2025 INSC 314 Civil Appeal No.4048 of 2024 Page 1 of 27

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 4048 OF 2024

SARANGA ANILKUMAR

AGGARWAL

... APPELLANT(S)

VERSUS

BHAVESH DHIRAJLAL

SHETH & ORS.

... RESPONDENT(S)

J U D G M E N T

VIKRAM NATH, J.

1. The present appeal has been filed against the final

judgment and order passed by the National

Consumer Disputes Redressal Commission

1, wherein

multiple penalties (27 in total) were imposed on the

appellant for failing to deliver possession of

residential units to homebuyers as per the agreed

timeline. The appellant seeks a stay on the penalty

proceedings before the NCDRC, contending that an

1

NCDRC

Civil Appeal No.4048 of 2024 Page 2 of 27

application under Section 95 of the Insolvency and

Bankruptcy Code, 2016

2 has been filed against them,

triggering an interim moratorium under Section 96 of

the IBC.

2. This Court is called upon to adjudicate whether

execution proceedings under Section 27 of the

Consumer Protection Act, 1986

3, can also be stayed

during an interim moratorium under Section 96 of

the IBC. The present matter arises from an

application filed by the appellant, who is the

proprietor of proforma respondent no. 3 – East &

West Builders (RNA Corp. Group Co.), in an execution

application filed by respondent nos. 1 and 2 before

the NCDRC, challenging the execution of multiple

penalty orders imposed by the NCDRC during the

pendency of insolvency proceedings against the

Corporation. The appellant contends that the

imposition and execution of these penalties should be

stayed due to the pendency of insolvency proceedings

initiated under Section 95 of the IBC.

3. The appellant is engaged in real estate development

and has several pending consumer complaints before

2

IBC

3

CP Act

Civil Appeal No.4048 of 2024 Page 3 of 27

the NCDRC filed by homebuyers alleging delay in

possession, deficiency in service, and breach of

contractual obligations. The NCDRC, in its final

judgment dated 10.08.2018 in CC/1362/201 7 along

with other connected matters, allowed the complaints

and directed the appellant to complete construction,

obtain the requisite occupancy certificate, and hand

over possession and imposed 27 penalties on the

appellant for deficiency in service by failing to deliver

possession within a reasonable time. The respondent

no.1 and 2, as decree holders, subsequently filed

execution applications seeking execution of the

abovementioned order of the NCDRC as the appellant

failed to comply with the directions of the NCDRC.

4. Subsequently, the appellant, facing insolvency

proceedings before the National Company Law

Tribunal

4 under the IBC, moved an application before

the NCDRC seeking a stay of execution proceedings.

The appellant in the application before the NCDRC

sought to contest the execution on various grounds,

including financial distress, adverse market

conditions in the real estate sector, and its ongoing

4

NCLT

Civil Appeal No.4048 of 2024 Page 4 of 27

insolvency proceedings. The appellant contended

that it had entered into settlement agreements with

several decree holders and had already made

significant payments, satisfying a substantial portion

of the execution claims. Specifically, the appellant

stated that pursuant to entering into respective

settlement agreements, it had made entire payments

in the matters of seven homebuyers, thereby fully

satisfying seven execution petitions, leaving only

thirteen execution petitions pending out of a total of

twenty. It further stated that a total amount of Rs.

11,57,34,925/- had been paid in execution

proceedings. However, some instalment payments

were delayed due to reasons beyond its control,

particularly adverse economic conditions in the real

estate sector. The appellant also contended that it

was one of the personal guarantors to credit facilities

extended to A.A. Estates Pvt. Ltd. by the State Bank

of India (SBI). Due to an alleged default in repayment,

insolvency proceedings under Section 7 of the IBC

were initiated against A.A. Estates Pvt. Ltd. before the

NCLT, Mumbai Bench. Additionally, SBI initiated

proceedings under Section 95 of the IBC against the

appellant, the proprietor of the Judgment Debtor –

Civil Appeal No.4048 of 2024 Page 5 of 27

proforma respondent no.3. Consequently, an interim

moratorium was triggered against the appellant as

per Section 96 of the IBC, which the appellant

claimed barred further legal proceedings, including

the ongoing execution proceedings before the

NCDRC.

