Nagesh Madhava Suvarna v. State of Maharashtra

3. In the circumstances, we pass an order in accordance with the Minutes of the Order By Consent dated 7.5.2012. We make it clear that the Minutes of the order By Consent shall not affect party no.14 mentioned in the Annexure-I as Praful A. Dabolkar. It is not disputed that the correct name is Pradeep A. Dabolkar. Accordingly, prayer clause (c) which deals with reconstruction of Govinda Tower is allowed in accordance with the Minutes of the Order By Consent dated 7.5.2012. We direct MHADA to consider the development of the structure in accordance with the Development Control Regulation 33(5)-2C (ii) as it is an old proposal of MHADA layout and as a special case since the petitioners, victims of the building collapsed and the survivors are without a home. This shall not be a precedent in other cases. The local authorities shall consider and process the various applications necessary for reconstruction with utmost expedition. Rule shall be disposed of in due course.”

14. There are some further events that should not delay us. It is undisputed that AA Estate did seek extensions of time between 2012 and 2013. These extensions were inter alia in regard to demands by MHADA for payment of certain amounts. There is an extension, for instance, of 17th December 2013 when MHADA extended time saying that payments were to be made by AA Estate by 31st December 2013. AA Estate apparently did not meet that deadline.

15. 1st February 2014 is an important date for our purposes. This is when there came to be executed a Development Agreement (“DA”) and a Power of Attorney between the parties. We note that this is not registered but this is of consequence and possibly central to the principal argument that Mr Khandeparkar advances on behalf of AA Estate. A copy of this is at page 109 of the Affidavit in Reply that has been filed today by Respondent No 13. To be perfectly clear about this addition to the array of parties, Respondent No 13 was very recently joined. He is one Harshad Shamkant Deshpande, appointed as the Resolution Professional (“RP”) of AA Estate under the Insolvency and Bankruptcy Code, 2016 (“IBC”) since AA Estate has, relatively recently, been subjected to Corporate Insolvency Resolution Process (“CIRP”) proceedings.

16. At least one clause of this DA is crucial. It is the clause regarding possession. We find this in Clause 4 at page 120 of the Interim Application paper book. It also occurs elsewhere in that very document. Clause 4 says that the members in the society “have already handed over vacant and peaceful possession of the said plot of land on or around June 2012” along with structures/premises standing thereon. It goes on to speak of a possession receipt. And then it says in its last line that the developer, i.e., AA Estate is “in possession” of the Govinda Towers plot of land.

17. As we noted, this is not an isolated mention of possession. But for our purposes it will suffice. Reciting every occurrence of possession in this agreement will serve little purpose today.

18. On 24th March 2014, following a request by AA Estate, MHADA issued a revised offer letter. It now demanded an amount of about Rs 8.15 crores by 31st March 2014 and said that if payment was not made by this date, the offer letter would stand cancelled. AA Estate did not make this payment.

19. Another revision followed on 25th May 2015. On 31st July 2015, AA Estate asked MHADA to delete a particular condition from the offer letter.

20. On 13th August 2015, one of the Petitioners wrote to AA Estate asking it to commence construction work.

21. Just to put this into perspective, the Consent Minutes are of 7th May 2012. The order on those Minutes was of 28th June 2012. The construction was to be done within 36 months. And yet it was on 13th August 2015, well after that period, that one of the Petitioners had to write to AA Estate asking that construction should begin.

22. In the meantime, the Petitioners filed contempt proceedings against AA Estate. Notice in contempt was issued on 22nd February

2016. This court noted that AA Estate had a liability to make payment.

23. On 5th March 2016, AA Estate once again asked MHADA for an extension of time to make payment. It never did.

24. On 29th April 2016, there came a strange communication which we note only for its oddity although it has no bearing at all on what follows. AA Estate wrote to the society now contending — more than likely with the introduction of fresh legal advisory — that it was not liable to make any payment to the society or its members until construction actually began.

