Maharashtra Housing And Area Development Authority (MHADA) & Ors. vs Rajendra K. Bhuta, Liquidator Of M/s Guruashish Construction Pvt. Ltd. (Under Liquidation) & Ors.

IA. No. 2333 of 2020 ("Implementation Application") has been filed on behalf of the Applicant Maharashtra Housing And Area Development Authority ("Applicant"/"MHADA") for Guruashish Construction Pvt. Ltd. (“Corporate Debtor”/“Guruashish Construction”).

The Applicant sought reliefs as follows:

In the instant Application, the Respondent is the Liquidator of the Corporate Debtor (“Liquidator”).

area. As per the approved layout, the entire scheme was divided into 13 sectors: • R-1 to R-5 - MHADA Component • R-9 – Rehabilitation Component • R-6 to R-8 & R-10 to R-13 – Free Sale Component. Further, As per clause 11 of the DCM (Page 276 of IA 2333/2020-Volume II), clause 2.1.2(xviii) of the JDA (Page 137 of IA 2333-Volume II) was modified to the limited extent to allow the Corporate Debtor to sell their free sale component but that too at their own risk and responsibility. Further, Clause 11 of the DCM categorically stipulates that NOC to the Occupation Certificate for Free Sale Component shall not be issued by MHADA unless and until proportionate share of built-up area is handed over to MHADA. NOTE: Pursuant to the JDA and DCM, Corporate Debtor created

The facts leading to the Application are that, MHADA is the owner of the “Siddharth Nagar Property” admeasuring 47 acres. Vide the Joint Development Agreement (“JDA”) dated 10th April, 2008, a license was granted to the Corporate Debtor to enter upon MHADA’s land and to construct and hand over MHADA and rehabilitation portion free of cost. To recover the cost, Corporate Debtor/ Developer was granted Free Sale Component. only upon the fulfilment of its obligations under the JDA i.e., upon the construction of rehab component and MHADA component and upon handing it over free of cost to MHADA and Goregaon Siddharth Nagar Sahakari Griha Nirma Sansthan Ltd. ("Society"). JDA read with DCM reflects the below mentioned rights and liabilities of the Corporate Debtor:

Under the JDA and DCM, it was the obligation of the Corporate Debtor to construct Rehabilitation component for 672 tenants and MHADA component of not less than 1,11,488.32 sq. mtrs. BUA. Further, the JDA also required the Corporate Debtor to provide rent to 672 tenants during the transit period.

In consideration to the obligation, Corporate Debtor was given right to Free Sale Component to recoup the construction cost for construction of MHADA and Rehabilitation component.

Clause 6.1 of the JDA gave right to MHADA to revoke the license granted to the Corporate Debtor in the event the Corporate Debtor failed to comply with the obligations under the JDA. The Corporate Debtor defaulted in completing the construction and handing over the rehabilitation portion and MHADA portion inspite of repeated extentions. After lapse of about nine years from the date of extention of the JDA and seven years from DCM, the Corporate Debtor had failed to complete the rehabilitation portion and MHADA’s portion. As the Corporate Debtor was in breach of material terms of JDA, MHADA vide notice dated 12.01.2018 terminated the JDA.

Since the Corporate Debtor had the restrictive rights of entry upon the said land admittedly belonging to MHADA, vide the termination notice, the Corporate Debtor was put to notice that the Corporate Debtor will not be allowed to enter the said land and the authority/ license to enter the said land or remain thereupon is terminated. This termination notice has not been challenged by the Resolution Professional/ Liquidator in the appropriate forum and has attained finality.

Post the termination of the JDA and DCM, Resolution Professional has filed an M.A. No. 96 of 2018 before the Tribunal under Section 14(1)(d) of the IBC against MHADA to refrain from taking over the possession of the said Property till completion of CIRP and seeking ad interim order directing MHADA to continue with JDA and DCM till completion of CIRP. Both the NCLT and the NCLAT rejected the Application filed by the Resolution Professional under Section 14(1)(d) of the IBC. The Hon’ble SC after distinguishing “occupation” and “possession” used in Section 14(1)(d) of the IBC and after going through the JDA and DCM held that the construction of the JDA r/w the DCM shows that the right of the Corporate Debtor was only that of a licensee in occupation. However, it further held that since the Corporate Debtor was nevertheless in occupation, albeit, under a license granted by MHADA to the Corporate Debtor the statutory freeze under Section 14(1)(d) would be applicable till the completion of CIRP process.

Liquidator post the cessation of moratorium has filed the I.A. No. 2377 of 2020 claiming that the entire 47 acres of land should be part of the Liquidation Estate.