5. The NCDRC vide the impugned order dated

07.02.2024 rejected this application, holding that

consumer claims and the penalty imposed did not fall

within the moratorium under the IBC.

6. The NCDRC relied on this Court’s decision in State

Bank of India v. V. Ramakrishnan & Anr.

5, which

clarified that Sections 96 and 101 of the IBC provide

a distinct moratorium applicable to personal

guarantors, separate from the moratorium under

Section 14 applicable to corporate debtors. The

NCDRC emphasized that the stay under Sections 96

and 101 extends only to proceedings concerning the

debt and does not necessarily shield the guarantor

from all legal actions.

7. Additionally, the NCDRC placed significant reliance

on this Court’s ruling in Ajay Kumar Radheyshyam

5

(2018) 17 SCC 394

Civil Appeal No.4048 of 2024 Page 6 of 27

Goenka v. Tourism Finance Corporation of India

Ltd.

6. In that case, this Court reaffirmed that

criminal proceedings against directors or signatories

of a company do not abate merely because the

corporate debtor is undergoing insolvency resolution.

This Court, referring to Manish Kumar v. Union of

India and Another

7, held that individuals

associated with the corporate debtor remain liable for

their acts, and the company’s dissolution does not

absolve them of personal liability under statutes like

the Negotiable Instruments Act, 1881

8.

8. Furthermore, the NCDRC rejected the applicant’s

reliance on the Bombay High Court’s decision in

Sheetal Gupta vs. National Spot Exchange

Limited and Ors.

9, wherein the Bombay High Court

had directed stay of criminal proceedings under

Section 138 of the NI Act against the concerned

persons representing the corporate debtors. The

Commission noted that while this Court had

dismissed an appeal against this ruling in SLP

(Criminal) No. 4727 of 2023 in order dated

6

(2023) 10 SCC 545

7

(2021) 5 SCC 1

8

NI Act

9

2023 SCC OnLine Bom 3095

Civil Appeal No.4048 of 2024 Page 7 of 27

28.04.2023, the dismissal was by a brief and non-

speaking order, without any discussion on legal

principles. Given that this Court’s judgment in Ajay

Kumar Radheyshyam Goenka (supra) was

pronounced in the interim and was not considered in

the summary dismissal of the appeal, the NCDRC

deemed the earlier Bombay High Court ruling as per

incuriam.

9. Accordingly, for the reasons stated above the NCDRC

concluded that the interim moratorium under

Section 96 of the IBC did not bar the continuation of

criminal proceedings under Section 27 of the CP Act,

against the applicant in her personal capacity as a

guarantor.

10. The appellant is before us challenging this order of

the NCDRC.

11. The primary question of law before this Court is

whether the execution of penalty orders passed by

the NCDRC can be stayed under the interim

moratorium provisions of Section 96 of the IBC.

12. The appellant argues that all debts and all

proceedings relating to debt are automatically stayed

under Section 96 of the IBC. The respondents, on the

other hand, contend that the penalties imposed by

Civil Appeal No.4048 of 2024 Page 8 of 27

NCDRC are distinct from "debt recovery" proceedings

and should not fall within the ambit of the interim

moratorium.

13. The appellant contended that Section 96 of the IBC

creates an absolute bar on any proceedings against

the debtor relating to any debt once an interim

moratorium is in place. It is submitted that the

penalties imposed by the NCDRC arise out of

financial obligations or debts and must, therefore, be

stayed. The appellant submits that as per Section 96

of the IBC when an application is filed under Section

94 or Section 95 of the IBC, an interim moratorium

shall commence on the date of the application, in

relation to all debts. In the present case the

application under Section 95 of the IBC was filed

against the appellant on 20.01.2022 and therefore,

as per the provisions of Section 96 of the IBC, the

interim moratorium commenced against the

appellant from 20.01.2022 and thus the proceedings

under Section 27 of the CP Act pending before the

NCDRC shall be deemed to have been stayed since as

per Section 96(1)(b)(i) of the IBC during the interim

moratorium period, “any legal action or proceedings,

Civil Appeal No.4048 of 2024 Page 9 of 27

pending in respect of any debt, shall be deemed to

have been stayed.”