25. Mr Sancheti for the Applicant maintains that AA Estate did no work at all. He says that it abandoned the project and the project site. It made no payment to the society or its members. It submitted no plans for approval. It did not pay MHADA’s demands. More to the point, he maintains that whatever be the phrasing in the DA, the property continued in the possession of the society. He has some material in this regard. We will turn to this presently.

26. Between November 2019 and September 2020, AA Estate faced and miraculously survived the CIRP proceedings. This is important because up to this point at least AA Estate was solvent, was not facing bankruptcy or insolvency and was not either in liquidation or under a RP. This meant that it was not only at liberty but was contractually obliged and more so obliged under orders of this court to complete the reconstruction and redevelopment of Govinda Tower.

27. Yet nothing happened.

28. On 12th August 2022, and this timing is going to be critical, the Petitioners filed the present Interim Application. It proceeds on the footing, as indeed it must, that AA Estate had done nothing at all, was not capable, ready or willing to perform its obligations including paying transit rent, was offering a far lower area than agreed, but it had no interest in the property and therefore seeking the following reliefs: “(a) That the name of the Respondent No. 9 be deleted; (b) That the names of Respondent No. 11[a] to 11[c] be deleted;

(c) That the Applicants-Petitioners be granted liberty to appoint builder/developer of their choice and get the construction work within a stipulated time;”

29. It is prayer clause (c) that is pursued today by Mr Sancheti on behalf of the Applicant.

30. But this Interim Application itself encountered yet another speed bump. By December 2022, that is to say after this Interim Application was filed, AA Estate — and we may note incidentally that this is part of the infamous RNA group of companies many of whom are in law more underwater than afloat — was facing fresh insolvency proceedings. These led to the appointment of Mr Deshpande as the RP.

31. On 27th March 2023 we were told about this and we directed that Mr Deshpande be impleaded as Respondent No 13 to the Interim Application.

32. There are a few other areas that we must touch upon at this stage. Between July and August 2023, according to Mr Sancheti, Mr Deshpande as the RP of AA Estate issued public notices inviting Expressions of Interest for various projects of AA Estate. Govinda Towers, he says, was not one of them. Mr Khandeparkar has something of an answer to this, but we will come to that presently.

33. On 25th August 2023, we passed an order allowing the deletion of AA Estates (evidently now not necessary since Mr Deshpande had been joined) and we took on record a letter from the society that it had appointed a new developer. We issued directions to MHADA.

34. A short while later, on 3rd October 2023, Mr Khandeparkar appeared before us on behalf of Mr Deshpande. He raised a point of law (and Mr Khandeparkar has throughout been circumspect to confine this to a point of law), to the effect that since AA Estate was in CIRP and there was a declared moratorium, no one other than the RP could be in ‘possession’ of the property. He therefore said that our order of 25th August 2023, passed without hearing him on behalf of the RP on this aspect of the law ought to be recalled. It was true that we had not heard the RP and we had certainly not considered this submission. We unhesitatingly therefore recalled a part of our order of 25th August 2023 at least to the extent of the directions to MHADA and permitting the society to proceed with the appointment of a new developer. We listed the matter thereafter.

35. It is on this that we have since heard Mr Sancheti for the Applicant and Mr Khandeparkar for the RP.

36. Before proceeding further, we note that in this Interim Application Mr Sancheti is effectively seeking that the original order of 28th June 2012 be modified or substituted at the instance of the court, i.e., without consent of the parties. We address this straightaway. Such a relief might not have been possible had these been Consent Terms arrived at as an agreement between the parties. But since these are Consent Minutes, i.e., an order to which both sides were agreeable, we believe it is always within the province of the court, when circumstances so demand, to modify an earlier order especially when the modification sought is to give effect to what the court intended in the first place.

37. Additionally, those very minutes granted liberty to the parties to apply. No part of that order can be read in a vacuum or read to be entirely meaningless. Some heft must be given to every word in an order of a court. A liberty of this kind cannot be said to be a sterile or idle chanting. It speaks directly to the continued exercise of supervision and discretion of the court and clarifies that the court has not rendered itself functus officio nor divested itself of the matter.

