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Rajendra K. Bhuta Re... v. Maharashtra Housing ...
Factual and Procedural Background
An appeal has been filed by Mr. Rajendra K. Bhuta, the Resolution Professional, against an order dated 2nd April 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench. The order rejected the application filed by the appellant seeking to apply the moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 (I&B Code) on land belonging to the Maharashtra Housing and Area Development Authority (MHADA).
The land originally belonged to the Bombay Housing & Area Development Board, which vested in MHADA in 1966 under the Maharashtra Housing and Area Development Authority Act, 1966. The land measuring 40 acres was allotted to a society in 1988. The society entered into a Joint Development Agreement (JDA) in 2008 with Guru Ashish Construction Private Limited (the Corporate Debtor) and MHADA for construction and rehousing purposes.
The Corporate Debtor took a term loan of Rs. 200 crores from Union Bank of India in 2011. MHADA permitted sale of the free sale component without its officers’ signature but withheld the No Objection Certificate (NOC) for occupation certificate until the proportionate built-up area was handed over to MHADA.
Flat purchasers filed a suit in 2017 for revised construction timelines. MHADA revoked the agreement and issued a stop work notice. The Corporate Debtor defaulted on the loan repayment in April 2017, leading Union Bank of India to file an insolvency application under Section 7 of the I&B Code, which was admitted in July 2017.
MHADA, pursuant to the termination clause in the JDA, demanded handover of the land in January 2018. The Resolution Professional, having taken over management, informed MHADA of the moratorium and requested non-termination of the JDA. After no reply, the Resolution Professional filed an application for amendment which was rejected by the Adjudicating Authority, refusing to apply the moratorium provisions to the property.
The 270-day Corporate Insolvency Resolution Process was completed in April 2018 with a resolution plan submitted.
Legal Issues Presented
- Whether the moratorium under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 applies to the land owned by Maharashtra Housing and Area Development Authority but subject to a Joint Development Agreement with the Corporate Debtor.
- Whether the Corporate Debtor has any right or interest in the land sufficient to treat it as an asset under the I&B Code for the purpose of moratorium.
Arguments of the Parties
Appellant's Arguments
- The Corporate Debtor has rights over the land based on the Agreement dated 9th November 2011 and the Joint Development Agreement dated 10th April 2008.
- The moratorium under Section 14(1)(d) of the I&B Code should apply to the land in question.
- Relied on the termination letter issued by MHADA to argue the applicability of moratorium protections.
Respondent's Arguments (Maharashtra Housing and Area Development Authority)
- No rights were created in favor of the Corporate Debtor as it was only a developer of the land.
- The Corporate Debtor sold its rights to a third party and thus does not hold any substantive interest in the land.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court examined the Joint Development Agreement and the relationship between the parties. It found that although the Corporate Debtor was handed the land for development purposes, it did not acquire any ownership or substantive rights over the land itself. The land remains the property of the Maharashtra Housing and Area Development Authority, which has not formally transferred ownership to the Corporate Debtor. Therefore, the land cannot be considered an asset of the Corporate Debtor for the purposes of applying Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016. The moratorium provisions cannot be extended to the land in question as it does not fall within the Corporate Debtor’s estate.
Holding and Implications
The court REJECTED the application filed by the Resolution Professional seeking to apply the moratorium under Section 14(1)(d) of the I&B Code to the land owned by Maharashtra Housing and Area Development Authority.
The direct effect of this decision is that the land remains outside the protection of the moratorium, allowing MHADA to exercise its rights under the Joint Development Agreement, including termination and possession. The opinion does not establish any new precedent beyond the facts of this case.
SUDHANSU JYOTI MUKHOPADHAYA, J. This appeal has been preferred by Mr. Rajendra K. Bhuta, Resolution Professional against order dated 2nd April, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, whereby and whereunder the application preferred by the Appellant for applying Company Appeal (AT) (Insolvency) No. 119 of 2018 Moratorium in terms of Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 (I&B Code for short) on the land of Maharashtra Housing and Area Development Authority has been rejected.
2. The land in question originally belonged to Bombay Housing & Area Development Board, which was vested in the Maharashtra Housing and Area Development Authority in the year 1966 pursuant to Maharashtra Housing and Area Development Authority Act, 1966 with all rights, liabilities and obligations.