14. The appellant further submitted that the proceedings

under Section 27 of the CP Act are effectively recovery

proceedings. Respondent No. 1 and 2 in their

execution application have primarily sought for an

award of Rs. 1,55,00,000/- while abandoning the

other prayers or reliefs granted in the Consumer

Complaint. Therefore, the execution proceedings

initiated by the Respondent No s. 1 and 2 are

proceedings to recover the amounts under the garb

of seeking an award. Since, the interim moratorium

has commenced against the appellant, the appellant

is estopped from undertaking any preferential

payments, as such the continuation of the execution

proceedings against the appellant would constitute

an act of double jeopardy.

15. The appellant cited P. Mohanraj and Others v.

Shah Brothers Ispat Private Limited

10, where it

was held that proceedings under Section 138 of the

NI Act are covered under “any legal action or

proceeding pending” even though they are quasi -

10

(2021) 6 SCC 258

Civil Appeal No.4048 of 2024 Page 10 of 27

criminal in nature, thus also staying criminal

proceedings against the corporate debtor. The

principle that insolvency proceedings should take

precedence over all other claims is reiterated, and the

appellant seeks similar protection under Section 96

of the IBC for interim moratoriums applicable to

personal guarantors and individuals. It is argued that

unless such a stay is granted, the insolvency process

will be frustrated, and the appellant will be subjected

to conflicting proceedings across multiple fora.

16. The appellant also relied upon the judgment of this

Court in the matter of SBI V. V.Ramakrishnan

(supra), wherein it was held that when an application

is filed under Part III of the IBC, an interim

moratorium or a moratorium is applicable in respect

of any debt due and that the protection under Section

96 of the IBC is far greater than that under Section

14 of the IBC. Reliance was also placed on the

judgment of this Court in Kaushalya Devi Massand

vs. Roopkishore Khore

11, holding that the gravity of

complaint under the NI Act cannot be equated with

an offence under the provisions of the Indian Penal

11

(2011) 4 SCC 593

Civil Appeal No.4048 of 2024 Page 11 of 27

Code, 1860

12 or other criminal offences and that an

offence under Section 138 of the NI Act is almost in

the nature of civil wrong which has been given

criminal overtones. Thus, it has been submitted,

similarly the penal provisions under the CP Act

cannot be equated to offences under the IPC. Since

these are also recovery proceedings in nature, they

would also fall within the ambit of Section 96 of the

IBC.

17. It was thus the submission of the appellant that a

bare perusal of the aforementioned judgments, would

leave no scope of interpretation that the definition of

the term ‘debt’ is wide enough to not only include

quasi-criminal proceedings but also recovery

proceedings. Therefore, it is abundantly clear that the

NCDRC erred in dismissing the application filed by

the appellant. Furthermore, in view of the settled

legal position as enunciated hereinabove, the

execution proceeding pending against the appellant

must be stayed till the operation of interim

moratorium under Section 96 of the IBC.

12

IPC

Civil Appeal No.4048 of 2024 Page 12 of 27

18. On the other hand, the respondent nos. 1 and 2,

primarily homebuyers, contend that the penalties

imposed by the NCDRC are not merely monetary

claims but punitive measures to deter unfair trade

practices. They argue that consumer protection

proceedings serve a vital public function in ensuring

compliance with orders protecting homebuyers, who

are already vulnerable due to the developer’s delays.

The respondents assert that staying such penalties

would set a dangerous precedent where developers

can indefinitely delay justice by invoking insolvency

proceedings.

