When a Builder Faces NCLT: Can You Sue the Promoters Individually in Consumer Court?

The Homebuyer's Nightmare and the 'Moratorium' Shield

Consider the situation of a typical homebuyer in India. You invest your life savings, take a bank loan, and pay regular EMIs for a flat that is promised in three years. Five years pass, and the site remains an empty concrete shell. Desperate, you file a complaint before the Consumer Commission seeking a refund or possession.

Suddenly, a creditor drags the builder company to the National Company Law Tribunal (NCLT) over an unpaid debt. The company enters the Corporate Insolvency Resolution Process (CIRP). Along with this news comes a restrictive legal term: moratorium.

Under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016, once a moratorium is declared, no new suits can be filed and no pending cases can continue against the corporate debtor. Historically, developers and resolution professionals used this clause as a blanket defense. They argued that because the company was in NCLT, consumer court proceedings against the individual promoters, directors, or landowners must also be stayed.

For years, the National Consumer Disputes Redressal Commission (NCDRC) often accepted this defense, adjourning consumer complaints *sine die* (indefinitely), leaving homebuyers stranded.

The Case: Tejas J. Shah vs. Mantri Technology

The Supreme Court directly addressed this practice in the case of *Tejas J. Shah & Amisha T. Shah & Ors. v. Mantri Technology Constellations Pvt. Ltd. (now known as Buoyant Technology Constellations Pvt. Ltd.) & Ors.* (Civil Appeal Nos. 4289-4290 of 2025), decided on July 27, 2026.

Homebuyers who had booked apartments in the 'Mantri Manyata Energia' residential project in Bengaluru had approached the NCDRC due to delayed possession. When the corporate developer entered insolvency, the NCDRC, on January 20, 2025, rejected the homebuyers' applications to proceed against the non-corporate respondents—namely the individual promoters, directors, and landowners—and stayed the entire case.

A division bench of Justice Vikram Nath and Justice Sandeep Mehta set aside the NCDRC's order. The Supreme Court clarified that the statutory moratorium under Section 14 of the IBC is limited to the Corporate Debtor (the developer company itself). The court noted:

The moratorium is designed to protect the assets of the company under resolution so that a recovery plan can be structured. It does not provide a protective umbrella to individual promoters, directors, or landowners in their personal capacities.

The Supreme Court directed the NCDRC to proceed with the consumer complaint against the remaining non-corporate respondents in accordance with the law.

Understanding the Legal Precedent

This is not a new legal concept. The Supreme Court established this exact principle in 2021 in the landmark case of *Anjali Rathi & Ors. v. Today Homes & Infrastructure Pvt. Ltd.*

In that case, the Court held that while homebuyers cannot execute consumer court refund orders against the assets of the corporate debtor undergoing resolution, they are entirely free to pursue their remedies against the promoters and directors personally.

Despite the 2021 precedent, district and national consumer forums frequently continued to issue blanket stays on complaints. The *Tejas J. Shah (2026)* judgment serves as a vital reminder to consumer commissions that they cannot put cases against individual directors on hold merely because the builder company is in NCLT.

What This Means for Homebuyers in Practical Terms

If you have a pending consumer court case or are planning to file one against an insolvent builder, you must understand how this applies to your situation:

• The Case Against the Company Stays Paused: You cannot seek refunds or execute possession orders against the bank accounts, land parcel, or assets belonging to the builder company itself.
• The Case Against Individuals Proceeds: The consumer court will continue the trial against the directors, promoters, and landowners whom you have named in the complaint.
• Targeting Personal Assets: If the Consumer Commission rules that there was a "deficiency in service" (under Section 2(11) of the Consumer Protection Act, 2019), the final order can be executed against the personal bank accounts and properties of the promoters and directors.

Important Caveats and Limitations

While this ruling is a positive step, homebuyers should remain realistic about the challenges:

• No Automatic Refunds: The Supreme Court did not decide the merits of the case. It only cleared the path for the trial to continue. Homebuyers must still prove deficiency in service before the NCDRC.
• Asset Recovery Challenges: Recovering funds from the personal assets of directors can be difficult. Promoters often shelter their personal wealth through trusts, offshore accounts, or under family members' names, making attachment proceedings long and complex.
• Specific Allegations Needed: You cannot hold a director liable simply because they hold a title. Your complaint must demonstrate that the specific directors were actively involved in the project's management and decision-making.

Checklist: How to Protect Your Rights

If your builder is facing financial distress or NCLT proceedings:

• Name Individuals in the Complaint: Never file a consumer case solely against the company (e.g., *XYZ Developers Pvt. Ltd.*). Always array the Managing Director, active promoters, and partners by name as co-respondents in their individual capacities.
• Verify Company vs. Personal Assets: Work with your legal counsel to identify properties or assets owned personally by the promoters (not registered under the company name) in case execution of orders becomes necessary.
• Submit Your Insolvency Claim: Do not rely solely on the Consumer Court. Ensure you also file a claim as a "Financial Creditor in a Class" (Form CA) with the Interim Resolution Professional (IRP) within the timeline specified in the NCLT public notice.

Legal Disclaimer

*This article is provided for general informational and educational purposes only. Insolvency proceedings, Consumer Protection rules, and NCLT procedures vary case-by-case. Homebuyers are advised to verify the current legal status of their developer with a qualified advocate before filing applications under the IBC or the Consumer Protection Act.*