3. The land admeasuring 40 acres was allotted in favour of a society on 8th February, 1988. The society in its Annual General Meeting decided to enter into an agreement with Guru Ashish Construction Private Limited- (Corporate Debtor) and a Joint Development Agreement was executed between the Society, Corporate Debtor and Maharashtra Housing and Area Development Authority on 10th April, 2008 for construction of building by the Corporate Debtor and thereafter, to hand over to the Society for rehousing of 672 tenants and the area earmarked for the Maharashtra Housing and Area Development Authority.
4. The Corporate Debtor had taken Rs. 200 Crores Term Loan Facility from the Union Bank of India on 25th March, 2011. Subsequently, the permission was granted by the Maharashtra Housing and Area Development Authority to sell the free sale component without the Company Appeal (AT) (Insolvency) No. 119 of 2018 signature of the officers of Maharashtra Housing and Area Development Authority. However, NOC for the occupation certificate for free sale component could not have been issued by the Maharashtra Housing and Area Development Authority unless and until proportionate share of built up area is handed over to the Maharashtra Housing and Area Development Authority.
5. On 20th March, 2017, a suit was filed before the Honble High Court of Bombay being Suit No. 40 of 2017 by flat purchasers, for revised timeline for construction of Rehab Component, Maharashtra Housing and Area Development Authority Component and Free Sale Component. On 24th April, 2017, the Maharashtra Housing and Area Development Authority issued a letter informing the Corporate Debtor that they are revoking the agreement followed by Stop Work notice issued in the year 2015.
6. On 30th April, 2017, the Corporate Debtor defaulted to pay Rs. 254,53,85,278/- towards the loan facility provided by the Union Bank of India. In this background, the application under Section 7 of the I&B Code was filed by the Union Bank of India against the Corporate Debtor on 15th May, 2017 which was admitted on 24th July, 2017.
7. Pursuant to the order of termination letter, in terms of clause 6.1 of Joint Development Agreement, on 12th January, 2018, the Maharashtra Housing and Area Development Authority asked to handover the land. The Company Appeal (AT) (Insolvency) No. 119 of 2018 Resolution Professional who had taken over the management of the Corporate Debtor by his letter dated 15th January, 2018 intimated the Maharashtra Housing and Area Development Authority that the Corporate Debtor is under Moratorium and thereby requested not to proceed in terms of notice of termination, and not to terminate the Joint Development Agreement.
8. Having received no reply, on 22nd February, 2018, the Resolution Professional filed Miscellaneous Application being MA 137 of 2018 for carrying out amendment in MA 96 of 2018 to which reply was filed by the Maharashtra Housing and Area Development Authority.
9. The Adjudicating Authority by impugned order dated 2nd April, 2018, rejected the application filed by the Resolution Professional for amendment and thereby refused to apply provision of Section 14(1) (d) of the I&B Code in respect to the property in question which belongs to the Maharashtra Housing and Area Development Authority.
10. During the course of hearing, it is informed that 270 days period of Corporate Insolvency Resolution Process has been completed on 19th April, 2018, and Resolution Plan submitted.
11. Learned Senior Counsel appearing on behalf of the Resolution Professional placed reliance on Agreement dated 9th November, 2011 and the Joint Development Agreement dated 10th April, 2008 to suggest that Company Appeal (AT) (Insolvency) No. 119 of 2018 the Corporate Debtor has right over the land in question. Reliance has also been placed on letter of termination issued by the Maharashtra Housing and Area Development Authority.
12. Learned Senior Counsel for the Resolution Professional referring to Section 14(1)(d) of the I&B Code and submitted that the Moratorium is applicable to the land in question.
13. On the other hand, according to the learned Senior Counsel for the Respondent- (Maharashtra Housing and Area Development Authority), no right was created in favour of the Corporate Debtor, who is merely a developer of the land, the Corporate Debtor sold its right to the third party.
14. On perusal of record, we find that pursuant to the Joint Development Agreement the land of the Maharashtra Housing and Area Development Authority was handed over to the Corporate Debtor and except for development work the Corporate Debtor has not accrued any right over the land in question. The land belongs to the Maharashtra Housing and Area Development Authority which has not formally transferred it in favour of the Corporate Debtor. Hence, it cannot be treated to be the asset of the Corporate Debtor for application of provisions of Section 14(1) (d) of the I&B Code.
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