A A Estates Private Limited vs Kher Nagar Sukhsadan Co-Operative Housing Society Ltd. & Ors.

2025 INSC 1366 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2025 [Arising out of SLP (C) No. 10758 of 2025]

A A ESTATES PRIVATE LIMITED THROUGH ITS RESOLUTION PROFESSIONAL HARSHAD SHAMKANT DESHPANDE AND ANOTHER … APPELLANT(S)

VERSUS

KHER NAGAR SUKHSADAN CO-OPERATIVE HOUSING SOCIETY LTD. & ORS. … RESPONDENT(S)

JUDGMENT

R. MAHADEVAN, J.

Leave granted.

2. This Civil Appeal has been preferred against the final judgment and order

dated 11.09.2024 passed by the High Court of Judicature at Bombay 1 in Writ

Petition No. 3893 of 2024.

Signature Not Verified Digitally signed by BORRA LM VALLI Date: 2025.11.28 18:04:32 IST Reason: 1 Hereinafter referred to as “the High Court” 2

3. Appellant No. 1 is the Corporate Debtor, which is presently undergoing

Corporate Insolvency Resolution Process2 under the provisions of the

Insolvency and Bankruptcy Code, 20163. Appellant No. 2, Mr. Harshad

Shamkant Deshpande is the Resolution Professional appointed in respect of

Appellant No. 1 in the said proceedings. Before the High Court, they were

arrayed as Respondent Nos. 8 and 9 in the writ petition, out of which the present

appeal arises.

4. Respondent No. 1, Kher Nagar Sukhsadan Co-operative Housing Society

Ltd., preferred the aforesaid writ petition before the High Court against

Respondent Nos. 2 to 7 and the present appellants, inter alia seeking the

following reliefs:

(a) issuance of a writ of mandamus directing Respondent Nos. 2 to 7 to grant

Respondent No. 1 and/or Respondent No. 8 the requisite permissions and

approvals, in accordance with law, for redevelopment of Respondent No. 1

Society in furtherance of the Development Agreement dated 10.12.2023

executed with Respondent No. 8, within such period as the Court deems fit;

(b) issuance of a writ of mandamus directing Respondent Nos. 2 to 7 to

recognize and accept Respondent No. 8 as the duly appointed Developer of

Respondent No. 1 Society and to disregard / reject any claims or objections

raised by the appellants in relation thereto;

2 For short, “CIRP” 3 For short, “IBC” 3

(c) issuance of a writ of mandamus directing Respondent Nos. 2 to 7 to grant

Respondent No. 1 and/or Respondent No. 8 the necessary permissions and

approvals, in accordance with law for redevelopment of Respondent No. 1

Society in furtherance of the Development Agreement dated 10.12.2023

executed with Respondent No. 8, within such period as the Court deems fit.

5. By the impugned judgment, the High Court made the Rule absolute in

terms of the aforesaid prayer clauses and accordingly, disposed of the writ

petition filed by Respondent No. 1.

Factual matrix

6. Originally, Respondent No. 1 Society and Respondent No. 3 Maharashtra

Housing & Area Development Authority4, had entered into a Lease Deed dated

12.02.1996 thereby leasing a plot of land admeasuring 1890.31 sq.m. along with

the building thereon known as “Kher Nagar Sukh Sadan” situated at Building

No. 33, Survey No. 341 (part), CTS No. 607 (part), Kher Nagar Mumbai

Suburban District, Bandra (E), Mumbai5 in favour of Respondent No. 1 Society

for a period of 99 years with effect from 01.04.1980.

6.1. On 16.10.2005, Respondent No. 1 Society executed a registered

Development Agreement with Appellant No. 1 for redevelopment of the subject

project. Pursuant to the same, a Power of Attorney dated 23.12.2005 was also 4 For short, “MHADA” 5 For short, “the subject project” 4

executed by Respondent No. 1 in favour of Appellant No. 1 and its directors.

After disputes and negotiations, a Supplementary Development Agreement

dated 09.04.2014 was executed, under which Appellant No. 1 was required to

complete redevelopment within 40 months from the receipt of the

commencement certificate. Appellant No. 1 obtained approvals, including No

Objection Certificate from Respondent No. 3, Intimation of Disapproval (IOD)

and Plan sanctions from the Municipal Corporation, after paying substantial

amounts of Rs. 4,02,20,590/- and Rs. 52,70,836/- towards infrastructure

charges.

6.2. However, redevelopment was stalled as the remaining 41 members failed

to vacate the premises, and the Society continued to raise repeated allegations

against Appellant No. 1. Appellant No. 1 also incurred expenses to carry out

necessary repairs to the existing building, but the Society persisted in attributing

the delays to the developer.

6.3. Disputes deepened, and in 2019, CIRP was initiated against Appellant

No. 1, but was set aside on 12.06.2020. Subsequently, by order dated

06.12.2022, CIRP was admitted against Appellant No. 1 at the instance of State

Bank of India, and Appellant No. 2 was appointed as the Resolution

Professional.

6.4. In the meanwhile, Respondent No. 1 Society disregarding its own lapses

and the statutory moratorium under Section 14 of the IBC, purported to

terminate the Development Agreement with Appellant No. 1 and, by executing a 5

fresh Development Agreement and Power of Attorney dated 10.12.2023,

appointed Respondent No. 8 as a new developer. The Society also sought

approvals from MHADA in favour of Respondent No. 8. This was done despite

the express objections raised by Appellant No. 2 in his capacity as Resolution

Professional.

6.5. Thereafter, Respondent No. 1 Society filed WP. No. 3893 of 2024 which

was disposed of by the High Court, by the impugned judgment dated

11.09.2024. Aggrieved by the same, the appellants are before this Court with the

present appeal.

Contentions of the Parties

7. The learned senior counsel for the appellants submitted that the impugned

judgement is in manifest disregard of the principles of natural justice. The High

Court proceeded to hear the writ petition on 02.09.2024 and reserved it for

orders on the very next day, without affording the appellants an opportunity to

file their reply on record. Such undue haste has resulted in grave prejudice to the

appellants and is contrary to settled law.

7.1. It was submitted that Appellant No. 1 was vested with valid and

subsisting development rights in respect of the subject property arising from a

registered Development Agreement dated 16.10.2005 and a Supplementary

Agreement dated 09.04.2014. These rights were duly created and acted upon 6

through substantial investment exceeding Rs. 10.82 crores, including payments

for additional buildable area, infrastructure charges, compensation to allottees,

and statutory approvals from MHADA and MCGM. These investments and

rights constitute valuable assets of the corporate debtor. However, delays and

disputes attributable to Respondent No. 1 Society, including the refusal by a

majority of members to vacate the premises and the legal proceedings initiated

by dissenting members, prevented redevelopment from progressing.

7.2. According to the learned senior counsel, the impugned judgment, granting

permission to Respondent No. 1 Society to appoint a new developer

(Respondent No. 8) for redevelopment of the subject property, ignored the

subsisting and registered Development Agreements and the statutory

moratorium imposed under Section 14 of the IBC. It has the effect of

extinguishing valuable development rights forming part of the estate of

Appellant No. 1, being the corporate debtor, in violation of both contract and

Code. The redevelopment dispute culminated in Respondent No. 1 Society

purportedly appointing a new developer, Respondent No. 8 in December 2023

during the pendency of the CIRP of Appellant No. 1, in contravention of the

moratorium imposed under Section 14 of the IBC. Instead of approaching the

adjudicating authority under the Code or resolving contractual disputes through

arbitration, Respondent No. 1 Society instituted a writ petition seeking a

mandamus to facilitate permissions in favour of Respondent No. 8. The High 7

Court failed to appreciate that no document evidencing the termination of the

Development Agreement was ever placed on record.

7.3. The learned senior counsel further submitted that the impugned judgment

disregards binding precedent that prohibits adjudication of contractual disputes

under Article 226 of the Constitution in the face of an arbitration agreement and

wrongly validates an alleged termination that was neither effected in law nor on

fact. The judgment, in effect, deprives the corporate debtor of valuable

development rights recognized as assets under Section 3(27) of the IBC, at a

time when resolution plan proposing the revival of the subject project was

actively under consideration by the Committee of Creditors. In these

circumstances, the impugned judgment not only undermines the objective of the

Code but also frustrates the statutory mandate of maximizing the value of assets

during the CIRP. The present appeal, therefore, raises substantial questions of

law concerning the interplay between contract, moratorium, and constitutional

remedies, and deserves to be allowed.

7.4. It was further contended that the impugned judgment has a direct and

adverse impact on the CIRP of Appellant No. 1 by unilaterally extinguishing

valuable development rights held by the corporate debtor. These rights, arising

from duly executed and registered agreements, constitute “property” within the

meaning of Section 3(27) of the IBC, which includes all legal or equitable

interests, whether present or future, vested or contingent, tangible or intangible. 8

The development rights bestowed upon Appellant No. 1 by Respondent No. 1

Society form part of the assets of the corporate debtor and are included in the

information memorandum. To divest the corporate debtor of these valuable

assets would have a detrimental effect on its revival and adversely impact the

interests of creditors, primarily public sector financial institutions.

