Consumer Proceedings Not Maintainable after IBC Moratorium Imposition: Bombay HC quashes Consumer Forum Order against SREI Equipment [Read Order]

The Bombay High Court has quashed an order passed by the District Consumer Dispute Redressal Commission, Akola, and subsequent recovery proceedings against Srei Equipment Finance Limited, holding them to be in contravention of the Insolvency and Bankruptcy Code (IBC), 2016.

The petition was filed by Srei Equipment Finance Limited, which was undergoing the Corporate Insolvency Resolution Process (CIRP). The petitioner challenged an order dated 20.07.2022 passed by the Consumer Commission in a complaint filed by a customer, Rajesh Bajirao Khandewar.

The complaint, which was initially filed against the petitioner's employees, concerned the alleged illegal repossession of the customer's JCB machine. The Commission had directed the return of the machine, and subsequent recovery proceedings, including the issuance of bailable warrants against the petitioner's owner and CEO, were initiated.

Counsel for the petitioner submitted that the order of the Consumer Commission was passed after a moratorium was imposed under Section 14 of the IBC on 08.10.2021. He argued that the proceedings were therefore prohibited and that the order was not binding on the company, as it was not a party to the original complaint. He further contended that the resolution plan had since been approved by the NCLT, which extinguished all claims not part of the plan.

Per contra, the counsel for the respondent argued that the complaint was maintainable, as it related to a deficiency in service and not merely a monetary recovery, and that the non-joinder of the company did not invalidate the proceedings against its employees.

A single bench of Justice M.M. Nerlikar, after considering the provisions of Sections 14 and 31 of the IBC, held that the moratorium strictly prohibits the institution or continuation of any legal proceedings against the corporate debtor. The Court observed that the order directing the return of the JCB machine upon payment of dues was akin to a monetary decree and thus squarely fell within the definition of 'property' under the IBC, attracting the bar under Section 14.

The Court noted that allowing such proceedings to continue would frustrate the object of the IBC and that the order passed by the Consumer Commission was "non-est" in the eyes of the law.

Accordingly, the Court allowed the writ petition and quashed the order dated 20.07.2022, the subsequent recovery proceedings, and the bailable warrants issued against the company's owner and CEO.

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