New Delhi, Aug. 3 -- Promoters of real estate companies undergoing insolvency proceedings can no longer use the Insolvency and Bankruptcy Code (IBC) to shield themselves from legal action by homebuyers. On 27 July, the Supreme Court ruled that the moratorium under the IBC protects only the company undergoing insolvency and not its promoters or directors.

Mint explains what the ruling means for homebuyers, promoters and the insolvency process.

A bench of Justice Vikram Nath and Justice Sandeep Mehta held that the Section 14 moratorium applies only to the corporate debtor and cannot be extended to promoters, directors, subsidiaries, personal guarantors or other non-corporate parties unless the law specifically provides so.

The court said...