Corporate Revival Under IBC Should Not Come At Cost Of Public Welfare Projects: NCLT Mumbai

Brief Facts

The case is related to an application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 by Aegis Resolution Services Private Limited acting as the Resolution Professional (RP) for Radius and Deserve Land Developers Private Limited. The application was filed against the Slum Rehabilitation Authority (SRA), Mumbai Metropolitan Region Development Authority (MMRDA), and the Government of Maharashtra. The primary agenda of the RP was to seek declaration that the ownership and possession of the Corporate Debtor's property should not be handed over to the Respondents due to moratorium imposed under Section 14 of the IBC Code 2016.

The case arose after the SRA through a letter directed the Corporate Debtor to hand over the land to MMRDA for the construction of a four-lane tunnel road connecting Thane to Borivali. The RP responded informing the SRA that the corporate debtor was under the CIRP and that a moratorium was under effect and thereby restricted any transfer or alienation of its assets. Despite this the, Government of Maharashtra issued notice for a survey of the land for acquisition. The RP in the exercise of its statutory duty and to safeguard the corporate Debtor's assets, approached the National Company Law Tribunal (NCLT) seeking relief.

NCLT Judgement

The tribunal examined Section 14 of the IBC and stated that moratorium prevents legal proceedings, assets transfers or recoveries against the Corporate Debtor. However, the tribunal acknowledged that the Government of Maharashtra has the authority to acquire land for public purposes through the due process of law. In the following case, the land in question was required for a public infrastructure and any acquisition would be accompanied by compensation.

The tribunal further cited the decision of the Hon'ble Bombay High Court in the CWP No. 1398 of 2024', wherein while dealing with the issue of staying the acquisition process, the court stated that the IBC provisions should not hinder slum redevelopment or other public infrastructure projects. The court observed that the moratorium should not be misused to prevent public initiatives. The judgement emphasized that corporate revival under IBC should not come at the cost of public welfare projects especially those impacting housing and infrastructure.

In the light of these considerations, the tribunal concluded that he proposed acquisition by MMRDA did not violate the IBC moratorium as it was the larger public interest and was not stripping the Corporate Debtor of its assets unlawfully. Consequently, the application was dismissed as premature.

Case Title: Aegis Resolution Service Private Limited, Resolution Professional of Radius & Deserve Land Developers Private Limited V. Slum Rehabilitation Authority (SRA)

Case Number: IA 2111/2024 IN C.P. (I.B) No. 892/MB/2022

Tribunal: National Company Law Tribunal, Mumbai

Coram: Ms. Reeta Kohli, Hon'ble Member (Judicial) and Ms. Madhu Sinha, Hon'ble Member (Technical)

For the Applicant: Adv. Karan Sangani (PH)

For the Respondent No. 2: Mr. Devansh Shah (VC)

Date of Judgement: 04.03.2025

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