Asset of Corporate Debtor:

The following Recitals in the Joint Development Agreement (JDA) acknowledges that MHADA is the owner of the “Siddharth Nagar Property”: Recital (a), (b) & (c) - Page 130/131 of the IA 2333/2020. The extracts of the same is as below:

Development Agreement dated 18th August, 2006 (Annexure 1 at Page 59 of I.A. 2333- Volume 1) executed between the Corporate Debtor and the Society also acknowledges MHADA as the owner of the property and further acknowledges that the agreement is for authorizing and empowering the developer/ corporate debtor to follow up with MHADA for obtaining approvals/sanctions and the allotment of the land for re-development.

the Corporate Debtor:

Vide the Joint Development Agreement dated 10th April, 2018 executed between the MHADA, Corporate Debtor and the Society, only a limited right by way of license was granted to the Corporate Debtor to enter upon the land and carry out the construction of the tenants' and MHADA's component. The relevant clauses which clearly evidences the aforesaid are as below:

(i). Clause 1.1.9 at (Page 133 of IA 2333- Volume II)

(ii). Clause 2.1.2 (xxvi)- (Page 138 of IA 2333- Volume II):

(iii). Clause 2.1.2(xxxix) (Page 140 of the IA 2333- Volume II):

Under the JDA, Corporate Debtor’s entitlement to its share in Free Sale Component was conditional upon the fulfilment of its obligations under the JDA i.e., upon the construction of Rehab component and MHADA component and successful handing over of the same free of cost to MHADA and Society. The scope of the work of the Corporate Debtor under the JDA as well as conditional entitlement is stipulated in the following recitals:

(i). Clause 2.1.1 (a) & (b) – (Page 135 of IA 2333- Volume II):

(ii). Clause 2.1.2 (iii) – a, b & c & Clause 2.1.2 (iv)- (Page 135/136 – Volume II):

(iii). Clause 2.1.2(xviii)- (Page 137 of IA 2333/2020-Volume II):

(iv). Clause 2.1.2(x)- (Page 136 – Volume II):

(v). Clause 2.1.2(xx)- (Page 137- Volume II):

(vi). Clause 2.1.2(xxvi)- (Page 138 – Volume II):

(vii). Clause 2.1.2(xlii)- (Page 140- Volume II):

All the aforesaid clauses show that the right to the Free Sale Component was conditional upon construction of the Rehab Component and MHADA component free of Cost. Since, Corporate Debtor has admittedly failed to perform its obligation under the JDA, it cannot claim any right under the JDA and DCM. On the contrary, Corporate Debtor has already sold the entire FSI (even more than what was accrued under the JDA and DCM) to nine (9) builders.

Learned Liquidator in its I.A. No. 2377/ 2020 (at Para 11) has himself admitted that the Free Sale Component was conditional upon fulfilment of the obligations under the JDA and the relevant extracts of the same is as below (Page 12-13 of the IA Volume I):

Even Learned Resolution Professional before the Supreme Court in Section 14(1)(d) proceedings (Order dated 19th February, 2020) has admitted that FSI was granted to only recover the cost of the project and now the Learned Liquidator is claiming the entire 47 acres of land which is completely contrary to the terms of the JDA. The relevant extracts of the Supreme Court Judgment dated 19th February, 2020 is as below:

under the free sale component or granted any interest arising therefrom:

Learned Liquidator has contended that vide Deed of Confirmation & Modification dated 09.11.2011, an absolute right to sell the free sale component was granted to the Corporate Debtor and that even without performance of its obligation under the JDA, Corporate Debtor is entitled to its Free Sale Component under the JDA.

It is submitted that Deed of Confirmation and Modification was executed due to revision in the area of development and the increase in the entitlement of the tenants of the rehabilitation component whereby the built up area for MHADA increased from 1,11,476.87 to 1,48,151.07 square meters and rehabilitation area of the tenants increased from 540 square feet to 767 square feet built up area. (Refer Para 26 @ Page 23-24 of I.A. No. 2333/2020). The relevant clauses of the DCM:

Clause 6/ (Page 275/ Volume II of IA 2333/2020) - Rehabilitation area of Tenants increased.

Clause 8/ (Page 275-276/ Volume II of IA 2333/2020) -MHADA's portion increased.

As per the approved layout the entire scheme was divided into following 13 sectors and the Corporate Debtor was entitled to the free sale component subject to completion of MHADA's as well as Rehabilitation Component. The approved layout is as below:

(1). R-1 to R-5 - MHADA Component

R-9 - Rehabilitation Component

R-6 to R-8 and R-10 to R-13 - Free Sale Component. (Refer Para 21 at Page 19 of the I.A. No. 2333/2020, Volume I)

DCM also amended original clause 2.1.2(xviii) in the JDA and substituted it with Clause 11 of DCM. The extracts of the original clause 2.1.2(xviii) of the JDA and Clause 11 of DCM are reproduced as below:

Vide clause 11 of the DCM, no absolute right to free sale component was granted to the Corporate Debtor. As per clause 11 of the DCM, clause 2.1.2(xviii) of the JDA (Page 137 of IA 2333- Volume II) was modified to the limited extent to allow the Corporate Debtor to sell their free sale component but that too at their own risk and responsibility. Further, Clause 11 of the DCM categorically stipulates that NOC to the Occupation Certificate for Free Sale Component shall not be issued by MHADA unless and until proportionate share of built-up area is handed over to MHADA.

