Bombay HC: Redevelopment Rights Excluded from Moratorium; Upholds Right to Shelter

The Bombay High Court division bench of Justices Kamal Khata and M.S. Sonak ruled that if the developer fails to meet its obligations under the Development Agreement, such as paying transit rent and completing construction within the specified time frame, there is a complete failure of consideration, and no rights accrue to it. A writ of mandamus was issued by the court to obtain a redevelopment license and approval. It was noted that the unpredictable outcome of a Corporate Insolvency Resolution Process (CIRP) should not deprive persons of their fundamental right to refuge.

The petitioner, Kher Nagar Sukhsadan Co-operative Housing Society, owns a block that has been ruled unfit for habitation (C-1 category). In 2005, it entered into a Development Agreement with AA Estates Private Limited to redevelop the property. Under the Development Agreement, AA Estates was required to finish the redevelopment work within 24 months. For 14 years, AA Estates did not begin the renovation process. On June 9, 2019, the petitioner dissolved the agreement due to its continued failure.

The court found that the Petitioner’s redevelopment rights were not part of AA Estates’ assets and consequently fell outside the scope of the moratorium. It ruled that the letters issued by the RP were ex-facie invalid and contradicted the CIRP data.

The court agreed with the decisions in Manohar M Ghatalia & Ors v State of Maharashtra & Ors and Tagore Nagar Shree Ganesh Krupa Cooperative Housing Society Ltd v State of Maharashtra & Ors., which held that if the developer (in this case, AA Estates) fails to meet its obligations—such as paying transit rent and completing construction within the specified timeline—there is a complete failure of consideration, and no rights accrue to it. As a result, no vested rights in the free sale component may be separated from the obligations under the Development Agreement.

Source: Live Law

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