Attachment During Insolvency Unenforceable, But NCLT Kochi Cannot Lift Consumer Forum Order

The National Company Law Tribunal (NCLT) at Kochi has recently held that an attachment ordered by the Kerala State Consumer Disputes Redressal Commission during an insolvency moratorium is legally unenforceable but said it lacks jurisdiction to itself remove or set aside the attachment.

A bench led by Judicial Member Vinay Goel said the attachment could not survive the moratorium or the approval of the resolution plan of the corporate debtor, under which the claim had already been dealt with.

The tribunal said, “Upon approval of the Resolution Plan on 09.02.2024 under Section 31 of the Code, the claim of Respondent No. 1 stood fully and finally extinguished, and Respondent No. 1 is not entitled to pursue or continue any proceedings, including execution proceedings, or to enforce any claim or right against the Corporate Debtor or its assets dehors the approved Resolution Plan.”

However, it added that it is powerless to set aside the attachment order passed by another forum.

"This Tribunal lacks jurisdiction to directly quash or set aside the said attachment. The appropriate course for the Applicants is to approach the competent Consumer Forum or such other jurisdictional court/forum seeking removal of the attachment in light of the legal position declared herein", It added.

The dispute involved a real estate developer that entered the corporate insolvency resolution process in November 2021 on a petition filed by homebuyers. Joseph Velivil had booked an apartment in the 'Nucleus Eleganza' project for Rs 25.60 lakh. Alleging delay in construction, he approached the state consumer commission seeking a refund. His complaint was allowed in 2019. Execution proceedings followed.

During this period, the apartment came to be allotted to another buyer, Siddharth K.S. He was later recognized as the allottee during the insolvency process.

Joseph submitted his claim during CIRP. It was admitted and recorded in the information memorandum. No resolution plan was approved initially. Liquidation was ordered in March 2023. That order was later kept in abeyance. A revised resolution plan was approved by the committee of creditors and the tribunal in February 2024. The plan recorded Joseph's claim and provided that no refund would be made for claims arising from cancelled apartment bookings.

Despite this, Joseph continued with execution proceedings. In January 2024, the consumer commission ordered attachment of the apartment during the subsistence of the moratorium. He argued that the later allotment was illegal.

The tribunal rejected the argument. It held that the attachment violated the Insolvency and Bankruptcy Code. It clarified that while it could declare the legal effect of the moratorium and the resolution plan, it could not set aside orders passed by other forums allowing the aggrieved to take proper recourse before the appropriate forum.

For Applicants: Advocate Akansha Choudhary

For Respondents: Senior Government Pleader Bimal K Nath