SRA – Redevelopment – Section 13(2) of Slum Act 1971 – Termination of Developer
Termination of the petitioner’s appointment as Developer of Slum Rehabilitation Project for failure to pay transit rent arrears and complete project within the stipulated time.
The petitioner is the absolute owner of the property admeasuring 11,832.17 sq.meters at Thane. The occupants of the said land formed respondent no.3 society for slum scheme. On 5.3.2011, the respondent no.3 executed Development Agreement in favour of the petitioner for the slum scheme.
The events that took place between 2011 to 2024 including insolvency proceedings against the petitioner are mentioned in paras 4 to 19 of the judgment leading to the termination of the petitioner as developer.
On 13.8.2024, the respondent no.2 passed an order terminating the appointment of the petitioner and appointment of the respondent no.4 as developer of the respondent no.3.
The important issues arose for consideration and decision –
Whether the approval of Resolution Plan overrides or nullify the obligations and liability of the petitioner under the Slum Act & the Slum Scheme?
In other words, whether the SRA is barred or restricted by the IBC from taking action under Section 13(2) of the Slum Act due to the resolution plan’s binding effect?
Para 42 – When a developer under a SRA Scheme enters insolvency proceedings the need to exercise the statutory right to change developer becomes even more compelling. If the developer, even prior to insolvency, had failed to pay transit rent or failed to make progress on construction, the slum dwellers’ mistrust is not only understandable but also reasonable. Insolvency cannot be used as a shield to erase the developer’s past non-performance. It would be illogical to suggest that a developer who could have been removed for delay while financially solvent must now be protected merely because insolvency proceedings have commenced. IBC cannot become a safe harbour for developers who have failed in their public obligations.
IBC does not guarantee that every corporate debtor who comes out of resolution will retain all contracts or development rights, particularly where such rights were already weakened by non-performance.
IBC addresses the financial distress and debt resolution of a company; the Slum Act, on the other hand, deals with the social and physical rehabilitation of vulnerable citizens.
If a developer’s inability to pay rent or deliver flats is a symptom of its financial failure, the IBC may resolve the debt but the fallout on slum dwellers still needs a solution under the Slum Act. In other words, insolvency resolution cannot cure social consequences by itself.
Mere approval of the Resolution Plan under the IBC does not automatically prevent the SRA from invoking its powers under Section 13(2) of the Slum Act.
The core of Section 13(2) of the Slum Act is not recovery of dues but replacement of the developer. It does not create any new debt obligation upon the petitioner; rather, it results in the petitioner being divested of the right to continue as the project developer. This right is not absolute but conditional – it exists only so long as the developer performs its obligations.
Whether the obligation to pay transit rent to the slum dwellers is a statutory imposed by the Slum Act / Regulations or merely a contractual term of the Development Agreement?
Para 65 – When a slum rehabilitation scheme is sanctioned under the Slum Act, it is a public welfare scheme governed by the statutory provisions, guidelines of SRA, conditions mentioned in the LoI, other regulatory documents such as Annexure II and Regulation 33(1) of the Development Control Regulations.
A critical condition of such scheme is that the developer must provide either alternate transit accommodation or monthly transit rent to every eligible slum dweller from the date of vacating their hutments until permanent units are given. This is not an optional or negotiable term that can be bargained away. It is mandatory requirement, forming part of the very structure of the slum redevelopment scheme, and is intended to ensure that slum dwellers are not left without shelter during the construction phase. Therefore, even if the actual payment mechanism flows from individual agreements, the source and nature of the obligation is statutory. It has the force of law because it is embedded in the sanctioned scheme and enforced by the SRA.