The right to sell the free sale component was only given so that Corporate Debtor can recover its cost but again subject to the completion of MHADA’s component and 672 tenants’ rehabilitation component. Clause 11 of the DCM can never be interpreted to mean that Corporate Debtor got the absolute right over the Free Sale Component or the entire 47 acres of land as alleged. As per the arrangement, the entitlement of the Corporate Debtor for the free sale component arose only subject to the carrying out of the obligation of construction of rehabilitation tenements and MHADA’s Component. The said entitlement was only in lieu of recovering the cost of construction of the rehabilitation tenements of MHADA’s Component. In the absence of complying with the aforesaid obligations no interest of any nature whatsoever inured to the benefit of the Corporate Debtor. Further, as per Clause 2 of the Deed of Confirmation and Modification, it is stipulated that all the obligations under the JDA will continue and that Deed of Confirmation and Modification shall form part of the Joint Development Agreement and both the documents to be read and construed together. The clauses of the DCM did not discharge the Corporate Debtor from the primary obligation and the scope of the project as was defined under the JDA. Further, Clause 11 in the Deed of Modification is also subject to termination clause under Clause 6.1 of the JDA. The relevant extracts of Clause 2 of the DCM is as below:

As per clause 12, the CEO of MHADA had given permission to the Corporate Debtor to avail loan for implementation of project against the security of Corporate Debtor’s free sale component. It is submitted that the aforesaid clause cannot be of any aid to the Corporate Debtor. The fact that Corporate Developer was allowed to take loan can in no way be interpreted to mean that MHADA’s control over the land was taken away. MHADA has always maintained and also reiterated in Clause 11 of the DCM that no NOC will be given provided the obligations are fulfilled by the Corporate Debtor. Also, it is the Corporate Developer who had taken the loan and the same has to be repaid by it and it is the risk which the Financial Institutions have taken knowing fully the terms and conditions under the JDA and DCM.

Reliance is placed on the order of Hon’ble Supreme Court in Municipal Corporation of Greater Mumbai v/s. Abhilash Lal & Ors. – (2020) 13 SCC 234 decided on November 15th, 2019, in a similar matter pertaining to MCGM’s land where No objection letter issued by MCGM for creation of interest with respect of the MCGM properties, held that whatever documents Corporate Debtor may have created with the banks and Financial Institutions, MCGM cannot be bound by the same.

Learned Liquidator has also relied on Clause 15 of the DCM to state that Corporate Debtor shall be promoter under MOFA & RERA with respect to building constructed out of its share of development and this shows that rights in the property was transferred. It is once again submitted that all the rights given to the Corporate Debtor were subject to the fulfilment of its obligations under the JDA and DCM and that the aforesaid clause in no way suggests that absolute rights was granted to the Corporate Debtor.

Liquidation Estate:

Applicant submits that the Corporate Debtor has already alienated the entire FSI arising out of the free sale component falling to the share of the Corporate Debtor in favour of nine (9) builders and there is no Free Sale Component remaining to be included in the Liquidation Estate. In fact, as per the M.A. No. 96 of 2018 in Company Petition No. 1061 of 2017, the Resolution Professional himself has admitted that the Corporate Debtor has alienated 3,11,745.45 square meters of the constructed area which is way more than the free sale component which was available to the Corporate Debtor i.e, 2,70,697.51 square meters under the DCM. Developers have in turn constructed and sold away flats to homebuyers and further created encumbrances on this land.

Due to these acts committed by the Corporate Debtor, MHADA was constrained to file six suits against the developers. On the other hand, the nine developers to whom Corporate Debtor had sold away the FSI have also filed suits in the Bombay High Court which is still pending. Due to the aforesaid situation which had been created by the Corporate Debtor, the State Government of Maharashtra, on the basis of the Joseph Committee Report, issued a Government Resolution ("G.R.") dated 09.07.2021 directing MHADA to take over the entire project and complete the same subject to the order passed by this Hon'ble Tribunal and the Hon'ble High Court. -Clause 1(a) of GR-Page 18-19 of the Additional Affidavit filed by MHADA in IA 2333/2020 dated 30.07.2021. The relevant extract of the GR is as below:

F. MHADA has already terminated the JDA vide termination letter dated 12^th January, 2018 by invoking clause 6.1 of the JDA and the same has attained finality:

Clause 6.1 of the JDA gives right to MHADA to revoke the license granted in the event the Corporate Debtor fails to comply with the obligations under the JDA. The extracts of the termination Clause 6.1 read as below:

On 12th January, 2018, MHADA terminated the Joint Development Agreement as Corporate Debtor defaulted in its obligations to complete and hand over the construction of the rehabilitation component (R-9) and MHADA component (R-1 to R-5) within timelines stipulated in the JDA & DCM and failure to pay the rent during the transit period. Post termination of JDA on 12th January, 2018, the entire 47 acres of Siddharth Nagar Property is in complete possession of the MHADA and that no challenge had been made against the termination in any Competent Court. Hence the termination letter has attained finality qua the Corporate Debtor.

