer and a personal guarantor connected with related corporate insolvency proceedings, sought an interim stay of enforcement on the basis that an application under Section 95 IBC (personal guarantor insolvency) had been filed and the moratorium under Section 96 IBC applied from the application date. The NCDRC had rejected the stay, relying on the distinction between enforcement/penalty proceedings under Section 27 CP Act and debt/recovery proceedings.

The parties advanced competing statutory and precedential narratives. The appellant relied on the expansive sweep of Section 96 and authorities that stayed quasi-criminal or recovery-adjacent proceedings (notably P. Mohanraj and State Bank of India v. V. Ramakrishnan). The respondents (homebuyers) emphasised the regulatory and compensatory character of consumer penalties, the public interest in prompt enforcement, and the IBC’s carved-out excluded debts under Section 79(15).

The NCDRC’s reasoning and Supreme Court scrutiny focused on legislative text and purpose: whether consumer penalties constitute “debt” that a moratorium under Part III IBC intends to freeze, and whether staying such penalties would subvert consumer protection and allow insolvency to become a shelter for statutory non-compliance. The Court examined statutory definitions, the limited scope of Section 96, prior case law differentiating corporate and personal moratoria, and public policy considerations about preserving regulatory accountability.

D) FACTS OF THE CASE 

The appellant, proprietor of East & West Builders (RNA Corp. Group Co.), developed residential projects where homebuyers alleged delay in possession, deficiency in service, and breach of contractual terms. Multiple consumer complaints culminated in the NCDRC’s final order dated 10.08.2018 in connected matters (including CC/1362/2017), directing completion of construction, procurement of occupancy certificates, handing over possession and imposing 27 penalties for delay and non-compliance. Respondent nos.1 and 2 filed execution applications to enforce the NCDRC award after the appellant failed to comply.

Separately, insolvency proceedings under the IBC were initiated: the appellant was a personal guarantor to credit facilities of A.A. Estates Pvt. Ltd. and victim of defaults; SBI initiated Part III IBC proceedings under Section 95 against the appellant on 20.01.2022, thereby invoking the interim moratorium under Section 96 IBC as per the appellant. The appellant informed the NCDRC that it had entered into multiple settlement agreements and had paid Rs. 11,57,34,925/- in execution proceedings, settling seven matters fully, but sought a stay on remaining execution petitions citing the moratorium. NCDRC rejected the stay (order dated 07.02.2024), treating consumer penalties as outside moratorium’s scope, relying on Supreme Court precedents (including SBI v. V. Ramakrishnan).

Appellant challenged the NCDRC order before the Supreme Court. Respondents pressed the enforcement route, stressing protracted delays since 2011 bookings, issuance of non-bailable warrants in 2021, and the hardship of homebuyers who invested life savings. The central contest became legal: are Section 27 enforcement proceedings regulatory/penal (thus excluded) or recovery-oriented debts amenable to a moratorium under Section 96 IBC?

E) LEGAL ISSUES RAISED 

i. Whether enforcement/execution of penalty orders under Section 27 of the Consumer Protection Act, 1986 falls within the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016?
ii. Whether penalties imposed by consumer fora are “debt” or constitute excluded debts under Section 79(15) IBC?
iii. Whether criminal or quasi-criminal proceedings (e.g., under Section 27 CP Act) abate or are stayed by personal guarantor moratorium under Section 96 IBC?
iv. Whether analogy to Section 138 NI Act proceedings is tenable to seek moratorium protection for Section 27 CP Act enforcement?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The counsels for Petitioner / Appellant submitted that once an application under Section 95 IBC was filed, Section 96(1)(b)(i) creates an absolute stay on “any legal action or proceedings pending in respect of any debt,” which must include execution petitions under Section 27 CP Act because the execution sought monetary recovery (Rs. 1,55,00,000/-) and thus is a debt recovery masquerading as penalty enforcement.
ii. Reliance placed on precedents (e.g., P. Mohanraj, SBI v. V. Ramakrishnan) to show that moratoriums have stayed quasi-criminal/recovery actions; the nature of Section 27 penalties is similar insofar as they enforce monetary liability.
iii. It was urged that without moratorium protection, insolvency resolution would be frustrated by multiplicity of proceedings and potential preferential payments.

G) RESPONDENT’S ARGUMENTS

i. The counsels for Respondent submitted that penalties under Section 27 CP Act are regulatory, remedial and punitive in character and are not ordinary contractual debts owed to a creditor.
ii. The moratorium under Section 96 is limited to “debt” as defined in the IBC and excludes liabilities such as fines or damages (see Section 79(15)), thereby permitting enforcement of consumer forum penalties.
iii. Accepting appellant’s plea would permit developers to use insolvency as a shield and defeat consumer protection; public interest and precedent (e.g., Ajay Kumar Goenka, Manish Kumar) support continuation of penal/regulatory proceedings.

H) JUDGEMENT 

The Supreme Court affirmed the NCDRC’s refusal to stay execution. The Court parsed Part III IBC and observed that Section 96 applies to personal guarantors but only stays proceedings “in respect of any debt” as the IBC frames it. The Court emphasised statutory exclusion: Section 79(15) IBC lists liabilities that are not to be treated as debts for moratorium purposes including fines and damages imposed by courts or tribunals and liabilities arising from negligence or breach.

