03 April 2024 Property/Real Estate Law >> Property & Real Estate  

Bombay High Court has dismissed a petition filed by the Resolution Professional (RP) of a bankrupt developer seeking to halt the acquisition of land for a slum rehabilitation project.

The dispute centered around a plot in Borivali where a developer, Truly Creative Developers Pvt Ltd (Truly Creative), had obtained a Letter of Intent (LoI) for a slum rehabilitation project in 1995. However, the project faced delays and allegations of non-compliance by Truly Creative. The Slum Rehabilitation Authority (SRA) initiated proceedings to acquire the land and appoint a new developer in 2018 due to the developer's failures.

Truly Creative challenged these actions but was unsuccessful. The company further entered insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) in 2022. The appointed RP then filed a petition arguing that the IBC's moratorium provision protected Truly Creative's assets, including the land.

The court, however, ruled against the RP. The order emphasized that the IBC provisions cannot supersede the Slum Act, a law designed to improve the living conditions of slum dwellers. The court criticized Truly Creative for neglecting its obligations towards the slum community, highlighting the fact that the company had not provided promised rehabilitation units or transit accommodation.

The order acknowledged the competent representation by the RP's lawyer but directed its criticism towards the RP's decision to file the petition. The court essentially stated that the petition aimed to "paper over the defaults of Truly Creative" and prioritize the developer's interests over the welfare of the slum dwellers.

This case underscores the importance of prioritizing the well-being of slum communities in redevelopment projects. It also clarifies that the IBC's moratorium provision has limitations and cannot be used to stall essential social welfare initiatives. Landowners in slum rehabilitation projects have a responsibility to fulfill their obligations towards the affected residents.