Court Holds Redevelopment Rights Not IBC Assets Where Agreements Terminated Before CIRP; Upholds Bombay HC Directions to Process Approvals

A bench of Justices J.B. Pardiwala and R. Mahadevan heard the civil appeal by A A Estates Pvt. Ltd. through its Resolution Professional, challenging the Bombay High Court’s judgment that directed statutory authorities to process redevelopment approvals in favour of a new developer appointed by a co-operative housing society despite an ongoing Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The appeal raised questions on the validity of termination of development agreements, the scope of moratorium under Section 14 of the Insolvency and Bankruptcy Code, and alleged violation of natural justice.

The Court dismissed the appeal and upheld the High Court’s order. It held that the Development Agreement dated 16.10.2005 and subsequent supplementary agreements did not constitute “assets” or “property” of the corporate debtor for the purpose of the moratorium under Section 14 of the IBC because those agreements stood validly terminated prior to the commencement of the second CIRP. The Court emphasised that Section 14 protected only “existing, enforceable and subsisting rights” and would not resurrect terminated contractual rights. The Court, in its reasoning, observed: “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 validly terminated prior to the initiation of the second CIRP, and hence, no subsisting or enforceable right survived in favour of the corporate debtor.” The Court also noted that “the moratorium under Section 14 protects only existing, enforceable, and subsisting rights — not inchoate or forfeited rights,” and directed compliance with the High Court’s directions within two months while leaving remedies open for monies expended.

Background

The dispute arose from a long-pending redevelopment project at Kher Nagar Sukh Sadan, Bandra (E). Respondent No.1, Kher Nagar Sukhsadan Co-operative Housing Society, had executed a Development Agreement in 2005 and a Supplementary Agreement in 2014 with Appellant No.1, A A Estates, under which the developer was to redevelop the society’s property. The developer obtained statutory approvals and incurred substantial expenditure but redevelopment stalled amid defaults, alleged non-payment of transit rent, internal resistance by members and litigation; only 19 of 60 members vacated over many years.

Respondent No.1 purportedly terminated the agreements by resolutions and notices dated 09.06.2019, 02.12.2019 and 06.11.2021, and appointed Respondent No.8 (Tri Star Development LLP) as a new developer. A CIRP against A A Estates was admitted on 06.12.2022; the Resolution Professional objected to redevelopment approvals being granted during the moratorium. The Society filed WP No.3893/2024 seeking directions to statutory authorities to process approvals for the new developer; the Bombay High Court allowed the writ petition on 11.09.2024. A A Estates challenged that order before this Court.

The Supreme Court analysed whether termination predated the second CIRP, whether development rights amounted to “assets” under Section 3(27) and thereby attracted moratorium protection under Section 14, and whether the High Court breached natural justice. Applying precedents including Victory Iron Works, Rajendra K. Bhutta, Gujarat Urja and Tata Consultancy, the Court distinguished cases where developers had obtained possession or proprietary incidents; it held that here the developer never obtained physical or juridical possession and the agreements were conditional and executory. The Court concluded termination was lawful for persistent non‑performance, the agreements did not survive as assets on the insolvency commencement date, the High Court therefore legitimately exercised Article 226 to secure administrative action, and the appellants failed to show any real prejudice from the High Court’s procedure. The appeal was dismissed; the Court directed compliance with the High Court’s order within two months and left the appellants to pursue remedies for monies spent in accordance with law. The Court recorded an earlier interim status‑quo order dated 15.04.2025 and made no order as to costs.

Case Details: Case No.: 2025 INSC 1366 (Civil Appeal arising out of SLP (C) No. 10758 of 2025) Case Title: A A Estates Private Limited through its Resolution Professional Harshad Shamkant Deshpande and Another v. Kher Nagar Sukhsadan Co-operative Housing Society Ltd & Ors. Appearances: For the Petitioner(s): A A Estates Private Limited — through its Resolution Professional Harshad Shamkant Deshpande (party‑representative as per record) For the Respondent(s): Kher Nagar Sukhsadan Co-operative Housing Society Ltd. (Respondent No.1); Tri Star Development LLP (Respondent No.8); statutory authorities (Respondent Nos.2–7) (advocates not specified in the judgment)