7.5. The learned senior counsel placed reliance on Victory Iron Works Ltd v.

Jitendra Lohia and another6, wherein it was held that development rights are

“assets” within the meaning of Sections 18(f) and 25(2)(a) of the IBC. The

Resolution Professional is duty-bound to take custody and control of such

assets, and any extinguishment without due process undermines the object of the

Code and the ability of the Resolution Professional and the Committee of

Creditors to maximize asset value. Hence, the impugned judgment violates

Section 14(1)(b) of the IBC.

7.6. It was further submitted that the impugned judgment violates the statutory

moratorium under Section 14. The CIRP against Appellant No. 1 was admitted

on 06.12.2022, upon which a moratorium was imposed interdicting the

institution or continuation of proceedings against the corporate debtor. Despite

being fully aware of the moratorium and the appointment of the Resolution

Professional, Respondent No. 1 instituted Writ Petition No. 3893 of 2024

seeking to validate a fresh Development Agreement with Respondent No. 8. The

High Court’s directions, rendered during the subsistence of the moratorium, are

6 (2023) 7 SCC 227 9

non est in law, as held in Alchemist Asset Reconstruction Co. Ltd v. Hotel

Gaudavan (P) Ltd. and others7, which emphasis that Section 14 creates a

statutory status quo to ensure the unhindered conduct of the insolvency process.

7.7. The learned senior counsel also highlighted the substantial financial

contributions made by Appellant No. 1 towards the project, including

Rs.4,02,20,590/- paid to Respondent No. 3 on 14.09.2011 towards the purchase

of additional buildable area of 2961.20 sq.m., whose current value is

Rs.12,78,57,213/-, and Rs.52,70,936/- paid to Respondent No. 7 on 19.10.2011

towards infrastructure charges. Further, Appellant No. 1 paid Rs. 5,66,46,428/-

towards compensation to allottees between 2008 and 2016, apart from rent

payments made at their request even before the IOD was issued. The cumulative

expenditure incurred by Appellant No. 1, valued at around Rs. 24 crores with

interest, has a direct bearing on its rights and equities in the project. The failure

of the High Court to consider these significant contributions renders the

impugned judgment legally unsustainable.

7.8. It was further pointed out that there exists a valid and subsisting

arbitration agreement between Appellant No. 1 and Respondent No. 1 Society,

which has already been invoked. Despite having agreed to arbitration vide letter

dated 06.11.2021, Respondent No. 1 deliberately chose to bypass the arbitral

mechanism and instead invoked the extraordinary writ jurisdiction. Such

conduct amounts to forum shopping, as writ jurisdiction cannot be invoked in

7 2017 SCC OnLine SC 1362 10

matters arising from private contractual disputes, particularly where parties have

agreed to arbitration, as held in Empire Jute Co. Ltd and others v. Jute

Corporation of India Ltd. and another8, Joshi Technologies International Inc.

v. Union of India and others9, and Union of India and others v. Puna Hinda 10.

Respondent No. 1, despite having recourse to arbitration under the Development

Agreement and Supplementary Agreement, failed to exercise that remedy in a

timely manner. Instead, upon commencement of the CIRP and the imposition of

the moratorium, it approached the High Court to circumvent the statutory bar

under Section 14 of the IBC.

7.9. The learned senior counsel submitted that Respondent No. 1 Society was

fully aware of the CIRP proceedings and the appointment of the Resolution

Professional, having received communications dated 11.04.2023 and 19.08.2023

and hence, the writ petition filed by them was nothing but an attempt to bypass

the moratorium and abuse the process of law. It was also submitted that once the

CIRP had commenced, the appropriate forum for Respondent No. 1 Society to

raise its grievances was the Adjudicating Authority in accordance with the

framework of the Code and the failure to do so reinforces that the writ

proceedings were misconceived and not maintainable in law.

7.10. It was further submitted that the inordinate delay in execution and

completion of redevelopment of the subject project is wholly attributable to

8 (2007) 14 SCC 680 9 (2015) 7 SCC 728 10 (2021) 10 SCC 690 11

Respondent No. 1 Society. From 2005 till the initiation of CIRP proceedings,

internal disputes among members, unreasonable demands for additional

benefits, and persistent obstruction in handing over possession repeatedly stalled

the project. These acts and omissions are recorded in contemporaneous

documents and show that delays were caused by the Society’s internal discord

and obstructionist behaviour, despite the appellant’s consistent readiness to

proceed. Out of 60 allottees, 41 refused to vacate the premises, litigation was

initiated by members, and several illegal constructions hampered progress.

Delays also arose due to late receipt of spill-over FSI clearance and persistent

demands for further revision of the redevelopment proposal between 2014 and

2019. Accordingly, no blame can be fastened on Appellant No. 1 and the delay

must be attributed solely to Respondent No. 1 Society.

7.11. The learned senior counsel further submitted that the High Court erred in

holding that the Development Agreement dated 16.10.2005 and the

Supplementary Agreement dated 09.04.2014 stood terminated pursuant to the

Special General Body Meeting of Respondent No. 1 Society held on

09.06.2019. This finding is patently erroneous, as no resolution effecting such

termination was passed in that meeting, and no document evidencing the same

was produced before the High Court. Even the alleged notice dated 02.12.2019

merely threatened termination, while the alleged public notice dated 31.12.2019

was issued during the moratorium period and without following due process. It

is well settled that a registered agreement cannot be terminated unilaterally; 12

cancellation of such an instrument must be effected by a competent civil court.

Any unilateral act purporting to terminate a registered agreement is legally

untenable and without effect.

7.12. In conclusion, it was submitted by the learned senior counsel that the

impugned judgment dated 11.09.2024 passed by the High Court is unsustainable

in law and on facts and deserves to be set aside. The development rights of the

corporate debtor in the subject project, being valuable assets under the Code,

must be protected from arbitrary extinguishment in the interest of justice, equity,

and to safeguard the sanctity of the CIRP process.

8. Per contra, the learned senior counsel for Respondent No. 1 submitted

that the respondent is a registered Co-operative Housing Society comprising

about 60 members belonging to the lower-income group, including tailors,

stenographers, and drivers. The Society is located at Building No. 33, known as

Sukhsadan CHS situated at Kher Nagar, Bandra (East), Mumbai. The building

constructed in 1956, was declared a C-1 category (dangerous structure) under

Section 264 of the Maharashtra Municipal Corporations Act, 1949 11. Between

2006 and 2017, several notices were issued to Respondent No. 1 Society by the

Municipal Corporation of Greater Mumbai (MCGM) under Sections 353B, 354,

and 354A of the MMC Act as well as by MHADA, indicating that the structure

was dilapidated and required redevelopment.

11

For short, “the MMC Act” 13

8.1. It was further submitted that a Development Agreement dated 16.10.2005

and a power of attorney dated 23.12.2005 were executed, requiring completion

of construction within 24 months (18 months plus 6 months’ grace), i.e., by

October 2007. Despite these timelines, no progress was made for almost two

decades. MHADA issued an offer letter on 24.08.2011 and a NOC on

05.01.2012. Clause 18 of the NOC mandated submission of building plans

within six months, failing which the NOC would stand cancelled. A

Supplementary Development Agreement dated 09.04.2014 again required

Appellant No. 1 to complete the project within 40 months from commencement,

pay transit rent, and provide compensation before vacating the premises. An

Intimation of Disapproval (IOD) was received only on 04.09.2014 i.e., almost

ten years later, subject to the condition requiring negotiation and provision of

alternate accommodation to the tenants. Between 01.07.2010 and 15.12.2018,

only 19 of the 60 members vacated their premises based on the transit rent paid

by Appellant No. 1. The payments were subsequently stopped, forcing re-

occupation of unsafe premises. Repeated correspondences were addressed to

Appellant No. 1 calling upon it to register the Supplementary Agreement,

execute Permanent Alternate Accommodation Agreements, and commence

construction, but no steps were taken. This compelled Respondent No. 1 Society

to terminate the Development and Supplementary Agreements by a resolution

dated 09.06.2019. The said decision was communicated to Appellant No. 1 by 14

notice dated 02.12.2019 and reiterated by reply dated 06.11.2021. Consequently,

a public notice confirming termination was issued on 31.12.2019.

8.2. The learned senior counsel further submitted that the first CIRP against

Appellant No. 1 was initiated on 14.11.2019, but was subsequently vacated on

12.06.2020 after settlement. Despite this, Appellant No. 1 took no action to

restart the project. Thereafter, arbitration was invoked by Appellant No. 1 on

28.10.2021, admitting termination. In such circumstances, Respondent No. 1

appointed Respondent No. 8 as the new developer on 07.11.2021, and MHADA,

by letter dated 18.11.2021, permitted redevelopment through Respondent No. 8.

8.3. It was submitted that the second CIRP was initiated against Appellant

No.1 only on 06.12.2022 at the instance of State Bank of India for a debt of

Rs.130 crores, well after termination. Thereafter, on 10.12.2023, a Development

Agreement was executed between Respondent Nos. 1 and 8, and possession was

handed over. Respondent No. 8 commenced redevelopment, including

demolition, payment of transit rent, and piling work. Claiming protection under

moratorium, Appellant No. 2, the Resolution Professional, addressed letters to

MHADA not to entertain any proposal for redevelopment of Respondent No. 1.