G. In the proceedings taken out by the Resolution Professional in the context of Section 14(1)(d) of IBC, Hon’ble Supreme Court vide order dated 19th February, 2020 has given the finding that Corporate Debtor was mere licensee under the JDA and DCM:

Post the termination of JDA & DCM on 12th January, 2018, Resolution Professional filed a Miscellaneous Application being M.A. No. 96 of 2018 under section 14(1)(d) of the IBC seeking orders against the MHADA to refrain from taking over the possession of the said Property till completion of CIRP and to continue the JDA and DCM till the completion of CIRP. The Tribunal dismissed the M.A. No. 96/2018 filed by the Resolution Professional by holding that no moratorium under Section 14 be applied as the said Property is not an asset of the corporate debtor nor any posessionary right vest in the Corporate Debtor. (Refer page 325 of the IA 2333/2020- Vol III). The Hon’ble NCLAT upheld the order of the NCLT, Mumbai and further affirmed the position of the Corporate Debtor as Licensee. (Refer Page 354 of IA 2333/2020- Volume III). The relevant paragraph of the NCLAT order is extracted hereinbelow:

The matter travelled to the Hon'ble Supreme Court (Order dated 19th February, 2020). Hon'ble SC after distinguishing "occupation" and "possession" used in Section 14(1)(d) of the IBC and after going through the JDA and DCM held that the construction of the JDA r/w the DCM shows that the right of the Corporate Debtor was only that of a licensee in occupation. However, it further held that since the Corporate Debtor was nevertheless in occupation, albeit, under a license granted by MHADA to the Corporate Debtor the statutory freeze under Section 14(1)(d) would be applicable till the completion of CIRP process.

As per the SC judgement, the moratorium under Section 14(1)(d) was only applicable till the completion of CIRP. With the cessation of the moratorium under Section 14(1)(d) of the IBC, Corporate Debtor’s right to enter the premise as a licensee also ended.

Learned Resolution Professional while arguing the Application under Section 14(1)(d) has also admitted the correct interpretation of the Section that any recovery of a property by an owner where such property is ‘occupied by’ the Corporate Debtor would clearly fall under Section 14(1)(d) of IBC. In other words, by relying on Section 14(1)(d) of IBC, Learned Resolution Professional had conceded that MHADA is the owner of the property.

The Hon’ble Supreme Court while deciding the issue under Section 14(1)(d) of the IBC after considering the JDA and DCM, gave a finding that a license was granted to the Corporate Debtor to enter upon the land for redevelopment. Hon’ble SC held that they do not need to go into the question of whether any interest is created but at the least a license was granted for the three purposes (structures demolished, tenements allotted free of cost to MHADA and then recover and recoup costs from free sale component). It is pertinent to note here that even the Hon’ble Supreme Court has observed that free sale component was given to the Corporate Debtor to recoup and recover cost of construction of MHADA and Rehabilitation component. The issue before the Supreme Court was that since moratorium had kicked in and as per Section 14(1)(d), Corporate Debtor was in occupation of the property and MHADA could not have taken back the property. In this context, the Supreme Court had to consider whether Corporate Debtor was in “occupation” or “possession” as both these words are used in Section 14(1)(d) of IBC. However, SC categorically held that Corporate Debtor is only occupier by reason of license and there is no question of possession at all.

With the passing of the liquidation order on 4th September, 2020, moratorium under Section 14(1)(d) of the IBC has ceased to operate and thereafter as per the Supreme Court order dated 19th February, 2020, even the limited right of the Corporate Debtor as a licensee to enter the “Siddharth Nagar Property” has expired.

Despite the clear order of the Supreme Court that moratorium would cease to operate on the date of liquidation and Learned Liquidator issued a notice dated 22nd September, 2020 (Ref Page 413 of the IA 2333- Volume II) MHADA stating that as per Section 36(3)(b) & (h) of the IBC, the entire Sidharth Nagar Property of 47 acres should form part of the Liquidation Estate of Corporate Debtor as the same was “vested” with Corporate Debtor on the day of commencement of CIRP. It is submitted that the aforesaid notice is in complete contravention of the Supreme Court Order as well as the IBC which has already been part of this submissions.

H. "Siddharth Nagar Property" cannot be included in the Liquidation Estate of the Corporate Debtor even as per provisions of the IBC.

Learned Liquidator has relied upon Section 36(3)(b) and 36(3)(h) of the Insolvency and Bankruptcy Code, 2016 to contend that since the “Siddharth Nagar Property” was in possession of the Corporate Debtor when the CIRP was initiated, the same vests in the Corporate Debtor and shall form part of the Liquidation Estate. The reliance placed on Sections 36(3)(b) and (h) is wholly misconceived in as much as both these sub-sections are expressly made subject to the provisions of sub-section (4) of Section 36. Further, as per Section 36(4)(a)(iv) of IBC, the assets owned by the third party which are in the possession of Corporate Debtor because of any contractual arrangements is excluded from the Liquidation Estate. Since the “Siddharth Nagar Property” is admittedly owned by the MHADA and was merely “occupied” by the Corporate Debtor as a Licensee for a specific purpose under the JDA as already held by Hon’ble Supreme Court, the same is specifically excluded under Section 36(4)(a)(iv) of the IBC.