The Court held that damages/penalties awarded by consumer fora arise from deficiency of service and aim both to compensate victims and to deter unfair practices; these liabilities are regulatory/penal and not ordinary commercial debts subject to restructuring. Consequently such liabilities fall within the excluded debts rubric and are not stayed by Section 96. The Court distinguished Section 138 NI Act cases: dishonour of cheque presupposes a debt and therefore moratorium coverage in certain contexts may be appropriate; by contrast, Section 27 enforcement seeks compliance with consumer protection orders and carries penal consequences, including imprisonment, and hence cannot be equated with simple debt recovery.

The Court relied on precedents to observe that insolvency moratoria do not provide blanket immunity from penal or regulatory consequences. It also noted public policy: permitting a stay would encourage abuse of insolvency processes to evade consumer obligations. The Court thus dismissed the appeal and directed compliance with NCDRC penalties within eight weeks.

a. RATIO DECIDENDI 

The operative ratio is that the interim moratorium under Section 96 IBC does not stay enforcement of penalties imposed under Section 27 CP Act because such penalties constitute liabilities excluded from moratorium protection under Section 79(15) IBC. The Court analysed legislative scheme and purpose: IBC’s moratorium aims to preserve assets for insolvency resolution, not to shelter statutory breaches or regulatory penalties. The distinction between civil recovery of a debt and regulatory/punitive liabilities is decisive. Where liability arises from enforcement of statutory protective orders (consumer awards), it serves public interest and deterrence and thus falls outside moratorium’s protective ambit.

b. OBITER DICTA 

The Court observed, obiter, on the limited ambit of Section 96 versus Section 14: corporate moratorium under Section 14 is broader; personal guarantor moratorium under Section 96 is narrower and confined to “debts” as understood in IBC. The Court also commented on the effect of non-speaking dismissals (e.g., this Court’s dismissal of challenge to Sheetal Gupta): such orders lack precedential force on substantive legal points. Furthermore, the Court indicated judicial sensitivity to preventing misuse of insolvency processes to frustrate enforcement of consumer rights.

c. GUIDELINES 

i. Consumer forum awards imposing penalties or damages are to be treated as excluded debts under Section 79(15) IBC unless the statute or judicial interpretation indicates otherwise.
ii. Personal guarantor moratorium under Section 96 should be interpreted strictly to apply only to debts amenable to insolvency restructuring, not to regulatory or penal liabilities.
iii. Courts/tribunals should scrutinise attempts to invoke IBC moratoria to stay enforcement of statutory regulatory orders and guard against procedural tactics that unduly delay relief to vulnerable consumers.
iv. Distinctions must be drawn between Section 138 NI Act (where debt is inherent) and enforcement under Section 27 CP Act — the nature of the underlying liability (debt v. regulatory penalty) determines moratorium applicability.
v. Non-speaking or summary dismissals at appellate level do not extinguish substantive precedent; lower courts/tribunals must place reliance on reasoned authorities.

I) CONCLUSION & COMMENTS 

The Court’s decision reinforces that insolvency law and consumer protection law serve different public policy ends; IBC’s moratoria preserve potential for commercial restructuring but do not operate as a universal stay that erases regulatory accountability. By anchoring the outcome in textual provisions (Sections 79(15), 94, 96 IBC) and purposive analysis, the judgment curbs the strategic invocation of insolvency to derail enforcement of consumer remedies. Practically, developers and guarantors will find it difficult to avert execution of consumer awards by merely initiating Part III IBC proceedings.

The judgment also clarifies jurisprudential contours: not all quasi-criminal or recoverylike proceedings are ipso facto stayed; the presence or absence of an inherent debt element and statutory exclusion controls. For consumer law practice, the ruling strengthens enforcement teeth of consumer fora. For insolvency practice, it signals the need to identify clearly which liabilities form part of the insolvency estate and which remain enforceable. The Court’s approach balances rehabilitative aims of IBC against deterrence and compensation goals of consumer protection, thereby preserving remedial efficacy for vulnerable decree-holders such as homebuyers.

The directions to comply within eight weeks reflect the Court’s intent to prevent further delay and ensure realizable relief to affected consumers.

J) REFERENCES

a. Important Cases Referred

i. State Bank of India v. V. Ramakrishnan & Anr., (2018) 17 SCC 394.
ii. Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corporation of India Ltd., (2023) 10 SCC 545.
iii. P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258.
iv. Manish Kumar v. Union of India & Anr., (2021) 5 SCC 1.
v. Kaushalya Devi Massand v. Roopkishore Khore, (2011) 4 SCC 593.
vi. Kunhayammed & Ors. v. State of Kerala & Anr., (2000) 6 SCC 359.
vii. Khoday Distilleries Ltd. & Ors. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., (2019) 4 SCC 376.
viii. Satyawati v. Rajinder Singh & Anr., (2013) 9 SCC 491.
ix. Vijay Madanlal Chaudhary & Ors. v. Union of India, 2021 SCC OnLine SC 1048.
(As cited in the judgment).

b. Important Statutes Referred

i. Consumer Protection Act, 1986 — s.27.
ii. Insolvency and Bankruptcy Code, 2016 — ss.79(15), 94, 95, 96, 101.
iii. Negotiable Instruments Act, 1881 — s.138.