Therefore, Respondent No. 1 filed Writ Petition No. 3893 of 2024 before the

High Court seeking directions to Respondent Nos. 2 to 7 (statutory authorities)

for redevelopment permissions. However, no relief was sought against the

appellants.

15

8.4. It was submitted that after serving an advance copy of the writ petition

and in the presence of the counsel for appellants, the High Court by judgment

dated 11.09.2024, disposed of the writ petition and directed the authorities to

grant approvals for redevelopment within two months. Pursuant thereto,

Respondent No. 8 entered into agreements for alternate accommodation with

members in January and February 2025, demolished the building, and

commenced the redevelopment work. In April 2025, a commencement

certificate was obtained by Respondent No. 8, and piling work was underway.

While so, this Court issued notice and directed the parties to maintain status quo

on 15.04.2025, in consequence of which, MHADA revoked the commencement

certificate granted to Respondent No. 8 citing the interim order of this Court.

According to the learned senior counsel, the present appeal filed belatedly on

10.02.2025, i.e., seven months after demolition, was clearly an afterthought to

obstruct redevelopment.

8.5. The learned senior counsel contended that the submission of the

appellants that their development rights are assets protected under Section 14 of

the IBC is clearly misconceived. The development agreements stood terminated

by valid resolutions long before the second CIRP (December 2022), possession

of the property always remained with the Society, and no physical possession

was ever given to Appellant No.1. Therefore, no “asset” or “occupied property”

of the corporate debtor existed to attract moratorium protection. 16

8.6. The learned senior counsel relied on Rajendra K. Bhutta v. Maharashtra

Housing and Area Development Authority and another 12 to contend that the

moratorium under section 14(1)(d) extends only to properties “occupied” by the

corporate debtor – requiring actual physical possession – which never occurred

in the present case. It was further submitted that the ratio of Victory Iron works

is inapplicable both on facts and in law to the present case as that case involved

a composite arrangement including financial assistance, shareholding, sale

certificates, and possession, thereby conferring quasi-ownership rights. None of

these features exist here – no financial assistance was given by Appellant No. 1

to Respondent No. 1, no shareholding or transfer of interest occurred, the

Development Agreement was terminated, and possession was never delivered.

8.7. It was further pointed out that the same appellant and Resolution

Professional previously relied on an identical plea of moratorium in another

redevelopment (Govind Tower) which tragically collapsed in Mumbai. The

Bombay High Court rejected that contention, permitting redevelopment through

a new developer, and this Court upheld the said decision by order 07.02.2025 in

SLP (C) No. 18909 of 2024. In yet another matter concerning Tagore Nagar,

Appellant No. 1 failed to redevelop a society and claimed immunity under the

IBC. The High Court, by its judgment dated 21.03.2024, noted the chronic

failures of Appellant No.1 and permitted redevelopment through another

developer. The SLP filed against the same was dismissed as withdrawn on

12 (2020) 13 SCC 208 17

28.04.2025 in SLP (C) No. 24807 of 2024. All these orders have been

suppressed by the appellants, thereby disentitling them to any relief under

Article 136 as held in G. Narayanaswamy Reddy (Dead) By LRs. and another

v. Government of Karnataka and another13.

8.8. According to the learned senior counsel, the appellants’ plea of breach of

natural justice is unfounded. The writ petition was served in advance, the

appellants were represented, and they neither filed a counter-affidavit nor sought

time. They consciously chose not to respond, thereby waiving their right to

reply. The High Court correctly recorded their appearance and submissions.

Hence, there is neither procedural irregularity nor prejudice.

8.9. It was further submitted that for nearly two decades, Appellant No. 1

failed to fulfil its two core obligations viz., (i) payment of transit rent and

(ii)timely completion of redevelopment. Out of 60 members, 41 never received

any rent; 19 received it only briefly before stoppage. This forced members to

reoccupy unsafe premises despite repeated demolition notices under the MMC

Act. Appellant No.1’s conduct has been exploitative and obstructive, depriving

low-income members of their fundamental right to life and shelter under Article

21 of Constitution of India. In contrast, Respondent No. 8 has provided alternate

accommodation, paid transit rent, and commenced redevelopment work. To stall

this project now would cause grave and irreparable hardship to innocent

members.

13

(1991) 3 SCC 261 18

8.10. It was lastly submitted that Appellant No. 1’s development rights were at

best contingent upon fulfilment of contractual obligations. With total failure of

consideration, no enforceable or vested rights accrued. Therefore, the appeal is

devoid of merit – factually and legally – and any interference at this stage would

unjustly penalize 60 low-income families who have already vacated and are

awaiting their rehabilitated homes.

9. The learned counsel appearing for Respondent No. 8 – Tri Star

Development LLP, submitted that Respondent No. 8 is the duly appointed

developer of Respondent No. 1 Society and has acquired lawful rights to

undertake redevelopment of the subject property. By the impugned judgment

dated 11.09.2024, the High Court directed Respondent Nos. 2 to 7 to grant

necessary permissions and approvals for the redevelopment of the Society to

Respondent No. 8.

9.1. It was further submitted that the writ petition before the High Court

became necessary due to the conduct of Appellant No. 2, who, in his capacity as

Resolution Professional of Appellant No. 1, had addressed communications to

various authorities seeking to obstruct the redevelopment being carried out by

Respondent No. 8.

9.2. The learned counsel submitted that Respondent No. 8 has achieved

substantial progress in the project that Appellant No. 1 failed to execute for

nearly two decades. Respondent No. 8 has demolished the old unsafe structure, 19

paid transit rent for one year from 01.11.2024, disbursed corpus amounts to the

original occupants, many of whom belong to modest means such as drivers and

tailors, expended about Rs. 33.65 crores towards redevelopment works, and

obtained all requisite permissions and approvals from statutory authorities.

9.3. It was further submitted that the development agreement is not an asset or

property of Appellant No. 1 (corporate debtor). The contention of Appellant

No.1 that the Development Agreements of 2005 and 2014 conferred exclusive

and subsisting rights forming part of the assets to be included in any resolution

plan is wholly untenable, as those agreements had been terminated on three

distinct occasions viz., on 09.06.2019, 02.12.2019, and 06.11.2021 – all prior to

the initiation of the second and subsisting CIRP, and none during the operation

of any moratorium under Section 14 of the IBC. Consequently, in the absence of

a subsisting development agreement, the appellants can claim no right, title or

interest in the redevelopment project, nor can the same be treated as part of the

assets of the corporate debtor.

9.4. The learned counsel contended that the reliance placed by the appellants

on Victory Iron Works is misconceived, as in that case, the corporate debtor

possessed a bundle of extant rights in immovable property arising from several

agreements with the landowner, which collectively partook the character of

ownership rights and were rightly treated as assets in insolvency. In the present

case, however, no such subsisting rights exist.

20

9.5. Lastly, it was submitted that the contention of the appellants regarding

violation of natural justice is equally untenable, since the appearance of their

counsel and their participation in the High Court proceedings were duly

recorded in the impugned judgment.

9.6. On these grounds, it was prayed that the appeal be dismissed, affirming

the impugned judgment of the High Court dated 11.09.2024, and Respondent

No. 8 be permitted to continue and complete redevelopment in accordance with

law.

Analysis and Determination

10. We have heard the learned counsel appearing for all the parties and

perused the materials available on record.

11. This Court, by order dated 15.04.2025, directed all the parties to maintain

status quo with respect to the subject property and the redevelopment work.

12. The undisputed facts reveal that Appellant No. 1 is a developer, who had

originally entered into a Development Agreement with Respondent No. 1

Society on 16.10.2005. Under the said agreement, Appellant No. 1 was required

to demolish the existing building and reconstruct a new building in its place. To

facilitate vacant possession of the existing structure, the developer was obligated

to pay rent compensation and transportation charges to the members of the 21

Society. The redevelopment was stipulated to be completed within a period of

18 months, with an additional grace period of 6 months, making a total of 24

months. For better appreciation, the relevant clauses of the Development

Agreement are reproduced below:

“13……..

(a) The Developers shall be given the possession on the said plot of land for the purposes of the development of the said plot of land.

(b) The society and the members shall vacate the said building and move to the temporary alternative accommodation of their choice as per mutually agreed terms for the purpose of development of the said plot of land within 30 days of intimation received from the Developers. However, the Developers shall provide monthly compensation and also shifting charges to each member separately towards vacating the existing Nat and going to temporary alternative accommodation and returning back to the new permanent accommodation in the newly constructed building. At the time of shifting the Developer has agreed to give each members rent compensation of Rs.10,000/- per month for the period of 18 months plus transportation charges of Rs.5,000/- totaling to Rs.1,85,000/-

(Rupees One Lakh Eighty Five Thousand Only). It is hereto agreed that if the redevelopment work is prolonged beyond a period of 18 months then the Developer shall be entitled to pay the rent for additional period at the rate of Rs. 10,000/- per month to each of the member till the date of completion of project. If for any reason the work gets prolonged beyond a period of 18 months then the Developer shall be able to pay the rent for additional period beyond the stipulated period of 18 months at the rate of Rs.12,000/- per month to the existing members till the date of handing over possession of their premises.