Further, Hon’ble Supreme Court vide order dated 19th February, 2020 has held that Siddharth Nagar Property was only under the “occupation” of the Corporate Debtor and not under “possession”. Hence, the invocation of Section 36(3)(b) by the Liquidator which states that “assets that may or may not be in possession of the corporate debtor” for inclusion of Siddharth Nagar Property is completely misplaced.

It is further submitted that the provision of Section 36 of the IBC 2016 has to be read along with the provision of Section 18 which permits the Interim Resolution Professional to take control and custody of only those assets over which the Corporate Debtor has ownership right. The explanation to Section 18 makes it clear that the term “assets” shall not include assets owned by third party in possession of the Corporate Debtor held under contractual arrangements. It is thus clear that when Interim Resolution Professional is barred from taking custody of assets owned by third party in liquidation which is in continuation of the insolvency process, the Liquidator cannot take possession of such assets.

Under Section 53 of the IBC, the Liquidator is empowered to distribute “proceeds from the sale of the liquidation assets” in accordance with the waterfall mechanism laid down thereunder. It is obvious that the sale can only be of what is defined to be the liquidation assets as defined by section 36(3) which as stated hereinabove by reason of Section 36(4)(a)(iv) excludes by statute -assets owned by a third party which may be in possession of the Corporate Debtor. Since MHADA is the owner of the Siddharth Nagar Property, the same can never be liquidated for the purpose of Section 53 of the IBC as Liquidator will never be able to pass a good title to any purchaser of the property from the liquidation. In other words, if the Liquidator were to exercise its powers under Section 53 of the IBC, 2016, it will not be able to liquidate the proceeds of the sale of the said property in question as part of the liquidation estate.

As per Section 52 of the Indian Easement Act, 1882, "License" is

As per the JDA & DCM, Corporate Debtor was given the limited right to enter upon MHADA’s land for the purpose of redevelopment. The Corporate Debtor was entitled to the right to the free sale component only upon completion of its obligation under the JDA and DCM and hence, it is a Licensee as per Section 52 of the Indian Easement Act.

J. IA No. 2377/2020 is barred by Res judicata as well as the constructive Res judicata under Section 11 and Explanation IV to Section 11 of CPC:

Section 11 of the Civil Procedure Code, 1908 provides that no suit can be tried again in which the matter was directly or substantially in issue in a former suit between the same parties and has already been decided by the Competent Court. Further Explanation IV to Section 11 CPC provides that any matter which might and ought to have been made ground of defence or attack in the former suit shall be deemed to have been matter substantially in issue of such suit and cannot be tried again.

It is submitted that I.A. No. 2377/2020 filed by the Learned Liquidator is barred under both under Section 11 and Explanation IV to Section 11 of CPC as the Judgment of Supreme Court dated 19th February, 2020 would operate as Res judicata. The issue with regard to the interpretation of JDA and DCM as to whether Corporate Debtor was a licensee or not, has already been decided by the Hon’ble Supreme Court in the judgment dated 19th February, 2020. Hence, since the issue of the interpretation of JDA and DCM has already been decided in the earlier proceedings, I.A. No. 2377/2020 would be barred under Section 11 of CPC. Thus, it is not open to the Liquidator after specifically conceding and admitting before this Hon'ble Court, NCLAT or the Hon'ble Supreme Court that the land belongs to MHADA. This plea is therefore barred by Res judicata.

K. MHADA’s case is squarely covered by the SC judgment in Municipal Corporation of Greater Mumbai v/s. Abhilash Lal & Ors. – (2020) 13 SCC 234 decided on November 15th, 2019:

By a contract dated 20th December, 2005, Seven Hills agreed to develop MCGM's land in Andheri (West) and construct a 1500 bed hospital within a period of 60 months. The project however, could not be completed within the stipulated time. In terms of Clause 15(g), the lease deed had to be executed within one month after completion. However, the deed was not executed as the project was not completed. Further Seven Hills even defaulted in payments towards annual lease rentals. MCGM issued show cause notice on 23rd January, 2018 proposing termination of the contract. On the strength of the contract, Seven Hills even created encumbrances on the land by borrowing from banks and financial institutions. On 13th March, 2018, before the period given by MCGM's show cause notice ended, CIRP was initiated at the instance of Axis Bank. A resolution plan was approved by COC which proposed payout to the tune of 102 crores to MCGM against the total claim of 140 crores and also committed to provide 20% beds in the hospital as per the agreement originally executed between Seven Hills and MCGM. Initially, MCGM agreed for the resolution plan but later it opposed the resolution plan arguing that being a public body as well as a planning authority, it had to comply with the provisions of MMC Act. Further it stated that the provisions of Section 14(1)(d) of the Code could not prevent MCGM from terminating the contract.

Both the NCLT and NCLAT rejected the plea of MCGM and approved the Resolution Plan with MCGM’s land by stating that plan filed along with application met with the requirements of Section 30(2). The Hon’ble Supreme Court reversed the NCLAT order and held as below:

With regard to Section 238 of the IBC Code, Hon’ble Supreme Court in paragraph 47 held that section 238 cannot be read as overriding MCGM’s right.

L. Reliance placed by the Learned Liquidator on Division Bench judgement of Bombay High Court in Chedda Housing Development Corp. Vs. Bibijan Shaikh & Ors., 2007 (3) MhLJ is completely misplaced.

