Case Summary: Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., 2025 INSC 314; Civil Appeal No. 4048 of 2024

• Title: Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors.
• Citiation: 2025 INSC 314; Civil Appeal No. 4048 of 2024
• Court: Supreme Court of India – Civil Appellate Jurisdiction.
• Bench: Vikram Nath and Prasanna B. Varale, JJ.
• Date of Judgment: 4 March 2025.
• Relevant Statutes / Key Provisions: 

Consumer Protection Act, 1986

• Section 27 – empowers consumer fora to enforce orders by imposing penalties, including imprisonment and fines, on non-compliant parties.
• Section 25 – procedure for execution of orders.

Insolvency and Bankruptcy Code, 2016

• Section 95 – initiation of insolvency resolution process against personal guarantors.
• Section 96 – interim moratorium on legal actions in respect of any debt once an application under Section95 is filed.
• Section 79(15) – definition of “excluded debts,” which expressly includes fines, damages and other statutory penalties.

Brief Facts

The dispute arose from a large residential development in Mumbai undertaken by Saranga Anilkumar Aggarwal through his company. Numerous homebuyers complained to the National Consumer Disputes Redressal Commission (NCDRC) about delayed possession and breach of promises. In 2018, the NCDRC directed the developer to hand over possession and pay compensation. When these orders were not followed, the NCDRC invoked Section 27 of the Consumer Protection Act, 1986, imposing penalties, including fines and potential imprisonment.

Meanwhile, insolvency proceedings were initiated against the appellant under Section 95 of the Insolvency and Bankruptcy Code, 2016 as a personal guarantor to loans for a related company. Invoking the interim moratorium under Section 96 of the Code, the appellant sought a stay on the consumer penalties, arguing they were “debts” under the Code. The NCDRC rejected this plea, holding that its penalties were regulatory sanctions, not debts. The appellant then appealed to the Supreme Court to decide whether the interim moratorium under the Code shielded him from consumer penalties.

Issues

• Does the interim moratorium triggered by filing an application under Section95 IBC automatically stay the execution of penalty orders issued by a consumer forum under Section27 CP Act?
• Are penalties imposed under Section27 CP Act for non-compliance with consumer forum orders “debts” for the purposes of the IBC, or are they “excluded debts” under Section79(15)?
• Can the interim moratorium under Section96 IBC be applied equally to civil recovery actions and penal enforcement actions?
• Does allowing a stay on penalty execution undermine consumer rights, and how does the Court balance the objectives of the Consumer Protection Act with those of the Insolvency and Bankruptcy Code?
• How far do precedents such as P. Mohanraj (cheque dishonour stayed under Section14 IBC) and V. Ramakrishnan (scope of moratorium for personal guarantors) extend to penalties imposed by a consumer forum?

Arguments

A. Appellant’s (Saranga Anilkumar Aggarwal’s) Arguments

The appellant’s submissions were built on a broad and inclusive reading of the moratorium under the Insolvency and Bankruptcy Code. According to the appellant, Section 96(1)(b) IBC creates an automatic stay of “any legal action or proceeding” in respect of any debt once an application under Section 95 is filed, and this should include execution proceedings under Section 27 of the Consumer Protection Act. The appellant sought to characterise the penalties imposed by the consumer forum as a form of debt, reasoning that they stem from financial obligations arising out of delayed or undelivered flats and therefore fall within the definition of a liability or obligation “in respect of a claim” under Section 3(11) of the Code. In the appellant’s view, these penalties were not truly penal but compensatory and thus should be suspended by the interim moratorium. This argument was coupled with the claim that the personal guarantor provisions in Part III of the Code were intended to mirror the corporate insolvency framework under Section 14, and therefore a similarly broad moratorium should apply to personal guarantors. In support of this proposition the appellant cited P. Mohanraj, where proceedings under Section 138 of the Negotiable Instruments Act were stayed during corporate insolvency, and V. Ramakrishnan, which extended certain moratorium protections to personal guarantors. The appellant also referred to Kaushalya Devi Massand v. Roopkishore Khore, (2011) 4 S.C.C. 593 (India) to argue that statutory provisions with criminal overtones can nonetheless be essentially civil in character. Finally, the appellant warned that allowing execution of penalties while insolvency proceedings were pending would undermine the collective process envisioned by the Code, result in preferential payments to some creditors and defeat the policy of centralising claims in a single forum.