…

e) In the event of failure on the part of the developer to complete the work within a period of 18 months plus a grace period of 6 months totaling to a total duration of 24 months, society shall be entitled to take following, action

a) issue of notice of 30 days to the developer to complete balance work within a reasonable time.

b) In the event of failure of Developer to expedite the progress of work within a reasonable time of 3 months, take following action by passing a unanimous resolution in its General Body.

i) Appoint jointly chartered value to work out the balance cost of construction work of rehab building for which the profession fees will be borne by the developer.

22

ii) Appoint a contractor to complete the balance work of rehab Wing only and charge the same to the Developer.

iii) Developer shall make the payment of balance work of rehab building to the Society within 30 days time after completion of work and its intimation to the developer. In case of failure of payment to the Society the society reserves the right to encash the Bank Guarantee.

iv) The rights of developer on his quota of flats shall remain intact on payment of construction cost of balance work to the society. It is however specifically agreed that the responsibility and right of completing the balance work of sale building as also the rights of sale in Sale building shall continue to remain with the developer and society shall not obstruct the developer in any way of continue the work nor the sale of sale building. The Power of Attorney issued to the Developer shall continue to remain in force. ….

(m)…….

That in consideration of the Developers agreeing to construct/reconstruct the said new building and their agreement to incur the costs and expenditures as listed in clauses (a) to (m) hereinabove the society and the granted/ allotted/transferred development rights to the Developers of the said plot of land and the said building and the rights to develop an construct the said new building on the said plot of land and the right to construct and develop and retain and sale and appropriate sale processed of the balance area remaining (which balance area is hereinafter referred to as the "said area available for sale") after accommodating the members as per the terms and conditions of these presents.

…”

12.1. Admittedly, Appellant No. 1 failed to complete the redevelopment within

the stipulated time. It was only in 2012 that Appellant No. 1 obtained the

requisite NOC for redevelopment, nearly seven years after execution of the

original agreement. Thereafter, on 09.04.2014, a Supplementary Development

Agreement was executed between the parties, extending the completion period

to 40 months from the date of receipt of the commencement certificate from

Respondent No. 7 (the Planning Authority), and revising the rent and hardship 23

compensation payable to the Society members. The relevant clauses of the

Supplementary Development Agreement read as under:

“5.1. Pay the following amounts:-

5.1.1. HARDSHIP COMPENSATION:- The hardship compensation as stated in clause (c) on page 8 of development agreement dated 16.10.2005, be further revised to Rs. 35,00,000/- (Rupees Thiry five lakhs Only) to each member in lieu of the earlier agreed amount of Rs. 2,50,000/- (Rupees two lakh fifty thousand only) per member. The said hardship compensation to be paid as per schedule mentioned herein below:-

5.1.2. 70% (Rs. 24,50,000/-) of total hardship compensation as mentioned herein above shall be paid within 7 days after the last member has vacated their premises and society has handed over the possession of all the premises and the building and the plot to the developer for carrying out redevelopment work.

Developer will start demolition of the building only after giving the initial corpus fund as mentioned herein above.

5.1.3. Balance hardship compensation (Rs. 10,50,000/-) shall be paid to the members at the time of possession of permanent alternative accommodation in the new building.

5.1.4….

5.2. RENT COMPENSATION:- The Developer shall not be responsible to provide any temporary alternate accommodation during the period of redevelopment of the said property and the Members shall procure the same at their entire cost and expense. However the Developer shall pay to all the Members rent / compensation for accruing the temporary alternate accommodation in the following manner:

5.2.1. Rent compensation payable under clause (b) on page no. 7 of the development agreement dated 16.10.2005 be revised to Rs. 35,000/- (Rupees Thirty five thousand only) per month for 24 months as follows:-

(a) Developer shall pay 12 month rent in advance @ Rs. 35,000/- per month for amounting to Rs. 4,20,000/- to each member with effective from date of vacating and handing over possession of existing premises to the developer.

(b) Developer shall pay balance 12 months rent by way of post dated cheques (PDC) It is clarified that 19 members out of 60 have already vacated the respective premises and handed over possession of their premises to the developer after taking rent compensation and Developer is paying rent compensation regularly for 19 members. The schedule of vacating balance 41 members is as follows:

(a) Rent compensation to be taken by the members after obtaining the IOD from MCGM. Accordingly developer shall give 1 month notice to the members for collecting the rent and vacated their premises 24

(b) To vacate the respective premises and handover peaceful possession to the developer after taking rent compensation

(c) Developer shall issue 1 month advance post dated cheques before expiry of rent compensation of 24 months for further rent.

5.2.2. The above rent compensation shall be paid and be effective from the date of vacating and handing over possession of existing premises to the Developer. Developer shall increase 10% rent after completion of 30 months period from the date of commencement certificate. If the construction work of proposed rehab building is not completed within 40 months from the date of commencement certificate, increase rent after 40 months to be decided mutually. Developer shall pay rent compensation in extended period until delivering of possession by the Developer of new flat in new building.

5.2.3. BROKERAGE & SHIFTING CHARGES:- Developer shall pay an amount of Rs. 1,00,000/- (Rupees One lakh only) towards brokerage charges, shifting, re-shifting during the entire period of construction and same to be given along with rent compensation to each member on handing over vacate possession of premises by individual members.

….

6.1. The Developer shall complete the project in the manner provided in this agreement by the Completion Date. It is clarified that the completion of the project by the Completion Date shall also mean the obligation of the Developer to provide to each of the Members, possession of the premises comprised in the society’s premises (i.e. rehab building) and the Car Parking Spaces comprised in the Society’s Car Parking Spaces to be allotted as per norms of MCGM with occupation certificate within 40 months from the date of commencement certificate from MCGM.”

Despite these modifications, the reconstruction work did not commence due to

disputes between the parties.

12.2. Subsequently, on 14.11.2019, Corporate Insolvency Resolution Process

was initiated against Appellant No. 1, which was, however, set aside on

12.06.2020 pursuant to a settlement between the parties. Meanwhile,

Respondent No. 1 Society issued communication(s) / notice(s) terminating the 25

development agreement entered into with Appellant No. 1, and on 07.11.2021,

appointed Respondent No. 8 as the new developer for the subject project. A

second CIRP proceedings were initiated against Appellant No. 1 and Appellant

No. 2 was appointed as the Resolution Professional on 06.12.2022. Thereafter,

Respondent No. 1 executed a fresh Development Agreement with Respondent

No. 8 on 10.12.2023. However, owing to the pendency of the second CIRP and

the moratorium operating under Section 14 of the IBC, the authority concerned

revoked the permission already granted, due to which, Respondent No. 8 was

unable to proceed with the redevelopment work. Therefore, Respondent No.1

Society filed W.P. No. 3893 of 2024 to direct the authorities concerned to grant

approvals / permissions to Respondent No. 8. The High Court disposed of the

writ petition in favour of Respondent No. 1. Challenging the same, the present

appeal came to be filed.

13. On the basis of the pleadings and the rival submissions, the following

issues arise for consideration in this appeal:

(i) Whether the termination of the Development Agreement dated

16.10.2005 and Supplementary Agreements dated 23.12.2005 and

09.04.2014 by Respondent No. 1 Society prior to the initiation of the

second CIRP was valid and effective in law.

(ii) Whether the aforesaid Development Agreement and the

Supplementary Agreements constitute “assets” or “property” of the 26

corporate debtor so as to attract the protection of moratorium under

Section 14 of the IBC.

(iii) Whether the High Court was justified in allowing the writ petition

filed by Respondent No. 1 Society and directing the statutory

authorities to process and grant approvals in favour of Respondent

No.8 for redevelopment of the subject project.

(iv) Whether the proceedings before the High Court stood vitiated by

violation of the principles of natural justice, as alleged by the

appellants.

14. We shall now discuss the issues in detail as follows:

Issue No. 1

Whether the termination of the Development Agreement dated 16.10.2005

and Supplementary Agreements dated 23.12.2005 and 09.04.2014 by

Respondent No. 1 Society prior to the initiation of the second CIRP was

valid and effective in law.

15. According to the appellants, the termination of the Development

Agreement dated 16.10.2005 and the Supplementary Agreements dated

23.12.2005 and 09.04.2014 by Respondent No. 1 Society was arbitrary, invalid,

and contrary to the contractual terms. It was contended that once the agreement

conferred an exclusive right upon the developer to undertake redevelopment,

such right could not be unilaterally withdrawn. It was further submitted that the 27

Society’s subsequent appointment of a new developer amounts to interference

with the corporate debtor’s assets, which are protected under the IBC.

15.1. Conversely, the Society asserts that the termination was validly and

lawfully effected after prolonged and repeated defaults on the part of the

developer. The record indicates that despite the execution of the Development

Agreement and subsequent Supplementary Agreements, the developer did not

commence or complete any substantial portion of the redevelopment work,

thereby defeating the very object of the project. The stipulated period of forty

months from the receipt of the commencement certificate had long expired, and

no satisfactory explanation was offered for such an inordinate delay.

