Saranga Anilkumar Aggarwal vs. Bhavesh Dhirajlal Sheth

2025 INSC 314
REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 4048 OF 2024

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
1
Consumer Disputes Redressal Commission , 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
Signature Not Verified
Digitally signed by
NEETU KHAJURIA
Date: 2025.03.04
17:23:23 IST
Reason:

1
NCDRC
Civil Appeal No.4048 of 2024 Page 1 of 27


application under Section 95 of the Insolvency and
2
Bankruptcy Code, 2016 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
3
Consumer Protection Act, 1986 , 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 2 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/1362/2017 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
4
Tribunal 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 3 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 4 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
5
Bank of India v. V. Ramakrishnan & Anr. , 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 5 of 27


Goenka v. Tourism Finance Corporation of India
6
Ltd. . 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
7
India and Another , 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
8
the Negotiable Instruments Act, 1881 .
8. Furthermore, the NCDRC rejected the applicant’s
reliance on the Bombay High Court’s decision in
Sheetal Gupta vs. National Spot Exchange
9
Limited and Ors. , 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 6 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 7 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 8 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 Nos. 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.
10
Shah Brothers Ispat Private Limited , 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 9 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
11
vs. Roopkishore Khore , 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 10 of 27


12
Code, 1860 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 11 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 12 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 13 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 &
13
Anr. and Khoday Distilleries Limited & Ors. v.
Sri Mahadeshwara Sahakara Sakkare
14
Karkhane Limited, Kollegal , 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 14 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
15
Singh and Another , 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 15 of 27


this Court’s ruling in Vijay Madanlal Chaudhary &
16
Ors. v. Union of India , 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 16 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 17 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 18 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 19 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 designed
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 20 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 21 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 22 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 23 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 24 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 25 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 26 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.
Civil Appeal No.4048 of 2024 Page 27 of 27