19. The respondents submitted that the moratorium

imposed under Section 96 of the IBC does not extend

to criminal proceedings under Section 27 of the CP

Act. The respondents contend that the moratorium

under Section 96 of the IBC is limited to recovery

actions and civil proceedings against the debtor, with

no applicability to criminal proceedings. It is

submitted that Section 27 of the CP Act provides for

punitive action against those who fail to comply with

orders of the consumer forum, which is penal in

nature and distinct from debt recovery proceedings.

The NCDRC, by its order dated 07.02.2024, has

Civil Appeal No.4048 of 2024 Page 13 of 27

rightly held that the moratorium under IBC does not

cover criminal proceedings, and such an

interpretation is consistent with established judicial

precedents. Additionally, the respondents contend

that the nature of proceedings under Section 27 of

the CP Act is inherently punitive, as it prescribes

punishment, including imprisonment, for non -

compliance with consumer forum orders. Unlike civil

recovery proceedings, which aim at debt

enforcement, Section 27 of the CP Act serves a penal

function by ensuring compliance with consumer

rights and providing a deterrent against non -

execution of forum orders. The regulatory and penal

proceedings are distinct from civil claims and cannot

be stalled due to insolvency moratoriums. Since

Section 27 of the CP Act explicitly provides for

imprisonment as a consequence of non-compliance,

it cannot be considered a mere debt recovery

mechanism and thus falls outside the scope of the

IBC moratorium.

20. The appellant sought to rely on the Bombay High

Court’s decision in Sheetal Gupta v. National Spot

Exchange Ltd. & Ors. (supra), and this Court’s

subsequent dismissal of the challenge in National

Civil Appeal No.4048 of 2024 Page 14 of 27

Spot Exchange Ltd. v. Sheetal Gupta & Anr.

(supra). However, the respondents argued that since

this Court’s order was a mere dismissal without any

reasoning, it does not constitute a binding precedent.

Citing Kunhayammed & Ors. v. State of Kerala &

Anr.

13 and Khoday Distilleries Limited & Ors. v.

Sri Mahadeshwara Sahakara Sakkare

Karkhane Limited, Kollegal

14, the respondents

submitted that a non-speaking dismissal does not

decide any legal issue and, therefore, does not attract

the doctrine of merger. In contrast, NCDRC correctly

applied the ratio of Ajay Kumar Radheyshyam

Goenka (supra), which distinguishes civil liability

from criminal prosecution.

21. The respondents further argued that the moratorium

under IBC is designed to protect the assets of the

corporate debtor and the personal guarantor from

alienation. However, not all debts are covered under

this protection. Section 94 of the IBC clarifies that the

moratorium applies only to debts that are not

"excluded debts" under Section 79(15) of the IBC. As

per this provision, liabilities arising from fines

13

(2000) 6 SCC 359

14

(2019) 4 SCC 376

Civil Appeal No.4048 of 2024 Page 15 of 27

imposed by courts or tribunals, damages for

negligence or breach of obligation, maintenance

liabilities, student loans, and other prescribed debts

are excluded. Since the damages awarded by NCDRC

and their execution fall under "excluded debts," the

moratorium under Section 96 of the IBC does not

apply.

22. The respondents emphasize that Section 27 of the CP

Act, imposes criminal liability, including

imprisonment for non-compliance with consumer

court orders. This Court in Satyawati v. Rajinder

Singh and Another

15, highlighted the severe impact

of delays in execution proceedings, observing that

such delays deprive decree-holders of the fruits of

litigation. Given that the NCDRC award falls within

the category of "excluded debts," the moratorium

does not extend to criminal proceedings initiated for

its enforcement, these proceedings are merely delay

tactics on part of the appellant.