15.2. The correspondence exchanged between the parties demonstrates that the

Society repeatedly called upon the developer to fulfil its obligations. Notices of

default and reminders were issued over several years, culminating in termination

notices dated 09.06.2019, 02.12.2019, and 06.11.2021. These communications

specifically cited persistent non-performance, failure to pay transit rent, and

failure to commence redevelopment. Out of 60 members, 41 received no rent

while 19 received it only intermittently. Such chronic default justified the

Society’s decision to terminate, which was duly communicated and never

revoked.

15.3. In contract law, time is of the essence in a redevelopment agreement,

whose object is timely rehabilitation of displaced members. Prolonged delay

defeats the foundation of the contract and constitutes a material breach entitling 28

the owner to terminate. The right to terminate for default was expressly reserved

in the Development Agreement and the Supplementary Agreements.

15.4. The termination was thus effected after due notice and prolonged default,

and cannot be termed arbitrary or mala fide. The Society, being the owner of the

property and guardian of the members’ welfare, cannot be compelled to

indefinitely await performance from a defaulting developer. The IBC is not

intended to freeze urban welfare projects or protect commercial indolence at the

cost of citizens awaiting rehabilitation.

15.5. In Gujarat Urja Vikas Nigam Ltd v. Amit Gupta and others 14, this Court

examined the NCLT’s jurisdiction under Section 60(5)(c) of the IBC and held

that the power to restrain or set aside termination is confined to cases where –

(i) the termination is solely on account of insolvency (for example, by an

ipso facto clause); and

(ii) such termination would inevitably result in the corporate death of the

debtor by depriving it of its sole or central contract essential to the

success of the CIRP.

The Court cautioned that the NCLT must refrain from interfering with valid

contractual terminations, based on breaches unrelated to insolvency. The

following observation is pertinent:

“176. Given that the terms used in Section 60(5)(c) are of wide import, as recognised in a consistent line of authority, we hold that NCLT was empowered to restrain the appellant from terminating PPA. However, our decision is

14 (2021) 7 SCC 209 29

premised upon a recognition of the centrality of PPA in the present case to the success of CIRP, in the factual matrix of this case, since it is the sole contract for the sale of electricity which was entered into by the corporate debtor. In doing so, we reiterate that NCLT would have been empowered to set aside the termination of PPA in this case because the termination took place solely on the ground of insolvency. The jurisdiction of NCLT under Section 60(5)(c) of IBC cannot be invoked in matters where a termination may take place on grounds unrelated to the insolvency of the corporate debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto clause like Article 9.2.1(e) herein, if such termination will not have the effect of making certain the death of the corporate debtor. As such, in all future cases, NCLT would have to be wary of setting aside valid contractual terminations which would merely dilute the value of the corporate debtor, and not push it to its corporate death by virtue of it being the corporate debtor's sole contract (as was the case in this matter's unique factual matrix).”

15.6. The above reasoning was reiterated in Tata Consultancy Services Ltd v.

SK Wheels Pvt. Ltd. Resolution Professional, Vishal Ghisulal Jain 15, where

this Court held that NCLT’s residuary jurisdiction cannot be invoked if the

termination of a contract arises from deficiencies or defaults independent of

insolvency. Intervention is justified only where the termination would make

certain the corporate death of the debtor. The following paragraphs are apposite

in this regard:

“28. In Gujarat Urja [Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209 : (2021) 4 SCC (Civ) 1, the contract in question was terminated by a third party based on an ipso facto clause i.e. the fact of insolvency itself constituted an event of default. It was in that context, this Court held that the contractual dispute between the parties arose in relation to the insolvency of corporate debtor and it was amenable to the jurisdiction of NCLT under Section 60(5)(c). This Court observed that : (SCC pp. 262-63, para 69)

“69. … NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of corporate debtor… The nexus with the insolvency of corporate debtor must exist.”

(emphasis supplied) 15 (2022) 2 SCC 583 30

Thus, the residuary jurisdiction of NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of corporate debtor.

29. It is evident that the appellant had time and again informed corporate debtor that its services were deficient, and it was falling foul of its contractual obligations. There is nothing to indicate that the termination of the facilities agreement was motivated by the insolvency of corporate debtor. The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10-6-2019 were not a smokescreen to terminate the agreement because of the insolvency of corporate debtor. Thus, we are of the view that NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of corporate debtor. In the absence of jurisdiction over the dispute, NCLT could not have imposed an ad interim stay on the termination notice. NCLAT has incorrectly upheld [Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain, 2020 SCC OnLine NCLAT 484] the interim order [BMW Financial Services (P) Ltd. v. S.K. Wheels (P) Ltd., 2019 SCC OnLine NCLT 28273] of NCLT.

30. While in the present case, the second issue formulated by this Court has no bearing, we would like to issue a note of caution to NCLT and NCLAT regarding interference with a party's contractual right to terminate a contract. Even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of CIRP. Crucially, the termination of the contract should result in the corporate death of corporate debtor.”

15.7. Applying these principles, the termination in the present case was not

occasioned by the insolvency of the corporate debtor but by its persistent non-

performance. Letters issued by the Society, including one dated 31.05.2019,

record that continuation of the agreement was conditional upon compliance by

the developer, failing which the contract would stand cancelled. These defaults

occurred well before initiation of the CIRP. Thus, the termination was based on

legitimate grounds unrelated to insolvency.

31

15.8. Moreover, the redevelopment agreement was not the sole or life-

sustaining contract of the corporate debtor. Appellant No. 1 (AA Estates) was

engaged in multiple projects; continuation of this particular redevelopment was

not significant to the success of the CIRP. The Expression of Interest issued by

the Resolution Professional did not even list this project among the corporate

debtor’s assets. Hence, termination of the contract neither arose from insolvency

nor imperiled the corporate debtor’s survival. It was a lawful termination for

non-performance, falling outside the jurisdiction of the NCLT under Section

60(5)(c).

15.9. The contention raised on behalf of the appellants that the termination

became ineffective upon initiation of the first CIRP in 2019 is untenable. The

said CIRP was set aside in 2020 upon settlement, and no act of revival or

affirmation of the terminated contract occurred thereafter. Consequently, the

subsequent termination notices stood valid and operative in their own right.

15.10. Reliance placed on Rajendra K. Bhutta (supra), is wholly

misplaced. In that case, Section 14(1)(d) of the IBC applied because the

corporate debtor was in actual occupation of the property under a subsisting

joint development licence, and the termination sought to recover such occupied

property during the moratorium. In the present case, as mentioned earlier,

Appellant No. 1 – AA Estates never obtained physical possession. The Society

and its members remained in continuous occupation. Termination was effected

before the CIRP and was not a recovery during moratorium. 32

15.11. Section 52 of the Indian Easements Act, 1882 defines a “licence” as a

right to do something upon immovable property of another without creating an

easement or interest therein. In Associated Hotels of India Limited v. R.N.

Kapoor16, this Court clarified that a licence merely permits use of premises for a

particular purpose while possession and control remain with the owner. The

relevant paragraph of the said judgment is extracted below:

“28. Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property.”

15.12. Similarly, in Qudrat Ullah v. Municipal Board, Bareilly 17, it was held

that where exclusive possession is not transferred, the transaction is a licence,

not a lease.

15.13. In light of these authorities and the terms of the Development

Agreement, the developer was granted only a limited licence to enter and use

the land for redevelopment. No estate, proprietary right, or transferable interest

was created; ownership and legal possession always remained with the Society.

Consequently, the so-called “development rights” of the corporate debtor

constitute, at best, a contractual permission and not an “interest in property”

within the meaning of Section 14(1)(d) of the IBC.

16

AIR 1959 SC 1262 17 (1974) 1 SCC 202 33

15.14. Accordingly, this Court holds that the termination of the Development

Agreement dated 16.10.2005 and the Supplementary Agreements dated

23.12.2005 and 09.04.2014 by Respondent No. 1 Society was valid, lawful, and

effective in law. No subsisting contractual or proprietary right survived in

favour of the corporate debtor on the date of initiation of the second CIRP.

Consequently, the NCLT lacked jurisdiction under Section 60(5)(c) of the IBC

to interfere with such termination.

Issue No. 2

Whether the Development Agreement and the Supplementary Agreements

constitute “assets” or “property” of the corporate debtor so as to attract

the protection of moratorium under Section 14 of the IBC.

16. The learned senior counsel for the appellants contended that the rights

arising from the Development Agreement executed between Appellant No. 1

(developer) and Respondent No. 1 Society constitute an “asset” or “property” of

the corporate debtor within the meaning of Section 14 of the IBC, thereby

attracting the protection of moratorium upon commencement of the CIRP.

16.1. It is not in dispute that the corporate debtor is entitled to the protection of

Section 14 of the IBC, which mandates that on the insolvency commencement

date, the Adjudicating Authority shall by order declare a moratorium

prohibiting, inter alia – 34

(a) the institution or continuation of suits or proceedings against the

corporate debtor including execution of any judgment, decree or

order in any court of law, tribunal, arbitration panel or other

authority;

(b) the transfer encumbrance, alienation or disposal by the corporate

debtor of any of its assets or any legal right or beneficial interest

therein;

(c) any action to foreclose, recover or enforce any security interest

created by the corporate debtor in respect of its property; and

(d) the recovery of any property by an owner or lessor where such

property is occupied by or in the possession of the corporate debtor.