Learned Counsel for the Liquidator relied upon para 12A & 13 of the Bombay High Court judgement in Chheda Housing to bring home the point that since the Corporate Debtor was granted the rights to sell the FSI to recoup the construction cost under the JDA and DCM, it is not a just a mere licensee/ contractor and that interest was created in favour of Corporate Debtor. Learned Counsel for the Liquidator has completely misapplied the ratio of the decision in the case of Chheda Housing. The Division bench in Chheda Housing was only considering which are the types of agreement where compensation in money will not be sufficient and specific performance can be sought. Further, Division bench observed that the parties must aver the readiness and willingness to perform the contract for seeking specific performance.

The judgement cannot be of any assistance to Learned Liquidator as neither any specific performance of the JDA is sought nor any readiness and willingness shown to perform the contract. On the contrary, Liquidator is claiming the vested right in the 47 acres of land through JDA and DCM despite the JDA/DCM being terminated on account of breach of material terms of the contract.

In the case of Chedda Housing, the Court was not called upon to decide whether the Plaintiff in that case had committed any breaches of its obligation under the agreement in question and therefore, the Hon’ble Bombay High Court there has not decided that a Plaintiff who had committed breaches of the agreement would nevertheless be entitled to seek Specific Performance. Hence, the ratio of this judgement is inapplicable to the facts of the present case.

The Respondent submits that on 18th August, 2006 a Development Agreement was signed between Corporate Debtor and the said Society, pursuant to which the Society appointed the Corporate Debtor to develop the 40 acres of land including the rehabilitation of the 672 tenements. Clause 20 of this Development Agreement gave rights to the developers to sell the remaining premises to any other person or persons (save and except the 672 flats to be allotted to the said 672 Tenants) on a principal to principal basis without holding the Society liable for the performance thereof. Under Clause 21, on the building being completed and Occupation Certificate being obtained, the developer would approach MHADA to execute the necessary Indenture of Lease and/or Deed of Confirmation as per rules applicable. Clause 27 and 42 gives rights to the developer to avail and utilise floating FSI, Transfer Development Right (TDR) or any other F.S.I. arising from the land.

It is further submitted that Stamp Duty on this document was paid under Article 5(ga) of the Bombay Stamp Act.

Pursuant to this Development Agreement on 29th October, 2007, MHADA took a decision to allow Development of the larger land of 47 acres i.e. 1.65,800 sq. mtr. By the said decision after making the project viable for rehabilitation of the tenants/ members of the Said Society and after deciding the project cost of construction and development of the layout MHADA agreed to share the constructed components in the said layout. The Corporate Debtor decided to undertake Development of the land on a Joint Venture Basis.

Vide resolution 6280 dated 1st November, 2007 MHADA allowed development of entire 40 acres of land on terms and conditions mentioned in the said resolution. This resolution was further approved by the Government of Maharashtra on 3rd March, 2008. The decision taken unanimously that net 10 acres out of the 40 acres land occupied by the 672 tenements of the Said Society would be allotted to the Said Society vide Govt. resolution no. HSG/3381/4118/1313ka dated 8th February, 1988 and permission was given to execute Joint Venture Agreement between the Developer, the said Society and MHADA on the remaining 26.82 acres on terms mentioned in the said resolution. Accordingly, undoubtedly and indisputably the Corporate Debtor is Joint Owner of the land under Joint Venture with MHADA.

Pursuant to the said resolution no. 6280 issued by MHADA and Government of India Approval on 3rd March, 2008 a Tri-partite Development Agreement dated 10th April, 2008 was entered into between MHADA, the said Society and the Corporate Debtor. Over and above this the Corporate Debtor as developer committed to pay 25 crores to the Said Society towards Corpus Fund and provide alternate accommodation to the existing tenants. In consideration of obligations the Corporate Debtor was allowed to sell the balance built up area required for recovering Project cost estimated to Rs. 809.08 crores calculated at 13,500 per sq. mtr. To recover this cost, the Developer was granted (BUA) of 1,61,816.55 sq. mtrs. This document was duly stamped and registered on the total consideration value of Rs.178,75,14,500 and stamp duty of Rs.2,46,91,270 was paid by the Corporate Debtor.

On 26th July, 2011, MHADA gave the Corporate Debtor permission to sell free Sale Components wherein Signatures of MHADA Officers is not required.

On 9th November, 2011 a Deed of Modification and Confirmation was executed between the Said Society, MHADA and the Corporate Debtor which recorded that the Corporate Debtor has appointed and obtained approvals and sanctions for the entire 40 acres of land from the Municipal Corporation of Greater Mumbai. On survey of land, parties have learnt that measurement of the said land has been enhanced from 1,65,805.80 sq. mtrs. to 1,93,599.90 sq. mtrs. In the meantime, DCR 33(5) was amended and as a result thereof MHADA is entitled to get share proportionately increased which should not be less than 1,48,151.07 sq. mtrs.

