When CIRP Does Not Put Every Project Dispute On Hold

There’s a common misconception in company restructuring. It is that an insolvency moratorium protects everyone associated with a distressed company. In reality, the statutory protection applies to the corporate entity undergoing insolvency. Connected individuals and business partners may remain exposed to separate proceedings and personal liability.

Promoters, directors, personal guarantors, project entities and landowners may all face separate exposure when a real estate developer or project company enters the Corporate Insolvency Resolution Process (CIRP). Homebuyers and consumers may name both the company and its directors, promoters or land partners in the same claim. The Supreme Court’s ruling in the Mantri Manyata Energia Project case, reinforces that Section 14 of the Insolvency and Bankruptcy Code (IBC) protects the corporate debtor and its assets, rather than every party connected with it. It does not extend the same protection to non-debtor individuals, so proceedings