Slum Act and IBC – Resolution Plan & Obligations of Developer

In 2011, the development agreement was executed in favour of the petitioner developer.

In 2022, the respondent No.5 LIC HFL filed section 7 petition sine the management of erstwhile promoters of the petitioner defaulted in repayment obligations.

On 15.3.2021, the NCLT admitted company petition and appointed IR Professional.

On 29.3.2023, the Resolution Plan was approved.

By the order dated 13.8.2024 of the Respondent No.2, the petitioner’s appointment as developer of SRA project was terminated for failure to pay transit rent arrears and to complete project within the stipulated time.  Another Developer was appointed.

In that context, the question was whether the Resolution Plan overrides or nullify the petitioner’s obligations and liabilities under the Slum Act.   In other words, whether SRA is barred or restricted by IBC from taking action under Section 13(2) of the Slum Act due to the Resolution Plan.

In this case, there was delay of 15 years as per the details given in para 28 of the judgment.

The crux of the judgment is that it is a regulatory forfeiture under Slum Act.  In that context, the Insolvency cannot be used as a shield to erase the developer’s past non-performance.  IBC cannot become a safe harbour for developers for their failure of public obligations.

The legal consequence of the Developer’s removal which is a non-monetary regulatory action – is that the corporate debtor loses the role in the project and the chance to earn profits from the free sale component.   This consequence flows directly from the breach of obligations by the developer.   This is not in the nature of a “claim” or “debt” as provided in IBC.

Judgment dated 25.3.2025 of the High Court of Bombay in Writ Petition No.2065 of 2025 of Anudan Properties Private Limited   Vs.   MMR Slum Rehabilitation Authority and others with connected matters