The Agreement clearly brings forth that the terms of the Agreement made the Corporate Debtor owner of the free sale Component. The interest this created by virtue of the Agreement dated 10th April, 2008 and 9th November, 2011 is an asset of the Corporate Debtor and hence should form part of the Liquidation estate that the Liquidator is required to protect during the Liquidation Process.

It is submitted that the possession of the land was not given to the Corporate Debtor as a contractor. The Joint Development Agreement is entered into with the Corporate Debtor as a developer on a 50:50 basis. An agreement is a Joint Development Agreement on which the developer paid Stamp Duty as required under Stamp Act. The amount of consideration was determined and stamp duty was paid at the Market Value for the purpose of payment of stamp duty. If the agreement is of a contractor there would not be any stamp duty payable on such agreement of the contractor.

On execution of JDA, the land and development rights become composite assets cannot be segregated as two separate assets of the JDA joint venture. One part of the land apportioned to Society with FSI of buildings to the Society having 672 flats to be built on that land, the second part of the land along with FSI is apportioned and provided to MHADA for MHADA buildings, and the third part of the land along with FSI is made available to Corporate Debtor to compensate the cost of construction of buildings for Society and MHADA as a consideration. The land was made available to the Corporate Debtor to construct buildings for self-development and/or allowed to sell FSI with land to other builders. FSI cannot be sold without rights on the land. The Joint venture has provided the rights and obligations of each party. MHADA has the right to get constructed buildings free of cost from the Corporate Debtor, the Society to get constructed buildings to house 672 tenant members, the buildings to be constructed free of cost by the Corporate Debtor and the Corporate debtor has development rights for self-development and free sale component as consideration for providing buildings free of cost to Society and MHADA. The members whose contractual obligations are not satisfied can file claims with the IRP/RP/Liquidator.

Respondent submits that as per reports submitted by engineers of MHADA 40.44% of the work is completed and 59.56% of the construction is yet to be completed the cost for completion estimated to be 337.06 crores. This claim can be satisfied from the available development rights and from the sale of flats from the meadows and further balance money can be recorded from the balance amount from the flats that are already sold and from Free Sale Components available and development rights available with the Corporate Debtor. As per the balance sheet of 30th September 2017, the Corporate Debtor has shown inventory work-in-progress of Rs 890 crores.

During the CIRP, on 12th January, 2018, MHADA unilaterally without taking the approval from the Said Society “Goregaon Siddharth Nagar Grihan Nirman Sansthan Ltd.” issued Termination Notice to terminate the Joint Development Agreement 10th April, 2008 and Deed of Modification Cum Confirmation dated 9th November, 2011 and sought recovery of land, property and standing structures on the said land built by the Corporate Debtor. The Liquidator filed MA No.96 of 2018 and challenged the said action of MHADA for issuing Termination Notice dated 12th January, 2018 before the NCLT, Mumbai seeking declaration that during the moratorium no action of termination of Joint Development Agreement and Deed of Modification cum Confirmation dated 09th November, 2011 could be done. The NCLT, Mumbai vide order dated 2nd April, 2018 dismissed the said application filed by the Resolution Professional/Applicant. Aggrieved by the said order dated 2nd April, 2011 the Applicant preferred Company Appeal (AT)(Insolvency) 119 of 2018 before NCLAT, New Delhi.

NCLAT vide order dated 14th December, 2018 stated that pursuant to the ‘Joint Development Agreement’ the land of the MHADA was handed over to the Corporate Debtor ‘except for development work’ the Corporate Debtor has not accrued any right over the land in question. The land belongs to MHADA which has not formally transferred it in favor 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’. This apart, since 270 days of the CIRP have lapsed on 19th April 2018 and the period of Moratorium in any case has come to an end, the question raised has become academic. Accordingly, Appeal filed by the Resolution Professional was dismissed by NCLAT. The Resolution Professional aggrieved with the above order filed Civil Appeal No. 12248 of 2018 before the Hon’ble Supreme Court of India.

Vide order dated 4th January, 2019 Supreme Court ordered status quo in respect of the share of the Corporate Debtor and vide order dated 19th February, 2020 the Apex Court confirmed the applicability of Moratorium under section 14(1)(d). Supreme Court did not decide on ownership and termination notice issued by MHADA. On the day of pronouncement of the Liquidation order by the Hon'ble NCLT i.e. 4th September 2020 the Siddharth Nagar Property is in occupation and vested with Resolution Professional/Liquidator. Applicant referred to section 36(3)(h) of the IBC which states that "any other property belonging to or vested in the Corporate Debtor as on Insolvency commencement date shall form part of the Liquidation estate." On the day of commencement of Insolvency i.e. on 24 July 2017 the property of Siddharth Nagar was vested with Corporate Debtor. The property of Siddharth Nagar should form part of Liquidation Estate. In view of the above Siddharth Nagar, Goregaon property is part of the Liquidation estate.