Transit monthly rent to slum dwellers and IBC – pre & post-resolution plan
Transit monthly rent paid to the slum dwellers is not a one-time debt. It is continuing performance obligation, which accrues monthly until the permanent housing is delivered. Even if unpaid transit rent for the pre-CIRP period is extinguished by the resolution plan, the developer’s statutory obligation to continue paying rent post-CIRP remains intact. This is because resolution plan under IBC only deals with liabilities existed before insolvency commencement date. They do not and cannot relieve the corporate debtor from ongoing duties imposed by other statutes. This is not a mere matter of financial accounting – it is a legal requirement flowing directly from the Slum Act and the conditions of scheme approval. Non-compliance would once again trigger the SRA’s jurisdiction under Section 13(2) of the Slum Act.
Termination of Slum Developer under Section 13(2) of the Slum Act
Timely execution of slum project is a core element. Judicial precedents have categorically upheld the principle that delays in implementation of slum schemes affect a vulnerable population that depends on the successful and timely completion of slum project for basic housing.
Therefore, SRA’s intervention to replace a defaulting or inefficient developer is legally justified and necessary. The power conferred by Section 13(2) is not discretionary in the abstract – it is a statutory mechanism meant to hold developers accountable and to avoid indefinite stagnation of rehabilitation schemes.
Delay for termination of the Petitioner Slum Developer
On 7.11.2009, Letter of Intent was issued by Corporation for completion of entire project in 24 months. However, the Developer Agreement was executed on 5.3.2011.
Revised LoI was issued by SRA on 24.10.2017 for two buildings R1 and R2 only. R2 building was completed in 2019 and occupation certificate was given on 25.4.2019.
On 8.1.2020, the respondent no.3 Society executed supplementary Development Agreement.
Revised LoI letters were issued on 5th June and 16th July 2024 in view of change in management of the petitioner, with fresh period of 72 months for the project.
However, as of December, 2024, only RCC work up to the 16th floor of R1 building was completed showing significant delay. The petitioner had given permanent accommodation to 245 eligible slum dwellers, whereas, 210 are in transit accommodation.
HELD that the Supplementary Development Agreement of 2020 and the fresh of LoIs in June / July 2024 have redefined the legal and contractual obligations of the parties. New 72-months timeline has come into play. This period is still ongoing and has not yet lapsed. Therefore, any assessment of delay or default must be made with reference to the revised timeline and not on the basis of delays that occurred prior to the new arrangement. In the absence of any finding on the ground of delay that predates the fresh contractual and regulatory framework, the invocation of section 13(2) is misplaced and unjustified.
Non-payment of Transit monthly rent to the slum dwellers & removal of Developer
Consistent failure to pay transit rent is a well recognised ground for removing a developer under Section 13(2). This is not a punitive measure but a corrective action to ensure that the project does not remain limbo and that the slum dwellers are not made to suffer unnecessarily. Transit rent is not a mere contractual commitment – it is an integral part of the developer’s public duty under a welfare-driven statutory framework. In the present case, the petitioner’s failure to fulfil this obligation, even after corporate revival, has undermined the confidence of the SRA and the beneficiaries. The persistent default, coupled with an absence of credible corrective action, justifies the SRA’s view that the petitioner cannot be relied upon to carry forward the scheme in a manner consistent with the public interest.
Balancing Objectives of IBC and Slum Act
The question was whether the petitioner Developer Company which has undergone revival under IBC through approved Resolution Plan should be given fair opportunity to resume slum project.
The facts of the present case are not limited to a standard commercial transaction. The project is a slum rehabilitation scheme where stakes involve not only contractual obligations but also vital public interest, particularly, housing rights, shelter security and socio-economic well being of slum dwellers.
The cost of failure in implementation of disproportionately borne by the slum dwellers. Allowing the revived petitioner to retain the slum project land, now a valuable and regularised asset under the Slum Act without corresponding obligations, would amount to handing over a sanitized asset free from responsibility. That would not only be inequitable but legally impermissible in the context of a public welfare scheme.
Judgment dated 25.3.2025 of the High Court of Bombay in Writ Petition No.2065 of 2025 (AS) of Anudan Properties Private Ltd. Vs. Mumbai Metropolitan Region, Slum Rehabilitation Authority and others with Writ Petition (L) No.6431 of 2025