23. The respondents highlighted the prolonged hardship

faced by the decree holders due to the appellant’s

repeated delays in execution proceedings. Despite

15

(2013) 9 SCC 491

Civil Appeal No.4048 of 2024 Page 16 of 27

this Court’s ruling in Vijay Madanlal Chaudhary &

Ors. v. Union of India

16, which held that orders

granting "no coercive action" should not be treated as

a stay of proceedings, the appellant has used such an

order to stall the matter. Through a timeline of events

the respondents sought to demonstrate the

appellant’s continued non-compliance, starting from

the booking of flats in 2011, the filing of consumer

complaints in 2017, the NCDRC's ruling in favour of

the consumers in 2018, and the subsequent delays

in execution proceedings. Non-bailable warrants

were issued against Saranga Aggarwal in 2021 due to

non-compliance, yet the appellant has failed to take

steps to honour its obligations.

24. Lastly, the respondents counter the appellant’s

argument that the execution petition’s prayer is

defective. They submit that the prayer must be read

holistically, as it seeks to enforce compliance under

Section 27 of the CP Act. The execution petition was

filed only after the appellant failed to pay

compensation or resume construction as per the

consumer court’s orders. Given these circumstances,

16

2021 SCC OnLine SC 1048

Civil Appeal No.4048 of 2024 Page 17 of 27

the respondents contended that NCDRC’s order is

legally sound and should be upheld, as the

moratorium under IBC does not bar the continuation

of criminal proceedings for non-compliance with

consumer court awards.

25. In light of the above, the respondent submitted that

the appeal against the NCDRC’s order is devoid of

merit and should be dismissed. The judicial

precedents, as well as the legislative intent behind

the CP Act and the IBC, make it clear that the

moratorium under Section 96 of the IBC is not meant

to protect individuals from criminal prosecution.

Accepting the appellant’s argument would lead to an

anomalous situation where persons violating

consumer rights could evade penal consequences

merely by initiating insolvency proceedings, thereby

frustrating the very purpose of consumer protection

laws.

26. We have heard Mr. K. Parmeshwar, learned senior

counsel appearing for the appellant and Mr.

Shashwat Parihar, learned counsel appearing on

behalf of respondent nos.1 and 2.

27. We find that there is a fundamental distinction

between civil and criminal proceedings concerning a

Civil Appeal No.4048 of 2024 Page 18 of 27

debt moratorium. While civil proceedings are

generally stayed under IBC provisions, criminal

proceedings, including penalty enforcement, do not

automatically fall within its ambit unless explicitly

stated by law. The penalties imposed by the NCDRC

are regulatory in nature and arise due to non -

compliance with consumer protection laws. They are

distinct from "debt recovery proceedings" under the

IBC.

28. A moratorium under Section 96 of the IBC is distinct

from a corporate moratorium under Section 14 of the

IBC. Section 96 of the IBC applies to individuals and

personal guarantors and provides that during the

interim moratorium period, "any legal action or

proceedings relating to any debt shall be deemed to

have been stayed." However, it is pertinent to note

that this provision applies only to "debt" as defined

under the IBC and not to regulatory penalties

imposed for non -compliance with consumer

protection laws. A careful reading of the statutory

scheme of the IBC suggests that penalties arising

from regulatory infractions are not covered under the

ambit of "debt" as envisioned under the Code.

Civil Appeal No.4048 of 2024 Page 19 of 27

29. It is well settled that there exists a distinction

between punitive actions and criminal proceedings.

While a criminal proceeding is initiated by the State

against an accused to determine guilt and impose

penal consequences, punitive actions in the

regulatory sphere, such as those imposed by the

NCDRC, are meant to ensure compliance with the law

and to act as a deterrent against future violations.

Section 27 of the CP Act empowers consumer fora to

impose penalties to ensure adherence to consumer

protection norms. These penalties do not arise from

any "debt" owed to a creditor but rather from the

failure to comply with the remedial mechanisms

established under consumer law. Unlike a criminal

prosecution, which requires the establishment of

mens rea, the penalties imposed by NCDRC are

regulatory in nature and aim to protect the public

interest rather than to punish criminal behaviour.

