IBC Moratorium Does Not Shield Penalties Under Consumer Protection Act, Supreme Court Asserts

The Supreme Court of India has delivered a landmark judgment in the matter of Saranga Anilkumar Aggarwal vs Bhavesh Dhirajlal Sheth & Ors.¹ clarifying that the interim moratorium under the Insolvency and Bankruptcy Code (IBC) does not shield individuals or companies from regulatory penalties imposed under consumer protection laws. This ruling has significant implications for both insolvency proceedings and consumer rights.

Background of the Case

The case involved Saranga Anilkumar Aggarwal, the proprietor of East and West Builders, who faced insolvency proceedings before the National Company Law Tribunal (NCLT) under the IBC. Aggarwal had been penalized by the National Consumer Disputes Redressal Commission (NCDRC) for failing to deliver possession of residential units to homebuyers within the stipulated timeframe. The NCDRC imposed multiple penalties (27 in total) for non-compliance of his agreed terms with the homebuyers. Aggarwal argued for stay over