Homebuyers cannot execute decree against promoters without liability: SC

The Supreme Court has held that decrees passed only against real estate developers cannot be enforced against directors or promoters personally unless the original adjudication clearly establishes ind

The Supreme Court has clarified that a decree passed only against a real estate developer cannot be enforced against its directors or promoters in their personal capacity unless the original adjudication clearly finds them liable.

 

Dismissing an appeal filed by homebuyers, a Bench of Justices Dipankar Datta and Augustine George Masih held that execution proceedings cannot be used to widen the scope of a decree or shift liability to individuals who were neither judgment debtors nor found personally liable in the underlying proceedings.

 

A judgment debtor is someone a court has ordered to pay money to someone else (the judgment creditor) because they lost a lawsuit or failed to meet an obligation.

 

“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,” the court observed.

 

The dispute arose from delays in the Ansal Crown Heights housing project in Gurugram. In 2022, the National Consumer Disputes Redressal Commission (NCDRC) directed the developer, Ansal Crown Infrabuild, to either complete the project or refund the amounts invested by buyers along with interest. The order, however, was confined to the company alone.

 

Following the commencement of insolvency proceedings against the developer and the resulting moratorium under the Insolvency and Bankruptcy Code (IBC), execution against the company’s assets stalled.

 

The homebuyers’ association then sought to recover the decretal amount (total money a court orders someone to pay) from the company’s directors and promoters. It contended that enforcement against the corporate entity had become impracticable.

 

The NCDRC rejected this plea, holding that its earlier order did not impose any personal liability on the directors.

 

Challenging that view, the homebuyers approached the Supreme Court. Upholding the NCDRC’s approach, the court said execution could not proceed against individuals who were not judgment-debtors or guarantors.

 

The judgment emphasised that the Consumer Protection Act contemplates a full adjudicatory process, including notice, pleadings, evidence and recorded findings, before liability can be fastened.

 

In this case, the court noted that there were no pleadings alleging any personal role of directors, no evidence establishing individual culpability, and no findings fixing personal liability.

 

In the absence of these foundational elements, execution could not be used as a substitute forum to impose liability.

 

The appeal was dismissed, though the court left it open to the homebuyers to pursue other remedies available under the Companies Act against the directors and promoters.