30. Further, a distinction must be drawn between the

moratorium applicable to a corporate debtor under

Section 14 of the IBC and the interim moratorium

applicable to individuals and personal guarantors

under Section 96 of the IBC. The former is much

broader in scope and stays all proceedings against

Civil Appeal No.4048 of 2024 Page 20 of 27

the corporate debtor, including execution and

enforcement actions. However, Section 96 of the IBC

is more limited in its scope, staying only "legal actions

or proceedings in respect of any debt." Unlike

corporate insolvency proceedings, where the goal is a

comprehensive resolution of the company’s liabilities,

individual insolvency proceedings are des igned

primarily for restructuring personal debts and

providing relief to the debtor. The legislative intent

behind limiting the scope of the interim moratorium

under Section 96 of the IBC must be respected, and

a blanket stay on all regulatory penalties would result

in defeating the objectives of consumer protection

laws.

31. The moratorium under Section 96 of the IBC is

intended to provide temporary relief to debtors by

preventing certain proceedings against them during

the resolution process. However, this protection is

not absolute and does not extend to all categories of

debts. The legislative intent behind the moratorium

is to ensure that the debtor's assets are preserved for

an efficient resolution process and to prevent

creditors from taking unilateral actions that may

frustrate the objective of insolvency proceedings.

Civil Appeal No.4048 of 2024 Page 21 of 27

However, the statutory scheme of the IBC makes it

clear that the protection under the moratorium does

not cover all forms of liabilities, particularly those

classified as "excluded debts" under Section 79(15) of

the IBC.

32. The respondents have rightly contended that Section

94(3) of the IBC explicitly limits the scope of the

moratorium by carving out exceptions for certain

categories of debts. Section 79(15) of the IBC defines

"excluded debts" to include liabilities arising from

fines imposed by courts or tribunals, damages for

negligence or breach of obligation, maintenance

liabilities, student loans, and other prescribed debts.

This classification is based on the nature of such

obligations, which are either statutory, penal, or

personal in nature, and therefore, they do not form

part of the insolvency estate that can be discharged

under the resolution process.

33. In the present case, the damages awarded by the

NCDRC arise from a consumer dispute, where the

appellant has been held liable for deficiency in

service. Such damages are not in the nature of

ordinary contractual debts but rather serve to

compensate the consumers for loss suffered and to

Civil Appeal No.4048 of 2024 Page 22 of 27

deter unethical business practices. Courts and

tribunals, including the NCDRC, exercise their

statutory jurisdiction to award such damages, and

these are distinct from purely financial debts that

may be subject to restructuring under the IBC. Since

such damages are covered under "excluded debts" as

per Section 79(15) of the IBC, they do not get the

benefit of the moratorium under Section 96 of the

IBC, and their enforcement remains unaffected by

the initiation of insolvency proceedings.

34. Furthermore, the rationale behind excluding such

liabilities from the moratorium is rooted in public

policy considerations. If damages arising from legal

violations, consumer protection claims, or penalties

imposed by courts and tribunals were to be shielded

under the moratorium, it would create an unfair

advantage for errant entities and individuals,

allowing them to evade their legal obligations under

the guise of insolvency. The IBC, being a special law

meant to balance the interests of all stakeholders,

does not intend to provide relief to those who have

been held liable for statutory breaches or

misconduct.

Civil Appeal No.4048 of 2024 Page 23 of 27

35. The penalties imposed by the NCDRC arise due to

non-compliance with consumer protection laws and

serve a regulatory function rather than constituting

"debt recovery proceedings." This distinction is

crucial. The IBC is designed to deal with insolvency

resolution and financial distress, whereas consumer

protection laws exist to uphold consumer rights and

ensure fair business practices. The penalties under

Section 27 of the CP Act are aimed at compelling

compliance and cannot be equated with recovery of

an outstanding debt. The appellant cannot claim that

such penalties fall within the scope of a debt

moratorium, as they do not constitute financial

liabilities owed to a creditor but rather statutory

obligations enforced to uphold consumer rights.