16.2. The object of Section 14 is to maintain the corporate debtor’s estate as a

going concern and to preserve its assets so as to facilitate resolution. The term

“property” under Section 3(27) of the IBC is defined in the widest terms to

include money, goods, actionable claims, land and every description of movable

or immovable, tangible or intangible property, and extends to deeds and

instruments evidencing title or interest therein. However, for the purposes of

Section 14, only such property or assets which form part of the corporate

debtor’s estate as on the insolvency commencement date are protected. Mere

expectant, contingent or uncrystallized contractual rights do not constitute

“assets” within the meaning of the Code.

35

16.3. In Sushil Kumar Agarwal v. Meenakshi Sadhu and others18, this Court

observed that “development agreements” are not of a uniform kind. While some

merely create contractual rights to construct without any proprietary interest,

others may, depending upon their terms, confer valuable proprietary or

possessory rights in land or the constructed area. The Court emphasized that the

determination depends on the nature and extent of rights created under the

specific agreement, and whether such rights are capable of being specifically

enforced or transferred. The relevant extracts are as follows:

“17. The expression “development agreement” has not been defined statutorily. In a sense, it is a catch-all nomenclature which is used to be describe a wide range of agreements which an owner of a property may enter into for development of immovable property. As real estate transactions have grown in complexity, the nature of these agreements has become increasingly intricate. Broadly speaking, (without intending to be exhaustive), development agreements may be of various kinds:

(i) An agreement may envisage that the owner of the immovable property engages someone to carry out the work of construction on the property for monetary consideration. This is a pure construction contract;

(ii) An agreement by which the owner or a person holding other rights in an immovable property grants rights to a third party to carry on development for a monetary consideration payable by the developer to the other. In such a situation, the owner or right holder may in effect create an interest in the property in favour of the developer for a monetary consideration;

(iii) An agreement where the owner or a person holding any other rights in an immovable property grants rights to another person to carry out development.

In consideration, the developer has to hand over a part of the constructed area to the owner. The developer is entitled to deal with the balance of the constructed area. In some situations, a society or similar other association is formed and the land is conveyed or leased to the society or association;

(iv) A development agreement may be entered into in a situation where the immovable property is occupied by tenants or other right holders. In some cases, the property may be encroached upon. The developer may take on the entire responsibility to settle with the occupants and to thereafter carry out construction; and

18 (2019) 2 SCC 241 36

(v) An owner may negotiate with a developer to develop a plot of land which is occupied by slum dwellers and which has been declared as a slum. Alternately, there may be old and dilapidated buildings which are occupied by a number of occupants or tenants. The developer may undertake to rehabilitate the occupants or, as the case may be, the slum dwellers and thereafter share the saleable constructed area with the owner.

18. When a pure construction contract is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area. The terms of the agreement are crucial in determining whether any interest has been created in the land or in respect of rights in the land in favour of the developer and if so, the nature and extent of the rights.

19. In a construction contract, the contractor has no interest in either the land or the construction carried out on the land. But, in other species of development agreements, the developer may have acquired a valuable right either in the property or the constructed area. There are various incidents of ownership of in respect of an immovable property. Primarily, ownership imports the right of exclusive possession and the enjoyment of the thing owned. The owner in possession of the thing has the right to exclude all others from its possession and enjoyment. The right to ownership of a property carries with it the right to its enjoyment, right to its access and to other beneficial enjoyments incidental to it. (B Gangadhar v BG Rajalingam, (1995) 5 SCC 239). Ownership denotes the relationship between a person and an object forming the subject matter of the ownership. It consists of a complex of rights, all of which are rights in rem, being good against the world and not merely against specific persons. There are various rights or incidents of ownership all of which need not necessarily be present in every case. They may include a right to possess, use and enjoy the thing owned; and a right to consume, destroy or alienate it. (Swadesh Ranjan Sinha v Haradeb Banerjee, (1991) 4 SCC 572). An essential incident of ownership of land is the right to exploit the development, potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer. This in essence is a parting of some of the incidents of ownership of the immovable property. There could be situations where pursuant to the grant of such rights, the developer has incurred a substantial investment, altered the state of the property and even created third party rights in the property or the construction carried out to be carried out. There could be situations where it is the developer who by his efforts has rendered a property developable by taking steps in law. In development agreements of this nature, where an interest is created in the land or in the development in favour of the developer, it may be difficult to hold that the agreement is not capable of being specifically performed. For example, the 37

developer may have evicted or settled with occupants, got land which was agricultural converted into non-agricultural use, carried out a partial development of the property and pursuant to the rights conferred under the agreement, created third party rights in favour of flat purchasers in the proposed building. In such a situation, if for no fault of the developer, the owner seeks to resile from the agreement and terminates the development agreement, it may be difficult to hold that the developer is not entitled to enforce his rights. This of course is dependent on the terms of the agreement in each case. There cannot be a uniform formula for determining whether an agreement granting development rights can be specifically enforced and it would depend on the nature of the agreement in each case and the rights created under it.”

16.4. The above exposition clarifies that whether a development agreement

constitutes an “asset” of the corporate debtor depends on whether it creates a

proprietary, possessory or enforceable right in its favour at the relevant time.

Not every executory or conditional contract amounts to an asset. The protection

of Section 14 is confined to existing, subsisting and enforceable rights as on the

date of commencement of the CIRP.

16.5. In Rajendra K. Bhutta (supra), this Court held that termination of a joint

development agreement during the subsistence of moratorium under Section 14

was impermissible since the corporate debtor was in occupation and possession

of the property. The Court explained that where the developer is “in occupation”

or has entered upon the property pursuant to the agreement, such occupation

attracts the protection of Section 14(1)(d). Conversely, where termination

occurred prior to CIRP and the developer was never in possession, the

moratorium would not apply. The following paragraphs are apposite in this

regard:

38

“23. The conspectus of the aforesaid judgments would show that the expression “occupied by” would mean or be synonymous with being in actual physical possession of or being actually used by, in contra-distinction to the expression “possession”, which would connote possession being either constructive or actual and which, in turn, would include legally being in possession, though factually not being in physical possession. Since it is clear that the joint development agreement read with the deed of modification has granted a licence to the developer (corporate debtor) to enter upon the property, with a view to do all the things that are mentioned in it, there can be no gainsaying that after such entry, the property would be “occupied by” the developer. Indeed, this becomes clear from the termination notice dated 12-1-2018, issued by MHADA to the developer, in which it is stated:

“35. This is therefore to inform you that on the expiry of 30 days from the date of receipt of this notice, the joint development agreement dated 10-4-2008 and deed of confirmation and modification dated 3-11-2011 and letter dated 18-1-2014 stand terminated and you will not be allowed to enter the property and your authority/licence to enter the property or remain thereupon is terminated. MHADA thereupon will not allow you to do anything on or in relation to the property and MHADA shall take possession of all the structures standing at whatever stage they are situated at Goregaon (West) and bearing CTS No. …”

16.6. Similarly, in Tata Consultancy Services Ltd (supra), this Court held that

the Resolution Professional cannot compel continuation of a contract that was

validly terminated prior to initiation of CIRP. Once a contract stands lawfully

terminated, it ceases to exist and cannot be treated as an “asset” or “property” of

the corporate debtor. The moratorium under Section 14 does not have the effect

of reviving or re-creating contractual rights that have been extinguished before

insolvency.

16.7. As already stated, in the present case, it is evident that the Development

Agreement dated 16.10.2005 and the Supplementary Agreements dated

23.12.2005 and 09.04.2014 stood terminated by Respondent No. 1 Society on 39

account of persistent default and failure of the developer to commence or

complete the project. The termination was duly communicated through letters

dated 09.06.2019, 02.12.2019 and 06.11.2021 – each preceding the initiation of

the second CIRP on 06.12.2022. No subsisting challenge to such termination

was pending when CIRP commenced. Upon such termination, the corporate

debtor was left, at best, with a claim for damages, which is a mere unsecured

monetary claim and not a proprietary right capable of protection under Section

14.

16.8. The Development Agreement expressly stipulates that redevelopment of

accommodation for the society members was a contractual obligation of the

developer and did not create any proprietary right in its favour. Only upon full

and proper performance would the developer earn a “free-sale” entitlement,

which alone could be treated as an asset. As the developer failed to perform its

obligations, no contingent or beneficial right ever crystallized in its favour.

16.9. The record further reveals that possession of the property at all times

remained with Respondent No. 1 Society. No actual, constructive, or juridical

possession was ever transferred to Appellant No. 1. The developer never

commenced demolition, construction, or payment of rent and compensation as

required under the agreement. In absence of possession or any incident of

ownership, Section 14(1)(d) has no application.

40 16.10. Reliance on Victory Iron Works (supra) is misconceived and

inapplicable to the present case. In that case, the corporate debtor had a

demonstrable proprietary and financial interest in the project property, having

advanced funds and obtained development rights. Whereas, the present case is

materially different; the agreements here were purely executory, conditional

upon performance, and never resulted in any proprietary or possessory right

being created in favour of the developer.

