IBC does not override the Slum Act; SRA retains the power to remove defaulting developers
- REEDLAW
- 12 hours ago
- 4 min read
REEDLAW Legal News Network reports: In a significant ruling, the Bombay High Court held that the provisions of the Insolvency and Bankruptcy Code (IBC) cannot override the statutory powers of the Slum Rehabilitation Authority (SRA) under the Slum Act. The Court clarified that SRA retains its authority to replace developers who default on their obligations, regardless of any resolution plan approved under the IBC.
The Bombay High Court Single-Judge Bench of Justice Amit Borkar, while adjudicating a batch of two writ petitions, affirmed that IBC resolution plans cannot limit or curtail the SRA’s statutory powers under the Slum Act. The Court emphasised that SRA retains the right to intervene and replace developers who fail to perform their obligations, ensuring that statutory objectives of slum rehabilitation remain protected.
The Petitioner filed a writ petition under Article 226 challenging the orders issued by the Slum Rehabilitation Authority (SRA) under Section 13(2) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971. These orders terminated its appointment as developer for a slum rehabilitation project on the grounds of persistent delay and non-payment of transit rent arrears. The Appellant had undergone insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, during which a resolution plan was approved by the Adjudicating Authority under Section 31 of the Code. It contended that the approved resolution plan extinguished all past dues, including transit rent, and that the SRA’s action violated the binding effect of the resolution plan.
The Respondent authorities and the slum society opposed the petition, arguing that the obligation to pay transit rent was a statutory duty that could not be nullified by insolvency proceedings. The dispute raised critical questions on the interplay between the IBC and the Slum Act, particularly whether an approved resolution plan overrides obligations under welfare legislation. The Court examined whether the SRA’s invocation of Section 13(2) after approval of the resolution plan amounted to enforcing an extinguished claim or constituted an independent regulatory measure.
The Court held that Section 238 of the IBC operates only in case of irreconcilable conflict between statutes and that both enactments must be harmoniously construed. It clarified that removal of a developer under Section 13(2) is a regulatory action in public interest to ensure the timely completion of rehabilitation projects, not a recovery proceeding. It further observed that statutory obligations under the Slum Act, such as providing housing and payment of transit rent, are performance-based duties and not “claims” under the IBC. While monetary claims for arrears may stand extinguished under an approved resolution plan, the power of the SRA to replace a defaulting developer and secure timely project execution remains unaffected.
The Court reaffirmed that approval of a resolution plan does not grant immunity from regulatory consequences and that the Slum Act and IBC operate in distinct domains, with the former aimed at protecting public welfare. The Court upheld the SRA’s authority to remove the Appellant as developer in the interest of slum dwellers, noting that persistent non-payment of transit rent since 2019 caused severe hardship to over 200 families. It found that the SRA had complied with principles of natural justice by issuing notices, granting hearings, and considering submissions before termination. Allegations of mala fides were rejected. While sustaining the termination, the Court granted one final opportunity to the Appellant to submit a concrete proposal for completing the project before the appointment of a new developer. The writ petitions were disposed of accordingly, and the request for a stay was refused.
Mr. Pravin Samdani, Senior Advocate with Mr. Mayur Khandeparkar and Mr. Arun Panickar, Advocates, represented the petitioner in WP/2065/2025 and respondent No. 3 in WPST/6431/2025.
Mr. G. S. Godbole, Senior Advocate, with Ms. Manisha Gawde i/by Ms. Uma Palsuledesai, Advocates, appeared for respondent Nos. 1 and 2 in both WPs.
Mr. Aspi Chinoy, Senior Advocate with Mr. Chirag Balsara i/by Mr. Sagar R. Gharat, Advocates, appeared for respondent No. 3 in WP/2065/2025 and WPST/6431/2025.
Mr. Abhishek Khare, Advocate, represented the respondent No. 4 WP/2065/2025 and respondent No. 5 in WPST/6431/2025.
Ms. Dhruti Kapadia, AGP, represented the respondent/State.
Mr. Prateek Seksaria, Senior Advocate with Mr. Anuj Desai, Mr. Nishant Chotani, Mr. Siraj Salelkar and Ms. Samiksha Rajput i/by Lexicon Law Partners, Advocates, appeared for the respondent No. 5 in WP/2065/2025 and for the petitioner in WPST/6431/2025.
Mr. Dinyar Madon, Senior Advocate, with Ms. Dhruti Kapadia, Advocate, appeared for the respondent No. 6-AGRC
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