Allowing the stay of such penalties would effectively

enable businesses to flout consumer protection

mandates by merely initiating insolvency

proceedings, which would be an unintended and

dangerous consequence of a misinterpretation of the

law.

36. The distinction between proceedings under Section

138 of the NI Act and those under Section 27 of the

CP Act must also be examined. Proceedings under

Civil Appeal No.4048 of 2024 Page 24 of 27

Section 138 of the NI Act pertain to dishonour of

cheques and are criminal in nature, where the

assumption of debt is inherent in the offence itself.

The dishonour of a cheque indicates a failure to

honour financial obligations, and the proceedings are

initiated for the recovery of the debt in question. In

contrast, Section 27 of the CP Act deals with non-

compliance with consumer protection orders, which

are remedial in nature rather than criminal. The

primary focus of proceedings under Section 27 of the

CP Act is to enforce consumer rights and ensure that

service providers fulfil their obligations. These

proceedings do not assume the existence of a

financial debt but rather deal with deficiencies in

service and the failure to comply with consumer

redressal mechanisms. Thus, the analogy drawn by

the appellant between the moratorium on Section

138, NI Act proceedings and Section 27, CP Act

proceedings is misconceived and legally untenable.

37. If the appellant’s argument is accepted, homebuyers,

who have already suffered immense delays and

financial hardship, would be further deprived of

relief. The legislative intent behind consumer

protection laws is to safeguard the interests of

Civil Appeal No.4048 of 2024 Page 25 of 27

consumers and ensure accountability from service

providers. Permitting a stay on regulatory penalties

under the guise of insolvency proceedings would

undermine the very purpose of the CP Act and

embolden errant developers to escape liability

through insolvency proceedings. Homebuyers, many

of whom invest their life savings in purchasing

residential units, are already in a precarious position

due to delays in possession and breaches of

contractual obligations. Staying penalties that serve

as deterrence against such unfair practices would

render consumer protection mechanisms ineffective

and erode trust in the regulatory framework.

38. Judicial precedents support the view that statutory

penalties and regulatory actions do not automatically

fall within the ambit of an insolvency moratorium. In

P. Mohanraj (supra) this Court held that a

moratorium under Section 14 of the IBC extends to

proceedings under Section 138 of the NI Act.

However, a distinction between debt recovery

proceedings and punitive actions needs to be created,

and therefore all criminal liabilities do not fall within

the scope of the moratorium unless explicitly covered

under the IBC. Consequently, penalties imposed by

Civil Appeal No.4048 of 2024 Page 26 of 27

regulatory bodies in the public interest cannot be

stayed merely because insolvency proceedings are

ongoing.

39. The present case does not involve a mere financial

dispute but concerns the enforcement of consumer

rights through regulatory penalties. Given that the

legislative intent behind the CP Act is to ensure

compliance with consumer welfare measures, staying

such penalties would be contrary to public policy.

Further, the appellant cannot invoke insolvency

proceedings as a shield to evade statutory liabilities.

The objective of the IBC is to provide a mechanism for

resolving financial distress, not to nullify obligations

arising under regulatory statutes.

40. For the foregoing reasons, this Court finds no merit

in the appellant’s arguments. The penalties imposed

by the NCDRC are regulatory in nature and do not

constitute "debt" under the IBC. The moratorium

under Section 96 of the IBC does not extend to

regulatory penalties imposed for non-compliance

with consumer protection laws.

41. The appeal is accordingly dismissed, and the

appellant is directed to comply with the penalties

Civil Appeal No.4048 of 2024 Page 27 of 27

imposed by the NCDRC within a period of eight weeks

from the date of this judgment.

42. Pending application(s), if any, shall stand disposed of.

…………………………. .J.

[VIKRAM NATH]

…………………………. .J.

[PRASANNA B. VARALE ]

NEW DELHI;

MARCH 04, 2025.