Case Name: Saranga Anilkumar Agarwal vs. Bhavesh Dhirajlal Sheth & Ors

Case Number: (Arising out of SLP (Civil) No(s). of 2025)

Date: pending final judgement

Quorum: Yet to be noted

 

FACTS OF THE CASE

 

The appellant, who was Mr. Saranga Anilkumar Agarwal, a real estate developer, appealed against the National Consumer Disputes Redressal Commission (NCDRC) decision, which rejected a stay on penalty orders imposed for delays in delivering residential units. The penalties were issued under consumer protection laws for the deficiency in service in the said case. The appellant , seeks the relief and compensation under the Section 96 of the Insolvency and Bankruptcy Code (IBC). He claims that the penalties should be stayed due to the interim moratorium that applies during insolvency proceedings. The NCDRC, however, further argued that these penalties are punitive in nature and should not be treated as debt recovery. The matter was then considered at the Supreme Court, where in the primary issue is whether the interim moratorium under Section 96 of the IBC extends to the penalties imposed by consumer courts in the question.

ISSUES

 

1. Whether the penalties imposed by the NCDRC can be further stayed under the ambit of Section 96 of the IBC during insolvency proceedings.
2. Whether such penalties are punitive measures distinct from the debt recovery and, therefore, are not subject to the moratorium.
3. The way to balance the consumer protection laws with the objectives of insolvency resolution under the IBC.

LEGAL PROVISIONS

 

1. Sections Section 96, The Insolvency and Bankruptcy Code (IBC): It provides for an interim moratorium on debt recovery actions against a debtor upon filing an application under the said Code.
2. Consumer Protection Act: It provides for the penalties in cases of deficiency in service and unfair trade practices.

ARGUMENTS

 

Petitioner’s Arguments:

 

1. The interim moratorium under Section 96 of the IBC protects the appellant from any financial liabilities, including penalties imposed by the NCDRC.
2. Consumer court penalties are financial liabilities that should be treated as “debt” under the IBC, making them subject to the moratorium.
3. Allowing penalties to be enforced during insolvency proceedings would be unfair to other creditors and disrupt the insolvency resolution process.

 

Respondent’s Arguments:

 

1. The penalties imposed by the NCDRC are punitive, not compensatory, and thus should not be considered “debt” under the IBC.
2. The purpose of these penalties is to deter unfair trade practices and uphold consumer rights, which should not be undermined by insolvency proceedings.
3. A stay on penalties would set a precedent where real estate developers could evade consumer protection laws by invoking insolvency proceedings.

 

ANALYSIS

 

 The core issue in this case is whether the interim moratorium under Section 96 of the IBC extends to penalties imposed for deficiency in service. The appellant relies on insolvency protection, while the NCDRC asserts that consumer protection laws function separately from debt recovery mechanisms. A relevant precedent is The State of Rajasthan Vs. Indraj Singh & Ors., where the Supreme Court ruled that judicial discretion should not undermine public confidence in institutional integrity. Similarly, in this case, the Court must determine whether staying the penalties would unfairly disadvantage consumers and erode public trust in consumer protection mechanisms. While the IBC is designed to provide relief to distressed businesses, it cannot be used as a shield against accountability under consumer laws. The Supreme Court must balance insolvency relief with the broader goal of consumer protection.

 

JUDGEMENT

 

1. While the final judgment is awaited, the Supreme Court is likely to:
2. Uphold the NCDRC’s decision: The penalties imposed serve an essential function in protecting consumer rights, and staying them would undermine the deterrent effect of consumer protection laws.
3. Clarify the distinction between debt recovery and punitive measures: The Court may rule that the interim moratorium under Section 96 of the IBC applies only to debt recovery proceedings, not to penalties imposed for misconduct or regulatory violations.
4. Emphasize the balance between insolvency resolution and consumer protection: The Court may stress that while insolvency laws provide relief to businesses, they cannot be used to evade liabilities under consumer laws

 

CONCLUSION

 

The Supreme Court’s judgment in this case is expected to reinforce the principle that insolvency proceedings cannot be used as a tool to avoid penalties for consumer rights violations. By upholding the NCDRC’s decision, the Court would establish that while businesses have insolvency protections, these do not extend to punitive measures imposed for legal and regulatory non-compliance. This aligns with the broader principle that judicial discretion must uphold public confidence in institutional mechanisms, as emphasized in The State of Rajasthan Vs. Indraj Singh & Ors.. 

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WRITTEN BY POOJA PARAMESWARAN