16.11. It is well settled that the moratorium under Section 14 does not revive

terminated contracts or protect rights that have ceased to exist prior to

insolvency. The protection is intended to preserve the existing value of the

corporate debtor’s estate, not to resurrect lapsed or extinguished interests.

Extending moratorium to such non-existent rights would defeat commercial

certainty and the sanctity of lawful termination under general law.

16.12. Accordingly, we hold that the Development Agreement dated

16.10.2005 and the Supplementary Agreements dated 23.12.2005 and

09.04.2014 do not constitute “assets” or “property” of the corporate debtor

within the meaning of Section 14 of the IBC, as the same stood terminated prior

to initiation of the second CIRP. No proprietary, possessory, or enforceable

right subsisted in favour of the corporate debtor on the insolvency

commencement date. The moratorium declared under Section 14 would

therefore not restrain Respondent No. 1 Society or its members from proceeding

with redevelopment in accordance with law.

41 Issue No. 3

Whether the High Court was justified in allowing the writ petition filed by

Respondent No. 1 Society and directing the statutory authorities to process

and grant approvals in favour of Respondent No. 8 for redevelopment of

the subject project.

17. With respect to the maintainability of the writ petition, the principal

grievance of the appellants is that the High Court exceeded its jurisdiction in

entertaining the writ petition filed by Respondent No. 1 Society and issuing

directions to the planning and municipal authorities to process and grant

approvals in favour of Respondent No. 8. The appellants contend that once the

CIRP had commenced against the corporate debtor, the High Court ought to

have deferred to the jurisdiction of the National Company Law Tribunal and

refrained from passing any order that could interfere with the moratorium under

Section 14 of the IBC. The appellants further state that the writ petition involved

disputed questions of fact concerning the validity of termination and ownership

of redevelopment rights, which could not have been adjudicated in proceedings

under Article 226 of the Constitution.

17.1. On the other hand, Respondent No. 1 Society contends that the High

Court’s intervention was necessitated by the paralysis caused by the pendency

of CIRP and the refusal of the statutory authorities to process its proposal for

redevelopment through the newly appointed developer, Respondent No. 8. The 42

Society submits that, being the absolute owner of the land, it was entitled, after

valid termination of the earlier agreements, to appoint a new developer to

safeguard the interests of its members. It was argued that the High Court merely

directed the statutory authorities to process the Society’s proposal in accordance

with law, without adjudicating any private contractual dispute.

17.2. It is well settled that while Section 14 of the IBC bars the institution or

continuation of suits and proceedings during the moratorium, the constitutional

jurisdiction of this Court and the High Courts under Articles 32 and 226 cannot

be curtailed by statute. In Embassy Property Developments Pvt. Ltd. v. State of

Karnataka and others19, this Court held that the NCLT, being a creature of a

special statute to discharge specific functions, cannot be elevated to the status of

a superior court exercising powers of judicial review over administrative or

statutory action. Matters in the public law domain do not “arise out of or relate

to” insolvency proceedings within the meaning of Section 60(5) of the IBC. The

Court further observed that decisions taken by governmental or statutory

authorities in the realm of public law may be corrected only through the High

Court’s power of judicial review. The following paragraphs are relevant in this

context:

“13.What is recognizedby Article 226 (1) is the power of every High Court to issue (i) directions, (ii) orders or (iii) writs. They can be issued to (i) any person or (ii) authority including the Government. They may be issued (i) for the enforcement of any of the rights conferred by Part III and (ii) for any other purpose. But the exercise of the power recognized by Clause (1) of Article 226, is restricted by the territorial jurisdiction of the High Court, determined 19 (2020) 13 SCC 308 43

either by its geographical location or by the place where the cause of action, in whole or in part, arose. While the nature of the power exercised by the High Court is delineated in Clause (1) of Article 226, the jurisdiction of the High Court for the exercise of such power, is spelt out in both Clauses (1) and (2) of Article 226.

14. Traditionally, the jurisdiction under Article 226 was considered as limited to ensuring that the judicial or quasijudicial tribunals or administrative bodies do not exercise their powers in excess of their statutory limits. But in view of the use of the expression “any person” in Article 226 (1), courts recognized that the jurisdiction of the High Court extended even over private individuals, provided the nature of the duties performed by such private individuals, are public in nature. Therefore, the remedies provided under Article 226 are public law remedies, which stand in contrast to the remedies available in private law.

28. As we have indicated elsewhere, the MMDR Act, 1957 is a Parliamentary enactment traceable to Entry 54 in List I of the Seventh Schedule. This Entry 54 speaks about regulation of mines and development of minerals to the extent to which such regulation and development under the control of the Union, is declared by Parliament by law to be expedient in public interest. In fact the expression “public interest” is used only in 3 out of 97 entries in List I, one of which is Entry 54, the other two being Entries 52 and 56. Interestingly, Entry 23 in List II does not use the expression “public interest”, though it also deals with regulation of mines and mineral development, subject to the provisions of List I. It is this element of “public interest” that finds a place in Section 2 of the MMDR Act, 1957, in the form of a declaration…..

29. Therefore as rightly contended by the learned Attorney General, the decision of the Government of Karnataka to refuse the benefit of deemed extension of lease, is in the public law domain and hence the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over administrative action. The NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having the power of judicial review over administrative action…”

17.3. A perusal of the judgment impugned herein reveals that the High Court

recorded a categorical finding that the Development Agreement with Appellant

No. 1 stood validly terminated prior to the initiation of the second CIRP. Once 44

the High Court found that the termination preceded the CIRP and that no

subsisting right of the corporate debtor survived in the project, it correctly

concluded that the bar under Section 14 of the IBC was inapplicable.

Accordingly, the High Court directed the planning and municipal authorities to

consider the Society’s redevelopment proposal in favour of the new developer

(Respondent No. 8) in accordance with law.

17.4. The approach adopted by the High Court cannot be faulted. The

jurisdiction under Article 226 is wide enough to ensure that statutory authorities

perform their public duties and do not withhold approvals without legal

justification. The High Court did not usurp the jurisdiction of the NCLT or

interfere with any matter directly arising from the insolvency process. Its

directions were confined to ensuring that the Society’s rights as owner of the

land were not indefinitely suspended due to the pendency of CIRP proceedings

against a developer who no longer had any subsisting contractual or proprietary

interest in the project.

17.5. This Court has consistently affirmed that the IBC does not oust the

constitutional jurisdiction of the High Courts, particularly where intervention is

sought against administrative or statutory inaction in the public law domain,

provided such intervention does not obstruct or undermine the insolvency

process. (See Embassy Property Development Pvt. Ltd (supra); and 45 Ghanashyam Mishra & Sons Pvt. Ltd v. Edelweiss Asset Reconstruction Co.

Ltd.20)

17.6. It is also significant to note that the High Court did not direct the

authorities to grant approvals as a matter of right; it merely required them to

consider and process the Society’s application on its own merits. Such an order

is procedural in nature and ensures that the statutory authorities discharge their

duties in accordance with law. It neither prejudices the CIRP proceedings nor

affects any stakeholder’s rights under the IBC.

17.7. Furthermore, the record discloses that Respondent No. 8 has already

commenced redevelopment pursuant to a fresh agreement executed in December

2023 and achieved substantial progress, including demolition of the existing

structure and payment of rent to the members. The High Court rightly took note

of these developments and passed the impugned judgment to prevent

administrative paralysis and to protect the rehabilitation rights of the residents

who had long awaited redevelopment.

17.8. In light of the above, this Court holds that the High Court was justified in

entertaining the writ petition and issuing directions to the statutory authorities to

process and consider the redevelopment proposal of Respondent No. 8 in

accordance with law. These directions do not encroach upon the jurisdiction of

the NCLT nor offend the moratorium under Section 14 of the IBC.

20

(2021) 9 SCC 657 46 Issue No. 4

Whether the proceedings before the High Court stood vitiated by breach of

the principles of natural justice, as alleged by the appellants.

18. According to the appellants, the impugned judgment of the High Court

stands vitiated for non-observance of the principles of natural justice. It was

specifically contended that the writ petition was taken up for hearing on

02.09.2024 and reserved for orders on the very next day, without affording the

appellants adequate opportunity to file their reply or place their defence on

record. Such undue haste resulted in serious prejudice and contravened the

settled principles of procedural fairness implicit in the exercise of jurisdiction

under Article 226 of the Constitution of India.

18.1. Per contra, the learned senior counsel for Respondent No. 1 Society

submitted that the appellants were duly served with notice and had knowledge

of the proceedings before the High Court. The matter was listed on several

occasions prior to the final hearing, and the appellants neither sought time nor

placed on record any material explaining their inability to file a reply. It was

further submitted that the High Court, being satisfied that the relevant

documents were already before it, proceeded to decide the matter on merits after

hearing all parties represented. Hence, no procedural irregularity or denial of

opportunity can be alleged.

47 18.2. The principles of natural justice act as fundamental safeguards ensuring

fairness, equity, and reasonableness in decision making. The twin pillars – nemo

judex in causa sua (no one shall be a Judge in their own cause) and audi alteram

partem (the right to be heard) – are essential components of the rule of law.

