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2024 Supreme(Bom) 745
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
M.S. SONAK, KAMAL KHATA, JJ.
Kher Nagar Sukhsadan Co-operative Housing Soc Ltd - Petitioners
Versus
The State of Maharashtra, through the Urban Development Department & Ors. - Respondents
Writ Petition No. 3893 of 2024
Decided On : 11-09-2024
For the Petitioners:Mr. Pradeep Sancheti, Senior Advocate, with Rohil Bandekar i/b Tejas Shah.
For the Respondents: Mr. Akshay Shinde, Ms. Aditi Bhat, with Deeksha Jani, Niket Jani i/b Jani & Parikh, Mr. Satchit Bhogle, with Joshila Borges, Mr. Milind More, Addl GP.
IMPORTANT POINT
The court established that failure of a developer to meet obligations under a development agreement negates any claims to redevelopment rights during insolvency proceedings.
Headnote:
Injunction - Redevelopment - Mumbai Municipal Corporation Act, 1888; Maharashtra Cooperative Societies Act, 1960; Insolvency and Bankruptcy Code, 2016 - The court interpreted the provisions regarding redevelopment rights and obligations of developers, concluding that the petitioner could proceed with redevelopment despite the developer's insolvency.
Fact of the Case:
The petitioner, a society, faced an impasse with AA Estates, whose building was declared unfit for habitation. AA Estates failed to redevelop the property despite a long-standing agreement, leading the petitioner to terminate the agreement and seek new developers.
Finding of the Court:
The court found that AA Estates had failed to fulfill its obligations under the development agreement, and thus the redevelopment rights belonged to the petitioner, not AA Estates, which was undergoing insolvency proceedings.
Issues: Whether the petitioner could proceed with redevelopment despite AA Estates being in corporate insolvency resolution process and the implications of the moratorium on AA Estates' assets.
Ratio Decidendi: The court held that the redevelopment rights of the petitioner were not part of AA Estates' assets under the moratorium, as AA Estates had failed to meet its obligations, leading to a complete failure of consideration.
Result: The court made the rule absolute, directing the authorities to grant necessary permissions for redevelopment.
JUDGMENT :
Kamal Khata, J.
1. Rule. Rule made returnable forthwith by consent of parties.
2. The Petitioner, a society, is faced with a classic impasse yet again because of the infamous RNA Group company AA Estates Private Limited (“AA Estates”). On the one hand, their building is declared unfit for habitation and categorised as “C-1”, and on the other, the same authorities refuse to process and grant permission for redevelopment of their building, all because of the Interim Resolution Professional (“IRP”) appointed for the erstwhile builder, AA Estates (whose contract was eventually terminated) who addressed letters to the authorities not to grant any permissions to the Petitioner.
3. The essential facts for determining the issue are as under:
4. The Petitioner owns the building on the plot of land leased to it by MHADA by a lease dated 12 February 1996. On 16 October 2005, the Petitioner entered into a Development Agreement (“DA”) with AA Estates, thereby granting redevelopment rights on certain terms and conditions. A General Power of Attorney dated 23 December 2005 also came to be executed.
5. Under the Development Agreement, more particularly clause 13(e), AA Estates was to complete the redevelopment work within 24 months. Admittedly, AA Estates did not take any steps for seven years. Thus, by 5 January 2012, it merely obtained a No Objection Certificate (“NOC”) from MHADA.
6. Probably for dearth of better choices or rather for inexplicable reasons, the Petitioner executed a Supplemental Development Agreement on 9th April 2014 with AA Estates. Thereafter, it took almost five months for AA Estates to obtain an IOD which it did on 4th September 2014.
7. In the meantime, the BMC issued notices under Section 353(b), 354, and 354A of the Mumbai Municipal Corporation Act, 1888 (“MMC Act”) in respect of the Petitioner’s building. According to these notices, the Petitioner’s building was declared in the C-1 category. One such notice is annexed at Exhibit ‘E’ of the Petition and is dated 10th August 2017.
8. Due to the dilapidated nature of the building, 19 out of the 60 members who were provided transit rent by AA Estates vacated their respective premises. Consequently, due to the non-payment of transit rent, these 19 occupants had no alternative but to re-occupy their respective premises.
9. Despite several correspondences, the AA Estates failed to commence property redevelopment. Thus, after patiently waiting 14 years for AA Estates to redevelop the property, on account of its continuing failure, the Petitioner terminated the agreement with AA Estates on 9th June 2019 by a decision at a Special General Body Meeting. The decision of the Special General Body Meeting is extracted in the Minutes annexed at Exhibit “F” to the Petition.
10. A notice dated 2nd December 2019 was served on AA Estates communicating the termination of the Development Agreement dated 16th October 2005 and Supplementary Development Agreement dated 6th April 2014. This termination notice is annexed at Exhibit “J” to the Petition.
11. In the meantime, AA Estates was admitted into the Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code 2016 (“IBC”) by an order dated 14 November 2019 by the National Company Law Tribunal (“NCLT”), Mumbai Bench.
12. Mr Gaurav Khurana, appointed as an IRP, informed the Petitioner through his letter dated 24 December 2019 that a moratorium is applicable to AA Estates’ assets and that, therefore, no coercive action should be taken against AA Estates. On 12 June 2020, the NCLT vacated the order initiating CIRP against AA Estates. The order is annexed as Exhibit “I” to the Petition.
13. On account of this turn of events, the AA Estates addressed a letter dated 8th July 2020 requesting the Petitioner to recall its termination notice dated 2nd December 2019 and hand over vacant peaceful possession of the property to enable them to redevelop it. The Petitioner did not do that. Therefore, by a letter dated 28th Oct