38. Further, we are not considering the question of compensation. But just because we are not considering it today does not mean that we are rejecting that prayer or that relief either. It is always open to the Petitioners to pursue their remedy for compensation and damages, and they may do so in any proceeding whether it is this proceeding or, if they are so advised, in a regular civil suit. If it should be in a civil suit, then having regard to the circumstances of the case, the manner in which events have unfolded and perhaps most especially the length of time that has passed when the matter is in this court, we have no hesitation in excluding the entire period taken by this Writ Petition and various applications in this court from limitation for the purposes inter alia of Section 14 of the Limitation Act, 1963.

39. There are two further documents to which we believe we must make quick reference. The first is an order of a Division Bench of this court on 22nd February 2016 at page 33 of the compilation. We note this because there is a finding returned here, never challenged, that AA Estate had committed “several breaches of the said order” meaning the order of 28th June 2012. The nature of those breaches was noted and included non-payment of the amounts due under Clause 6 (ii) and the non-payment to MHADA. There is an unequivocal finding that AA Estate was liable to pay those amounts. This is what resulted in the issuance of the contempt notice.

40. We must return briefly to the DA. Clause 40 at page 118, a long and typically meandering clause frequently found in such agreements although what it says over 30 or 40 lines could perhaps be more efficiently stated in four, reads thus: “40. In consideration of the Developer agreeing to carry out, execute and complete the construction envisaged in this agreement and ensure that Society and the Members herein, is provided with the permanent alternate accommodation in the form of a flats/ commercial premises/units on what is popularly known as on ownership basis of an aggregate area admeasuring 2722.80 sq mtrs., more particularly described in the Second schedule hereunder, free of cost and such permanent alternative accommodation is provided within a period of 36 months from issuance of fresh I.O.D. and Commencement Certificate from Municipal Corporation of Greater Mumbai or such extended period as is mutually agreed upon, Society and the Members herein agrees to grant to the Developer irrevocable rights, permission, and authority to carry out the work of construction hereby envisaged by using FSI, Fungible FSI and TDR as permissible and approved by MCGM and MAHDA and to allot the said area available for sale, remaining after providing premises to Society and the Members herein, as agreed in the said new Building so constructed, in the open market by the Developer for consideration, and on terms and conditions, acceptable to the Developer, to the person or persons of the Developer’s choice without any recourse to Society and the Members herein, and that such person or persons purchasing the premises from the Developer shall be made the member of the society without any demur or objection and for consideration not exceeding Rs.1250/- for allotment of 5 Shares of such society. The Developer shall not be liable to account for the same to Society and the Members herein. The Developer is authorized to enter into agreement/s with the proposed buyers of the premises hereby envisaged. It is expressly clarified that such right of Developer to allot the flats/Shops/offices/units in the additional construction thus on the Said Plot of Land shall also include right to mortgage and/or give consent for mortgaging, creating lien and dispose of any of such premises in favour of any financial institution/s as the Developer in his absolute discretion may deem fit. Society and the Members herein have agreed that providing the consideration as narrated in Minutes of the Order by consent dated 7th May, 2012 in Writ Petition No. 1380 of 2001 read with Order of Hon’ble High Court dated 28.06.2012 is in full consideration of the Development rights of the Said Plot of Land admeasuring 1497.99 sq. Meters and titbits granted to the Developer and no other consideration is to be provided by the Developer.”

41. The operative Clause 2 at page 119 is an undertaking by AA Estate to abide by the Minutes of the Order to which we have referred earlier.