In paragraph 30 of the Interlocutory Application 2333 of 2020 MHADA has provided a tabular form of the Built Up Area of the respective and argued that the Corporate Debtor has exceeded the free sale construction area. MHADA has further concluded in this paragraph that it is evident from the above tabular statement that the Corporate Debtor has already alienated the entire FSI arising out of the free sale component falling to the share of the Corporate Debtor in favor of third-party builder and there is no FSI of the Free Sale Components remaining to be included in the Liquidation Estate. This statement confirms MHADA’s submission that the Free Sale Component and the entire FSI are being held by the Developers who are listed in the above table. Accordingly, based on this admission it is concluded that MHADA accedes to the fact that the FSI of 270698 sq. mtrs. vests with the Corporate Debtor and this requires to be included in the Liquidation Estate.

At present MHADA has unauthorizedly taken the occupation of the aforesaid property and is thereby hindering the process of Liquidation of the Corporate Debtor This shall further affect the interest of the stakeholders such as the home buyers who have already purchased the said flats, the developers who have sold flats in their respective buildings.

With respect to why RP has not filed a suit against the Termination Notice, Respondent submits that all the matters during CIRP are to be referred to Adjudicating Authority, No other court has jurisdiction, hence Resolution Professional has not filed suit. Later on, this view got support from the order of the Hon’ble Supreme Court.

When the matter was referred to NCLAT, NCLAT had passed the order dated 12 7 2018 in the last Para it was directed that

It is submitted that NCLAT has not dealt with whether the subject that the Termination Notice is valid or not valid. It has dealt with the subject of moratorium under section 14(1)(d)., which was referred to the Hon’ble Supreme Court. If the moratorium is accepted it means the Termination Notice is discarded invalid ab initio.

On 9th July, 2021, Government of Maharashtra passed another Resolution to carry out the entire work subject to orders of the NCLT and Hon’ble Bombay High Court. In breach of this Resolution the Liquidator found that MHADA entered upon the property and started construction in blatant disregard of directions in the GR. Hence, the Liquidator was constrained to take out Interlocutory Application No. 2575 of 2022. In this I.A. the Liquidator has annexed the Liquidators Report along with photographs of site which is at Annexure 14 from page 127 to 149.

The following facts are undisputed:

(a). JDA read with DCM reflects the rights and liabilities of the Corporate Debtor to construct Rehabilitation component for 672 tenants and MHADA component which should not be less than 1,48,151.07 sq. mtrs. and provide rent to 672 tenants during the transit period.

(b). Clause 11 of the DCM conferred a right on the Corporate Debtor to sell it’s Free Sale Component, it was at the risk and responsibility of the Corporate Debtor.

(c). Clause 6.1 of the JDA gave right to MHADA to revoke the license granted to the Corporate Debtor in the event the Corporate Debtor failed to comply with the obligations under the JDA.

(d). Not even a single tenant has been rehoused till date and there are arrears of rent due to the tenants amounting to crores of rupees.

Before we decide on the pleadings regarding the sustainability of the termination letter and the status of the assets under liquidation estate, we must first look into the status of the Corporate Debtor vis-à-vis the said asset. Useful reference in this context can be taken from the judgement of the Hon’ble Supreme Court in the matter of Rajendra K. Bhutta Vs. Maharashtra Housing And Development Authority and Another in order dated 19.02.2020 the relevant portion reproduced herein below:

Further, the Respondent has failed to produce any document creating any right in favour of the Corporate Debtor by MHADA. Unless a document which is required to be compulsorily registered and stamped is executed and a right is created, there can never be a vesting of any immovable property in favour of any party under the Transfer of Property Act, 1882, Indian Registration Act, 1908 and Indian Stamp Act, 1899.

Thus, based on the above we conclude that the status of the Corporate Debtor to be that of a “Licensee” and that no ownership rights have been conferred upon it by the JDA read with DCM, by further relying on the Hon’ble Supreme Court’s observations as reproduced below:

The Hon’ble Supreme Court vide its order dated 19th February, 2020, directed status quo to be maintained during CIRP, subsequently this bench has passed an order for commencement of liquidation on 4^th September 2020 under Section 33 of the IBC. Upon reading the first provisio to Section 14(1) of the IBC it is evident that the statutory moratorium shall cease to exist once an order under Section 33 of the IBC is passed authorizing commencement of liquidation.

Based on the above, we reproduce the relevant portion of Section 36 of the IBC that defines Liquidation Estate to exclude:

Hence from the above it is clear that the Liquidator cannot include as a part of the liquidation estate, an asset that is not owned by the Corporate Debtor.

We cannot rely on the judgement of the Hon’ble Supreme Court cited in the case of Municipal Corporation of Greater Mumbai v/s. Abhilash Lal & Ors. – (2020) 13 SCC 234 dated November 15th, 2019 as the facts of the case clearly state that The show-cause notice in the case preceded admission of the insolvency resolution process. We did not find any such show cause notice produced pre-CIRP in this case.

On the Respondent’s own admission, 40.44% of the work is completed and 59.56% of the construction is yet to be completed, thus it appears that the corporate debtor has violated the JDA read with DCM. While the issue of the legality of the termination notice issued during the CIRP period has been decided, the Petitioner is well within its rights to terminate the arrangement under Clause 6.1 of the JDA.

Application bearing IA No. 2333/MB/C-I/2020 is thus disposed of as Allowed in above terms.

Application bearing IA No. 2377/MB/C-I/2020 is thus disposed of as Dismissed in above terms.