B. Respondents’ (Homebuyers/Consumers) Arguments

The respondents, consisting of homebuyers and consumer complainants, framed their submissions around the opposite premise. They insisted that Section 27 of the Consumer Protection Act creates a regulatory and punitive regime that is fundamentally different from debt recovery. Penalties imposed for non-compliance with consumer forum orders are in the nature of fines or damages for breach of a statutory obligation and therefore squarely fall within the category of “excluded debts” listed in Section 79(15) of the Code. Because of this classification, the interim moratorium in Section 96 cannot be invoked to block the execution of these penalties. The respondents stressed that the Consumer Protection Act was enacted to redress the imbalance between individual consumers and large traders or developers, and that allowing a stay would effectively gut the enforcement mechanism of the statute. They pointed out that the Supreme Court’s decision in P. Mohanraj was distinguishable because cheque dishonour proceedings directly concern recovery of a financial debt, whereas penalties under Section 27 CP Act are designed to punish non-compliance and deter misconduct. They also underlined that Section 96 IBC is drafted differently from Section 14: Parliament deliberately chose narrower language for personal guarantors, reflecting the need to hold individuals accountable for regulatory infractions even during insolvency. On the policy front, the respondents contended that granting a moratorium would reward non-compliance and inflict further hardship on consumers who had already suffered delays and financial losses. They drew support from Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corp. of India Ltd., (2023) 10 S.C.C. 545 (India), where the Court held that criminal proceedings do not abate during insolvency, and from Khoday Distilleries Ltd. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., (2019) 4 S.C.C. 376 (India), which addressed the limits of precedential value. This suite of arguments presented the Court with a stark policy and doctrinal choice between insulating the appellant from penalties during insolvency or protecting consumers from further delay.

Judgment

On 4 March 2025 the Supreme Court dismissed the appeal and upheld the NCDRC’s refusal to stay the execution of penalties imposed under Section 27 of the Consumer Protection Act, 1986. The Court explained that Section 96 of the Insolvency and Bankruptcy Code, 2016 creates an interim moratorium only for “debts” and that Parliament has explicitly excluded fines, penalties and damages from that category under Section 79(15). Penalties under Section 27 CP Act are regulatory sanctions designed to secure compliance with consumer orders and therefore do not qualify as “debts.” Distinguishing P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 S.C.C. 258 (India), the Court reasoned that the cheque dishonour cases there related directly to recovery of financial dues, whereas the penalties here are imposed for defiance of a statutory order. It also relied on Ajay Kumar Radheyshyam Goenka v. Tourism Fin. Corp. of India Ltd., (2023) 10 S.C.C. 545 (India) to reiterate that criminal or penal proceedings generally continue despite insolvency. The justices emphasised that the Consumer Protection Act exists to protect vulnerable consumers and that granting a stay would undermine the statute by letting defaulting developers postpone penalties indefinitely. The Court therefore ordered the appellant to comply with all outstanding penalties within eight weeks.

Ratio Decidendi

The key legal principle is that penalties imposed under Section 27 of the Consumer Protection Act are “excluded debts” under Section 79(15) IBC and thus fall outside the interim moratorium under Section 96. Insolvency protection for personal guarantors does not extend to statutory or regulatory penalties, which are imposed to enforce public obligations rather than recover private debts.

Final Decision

The Supreme Court’s ultimate decision was to dismiss the appeal and uphold the order of the NCDRC. It confirmed that the execution of penalties under Section 27 of the Consumer Protection Act could proceed unabated despite the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code. The Court directed the appellant, Saranga Anilkumar Aggarwal, to comply with all outstanding penalty orders within eight weeks from the date of judgment. In effect, the Court reaffirmed the primacy of consumer protection over insolvency protection in the limited sphere of statutory penalties and underscored that insolvency proceedings cannot be used as a tool for evading public-law responsibilities. This decision has far-reaching implications: it fortifies the enforcement powers of consumer fora, clarifies the limits of the IBC’s protective ambit for personal guarantors, and strengthens the doctrinal distinction between “debt” and “penalty” in Indian financial law. In Bluebook citation form, the holding may be stated as Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth & Ors., 2025 INSC 314 (India).

References:

1. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 S.C.C. 258 (India).
2. State Bank of India v. V. Ramakrishnan, (2018) 17 S.C.C. 394 (India).
3. Ajay Kumar Radheyshyam Goenka v. Tourism Fin. Corp. of India Ltd., (2023) 10 S.C.C. 545 (India).
4. Khoday Distilleries Ltd. v. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., (2019) 4 S.C.C. 376 (India).
5. Satyawati v. Rajinder Singh, (2013) 9 S.C.C. 491 (India).