However, their application depends upon the context and nature of the

proceedings. As held in Union of India and another v. W.N. Chadha 21, and

Canara Bank and others v. Debasis Das and others 22, the principles of natural

justice are not rigid rules of universal application; they are flexible, contextual,

and aimed at preventing real, not theoretical, injustice. The touchstone is not

whether every procedural formality was observed, but whether the party

complaining has suffered actual prejudice or denial of a fair opportunity.

18.3. In the present case, the writ petition filed by Respondent No. 1 Society

was pending before the High Court for a considerable period prior to its final

hearing. The record shows that the appellants were duly represented by counsel

throughout and were aware of the proceedings. No application for adjournment

or extension of time to file a reply was made. The proceedings on 03.09.2024

were conducted in the presence of the counsel for the Resolution Professional,

whose submissions were duly recorded in the impugned judgment. In these

circumstances, it cannot be said that the High Court acted in undue haste or

deprived the appellants of a reasonable opportunity of being heard. 21

1993 Supp (4) SCC 260 22 (2003) 4 SCC 557 48

18.4. Notably, the writ petition did not seek any direct relief against the

appellants. The prayer was confined to a mandamus directing the statutory

authorities to process and grant redevelopment approvals in favour of

Respondent No. 8, the newly appointed developer. The High Court’s directions

were limited to the administrative authorities and did not adjudicate upon

private contractual disputes or alter the rights inter se between the Society and

the appellants.

18.5. The questions before the High Court were essentially legal in nature –

relating to the applicability of the moratorium under Section 14 of the IBC and

the validity of termination of the redevelopment agreement – both turning upon

undisputed documents. No complex factual adjudication was required. Even

before this Court, the appellants have failed to point out any specific prejudice

or material that they were prevented from placing before the High Court.

18.6. The principles of natural justice are intended to ensure fairness, not to

operate as technical obstacles. They cannot be invoked as empty ritual where no

real injustice has occurred. The grievance of the appellants is, therefore, more

formal than substantive. Having been duly represented and having failed to

demonstrate any actual prejudice, the appellants cannot now be permitted to

impugn the judgment on grounds of procedural technicality.

18.7. In any event, the conduct of the appellants does not inspire equity. The

record discloses persistent defaults in payment of transit rent, repeated delays,

and failure to commence redevelopment despite multiple extensions. The 49

Society, acting in the collective interest of its members, lawfully terminated the

agreement and appointed a new developer who has since made substantial

progress. The invocation of Section 14 of the IBC to obstruct rehabilitation of

residents was a misconceived attempt to shield inaction under the guise of

moratorium protection.

18.8. This pattern of defaults on the part of Appellant No. 1 is not isolated. In

Manohar M. Ghatalia and others v. State of Maharashtra and others 23, and

Tagore Nagar Shree Ganesh Krupa CHS Ltd v. State of Maharashtra and

others24, the same developer defaulted in payment of transit rent and failed to

commence or complete redevelopment despite contractual obligations. The

Courts consistently held that a defaulting developer cannot invoke the

moratorium under Section 14 of the IBC to perpetuate inaction or defeat the

legitimate rights of residents. The rights of a developer are purely contingent

upon due performance, and no subsisting “asset” or “proprietary right” survives

once termination has lawfully occurred.

18.9. These repeated defaults and prolonged inaction reveal a consistent lack of

bona fides on the part of the appellants. The High Court’s intervention in the

present case was therefore not only legally sustainable but also necessary to

safeguard the rights of the residents and to ensure that the appellants did not 23 2023: BHC – OS: 15669 arising out of which SLP. (C) No. 18909 of 2024 decided on 07.02.2025 titled ‘A A Estates Pvt. Ltd. v. Bhavana Manohar Ghatalia’ 24 W.P. No. 1349 of 2024, BHC, arising out of which SLP (C) No. 24807 of 2024 decided on 28.04.2025 titled ‘A A Estates Pvt. Ltd v. Tagore Nagar Shree Ganesh Krupa Co-operative Housing Society Ltd.’ 50

misuse the pendency of insolvency proceedings to indefinitely stall

redevelopment.

18.10. Accordingly, we hold that the proceedings before the High Court were

conducted in substantial compliance with the principles of natural justice. The

appellants were duly represented, were not denied any reasonable opportunity of

hearing, and have failed to establish any demonstrable prejudice. The plea of

violation of natural justice is therefore devoid of substance and stands rejected.

Conclusion

19. In the present case, Appellant No. 1 – corporate debtor failed to take any

meaningful steps towards fulfilling its obligations under the Development

Agreement and Supplementary Agreements. Consequently, the slum dwellers

and members of Respondent No. 1 Society – among the most vulnerable

sections of society – continue to be deprived of their right to proper housing and

rehabilitation. Such conduct cannot be permitted to take refuge under the

moratorium provisions of Section 14 of the IBC. A clear distinction must,

therefore, be maintained between corporate debtors who have acted bona fide

and those who have merely secured development rights in form but never acted

in substance.

20. As indicated earlier, the moratorium under Section 14 protects only

existing, enforceable, and subsisting rights – not inchoate or forfeited rights 51

arising from default or non-performance. Development rights of a defaulting

developer who neither secured possession nor undertook any redevelopment

activity cannot be elevated to the status of an “asset” or “property” within the

meaning of Section 3(27) of the IBC.

21. Upon a comprehensive consideration, the conclusions of this Court on the

issues framed are as follows:

(i) The termination of the Development Agreement dated 16.10.2005 and

Supplementary Agreements dated 23.12.2005 and 09.04.2014 by

Respondent No. 1 Society was valid, lawful, and effective in law,

having been carried out after due notice and in consequence of

prolonged and inexcusable default by the developer. The Society, as

the owner of the land, was entitled to revoke the contract and appoint a

new developer to protect the interest of its members.

(ii) The aforesaid Development Agreement and the Supplementary

Agreements do not constitute “assets” or “property” of the corporate

debtor within the meaning of Section 14 of the IBC. The said

agreements stood validly terminated prior to the initiation of the

second CIRP, and hence, no subsisting or enforceable right survived in

favour of the corporate debtor.

(iii) The High Court was justified in entertaining the writ petition filed by

Respondent No. 1 Society and directing the statutory authorities to 52

process and grant approvals in favour of Respondent No. 8, subject to

compliance with law. Such directions were procedural in nature, did

not encroach upon the jurisdiction of the NCLT, and did not

contravene the moratorium under Section 14 of the IBC.

(iv) The proceedings before the High Court were conducted in substantial

compliance with the principles of natural justice. The appellants were

afforded a fair opportunity of hearing, and no real prejudice or failure

of justice has been demonstrated.

22. Accordingly, this appeal is devoid of merit and is liable to be dismissed.

23. This case highlights the larger human dimension underlying urban

redevelopment – the right of citizens to live with dignity in safe and habitable

dwellings. Slum redevelopment projects are not mere commercial ventures but

social welfare initiatives aimed at transforming unsafe tenements into dignified

homes. The role of a developer in such projects carries a public character; it

entails a responsibility to fulfil the collective aspirations of hundreds of families

awaiting rehabilitation and cannot be viewed solely through a profit-driven lens.

23.1. When such projects are delayed or abandoned, it is the residents – often

living in hazardous or temporary conditions – who suffer the greatest hardship.

In this context, the invocation of insolvency proceedings or the moratorium

under the Insolvency and Bankruptcy Code, 2016 cannot become a legal device

to indefinitely stall redevelopment or to obstruct the legitimate rights of slum 53

dwellers and cooperative housing societies. The Code was never intended to be

used as a shield for non-performance at the cost of human rehabilitation.

23.2. Courts, while dealing with disputes arising from slum redevelopment,

must therefore adopt a purposive and welfare-oriented approach, ensuring that

the statutory objective of insolvency resolution does not defeat the social

purpose of urban renewal. The balance of equities must tilt in favour of the

residents who have waited for years for a roof over their heads. The law cannot

countenance a situation where insolvency protection becomes an instrument to

perpetuate displacement or to defer the promise of dignified housing guaranteed

under Articles 19(1)(e) and 21 of the Constitution.

23.3. The IBC was never designed to serve as a refuge for corporate debtors

who, by their conduct, display no bona fide intention to fulfil contractual or

statutory obligations. Its purpose is to revive viable entities and ensure equitable

resolution of insolvency – not to extend protection to those who have

persistently defaulted, abandoned performance, or frustrated projects of public

significance. Urban redevelopment projects, particularly those involving

cooperative housing societies, are exercises in social rejuvenation that seek to

restore dignity, safety, and belonging to citizens. The law must, therefore,

balance commercial rights with human realities and ensure that economic

revival does not eclipse the constitutional promise of dignified living. 54

24. In fine, the instant appeal is dismissed. The directions of the High Court

shall be complied with within a period of two months from today. Needless to

state, the appellants may work out their remedy with respect to the amount

alleged to have been expended in the subject project, in the manner known to

law. In the facts and circumstances of the case, there shall be no order as to

costs.

25. All pending application(s), if any, stand disposed of.

.…………………………J. [J.B. PARDIWALA]

.…………………………J. [R. MAHADEVAN]

NEW DELHI;

NOVEMBER 28, 2025