High Court Upholds Termination of Developer’s Rights: Orders Authorities to Process Redevelopment Permissions Despite CIRP Moratorium

The High Court upheld the termination of the developer’s rights and directed the authorities to process redevelopment permissions for the petitioner despite the ongoing CIRP moratorium.

The Bombay High Court Division Bench of Justice M.S. Sonak and Justice Kamal Khata, J. reviewed a Petition and observed that once a development agreement is terminated due to the developer’s failure to perform, the developer loses any vested rights in the redevelopment project, and the property’s redevelopment rights do not fall under the moratorium of the CIRP under the Insolvency and Bankruptcy Code. The court held that the Resolution Professional’s objections to granting redevelopment permissions were illegal and directed authorities to process the permissions.

The High Court heard the petition of a society facing difficulties due to its contractual dealings with AA Estates Private Limited, a company now undergoing the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. The Petitioner, having entered into a development agreement with AA Estates in 2005 for the redevelopment of their building, faced delays and non-performance from AA Estates over several years. After terminating the agreement in 2019 due to AA Estates’ failure to perform, the Petitioner sought permission from the municipal authorities for redevelopment. However, the appointed Resolution Professional (RP) of AA Estates intervened, urging the authorities not to grant any redevelopment permissions, citing the ongoing CIRP and moratorium provisions under the IBC.

The Court noted that the rights to redevelop the property had already been terminated by the Petitioner and that AA Estates had no legal claim to the development rights. The RP’s letters preventing redevelopment were deemed illegal, and the Court emphasized that the redevelopment rights of the Petitioner were not part of AA Estates' assets under the CIRP. The High Court further referred to previous rulings where similar cases had established that a developer failing to perform its obligations could not retain any vested rights in the redevelopment project.

Accordingly, the Court ruled in favour of the Petitioner, directing the municipal authorities to process the pending redevelopment permissions and disregarding any objections raised by the RP. The Court ordered that these permissions be granted within two months and concluded the matter without imposing any costs.

Mr. Pradeep Sancheti, Senior Advocate, appeared with Rohil Bandekar, representing the petitioner.

Mr. Akshay Shinde represented Respondent No. 2 and Respondent No. 5. Ms. Aditi Bhat, along with Deeksha Jani and Niket Jani from Jani & Parikh, represented Respondent No. 7. Mr. Satchit Bhogle, accompanied by Joshila Borges, represented Respondent No. 9. Mr. Milind More, Additional Government Pleader, appeared on behalf of the State.

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REEDLAW 2024 Bom 09591