Termination of a development agreement is valid where a corporate debtor persistently defaults, and such rights do not qualify as assets under the moratorium rule of the IBC.

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 Bombay¹ [Hereinafter referred to as “the High Court”] in Writ Petition No. 3893 of 2024.

3. Appellant No. 1 is the Corporate Debtor, which is presently undergoing Corporate Insolvency Resolution Process² [For short, “CIRP”] under the provisions of the Insolvency and Bankruptcy Code, 2016³ [For short, “IBC”]. 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;

(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 [For short, “MHADA”], 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 [For short, “the subject project”] 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 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