42. Clause 13 again is important. It is to be found at page 122 and it reads as follows: “13. In consideration of the Developer having agreed to carry out, execute and complete the construction work of the said new building and hand over premises to the Members as stated hereinabove and in addition thereto pay compensation and corpus fund, the Society and the Members herein grants to the Developer irrevocable rights, permission, and authority to carry out the work or construction hereby envisaged by using FSI, Fungible FSI, TDR, acquiring titbits, and other areas and rights as permissible and approved by MCGM and MAHDA, and to sell the surplus area available after providing said Permanent Alternate Accommodation to the Members, as agreed in the said new building so constructed, in the open market for consideration, and on terms and conditions, acceptable to the Developer, to the person or persons of the Developer’s choice without any recourse to Society and the Members herein, and that such person or persons purchasing the Said Premises from the Developer shall be made the member of the society without any demur or objection and for consideration not exceeding Rs. 1250/- for allotment of 5 Shares of such society. The Developer shall not be liable to account for the same to Society and the Members parties herein. The Developer is authorized to enter into agreement/s with the proposed buyers of the Said Premises hereby envisaged. It is expressly clarified that such right of Developer to allot the Said Premises in the new building/s, thus on the Said Plot of Land shall also include right to mortgage and/or give consent for mortgaging, creating lien and dispose of any of such Premises in favour of any bank/s, financial institution/s, non-banking financial company (n.b.f.c.)., etc., as the Developer, in his absolute discretion, may deem fit. It is clarified that developer shall have no right to mortgage or lien any premises of members premise/rehab components.”

43. The submission by Mr Sancheti is this. At no point does the DA transfer title to AA Estate. It could not. Following settled law, including the decision of the Supreme Court in Sushil Kumar Agarwal v Meenakshi Sadhu & Ors,[1] no interest was created in favour of AA Estate in specie in the property itself. At best, AA Estate had limited rights but expansive obligations. If it had possession whether under Clause 4 or any other clause, this was ‘possession’ not in pursuance of an independent right that travelled with the DA but only because and to the extent necessary to perform its obligations to the society, i.e., to construct the society’s members’ homes. If there was any right at all contemplated in the DA, it was at the highest a contingent or conditional right. There was no absolute transfer or vesting of even a possessory interest in the plot. The reason is self-evident. AA Estate could not possibly construct or develop without actually being on site. That is all that the possession clause says. But once it is shown that AA Estate did not fulfil its obligations, then it cannot take any sort of advantage at any stage of any rights that were said to be assured to it. Those rights were dependent upon the performance and fulfilment of the conditions. The non-fulfilment of the conditions results, in terms of Contract Law, in a complete failure of consideration. Correspondingly, obligations law tells us that to be able to exercise any sort of right, the claimant must establish that every single preceding condition has been fulfilled.

44. In the present case Mr Sancheti submits, and we think with considerable justification that no great forensic skills are demanded because the order of 22nd February 2016 to which we have just referred of the Division Bench of AS Oka, J (as he then was) and CV Bhadang J, clearly and unambiguously points to the defaults of AA Estate. But it goes further. It says in no uncertain terms that AA Estate had that liability. It notes that it did not meet the liability. Therefore, the court issued notice in contempt.

45. Therefore, the submission is that once there is a failure of consideration then nothing at all accrues to AA Estate and there is no asset properly so-called that is housed in the hands of the RP, who in any case came to be only subsequently appointed after the present Interim Application was filed.

46. He meets Mr Khandeparkar’s case upfront by saying that possession in a case like this cannot be linked only to a moratorium and wholly untethered from the underlying contract. Possession may arise in a variety ways. Possession pursuant to a conveyance may be one thing. Even possession in part performance of an agreement of sale may be qualitatively different from allowing someone like say a contractor onto site to carry on works for which a construction site is required. It is his submission that AA Estate abandoned this project a long time ago. The onset of the IBC thereafter cannot possibly operate to revive let alone create an interest where none previously existed.

47. It is in this context that he submits that the RP was perfectly well aware of this and therefore in the public notices that he issued (compilation page 59) there is not even a mention of the Govinda Towers project. He submits that while the Affidavit in Reply asserts that AA Estate did some work of excavation and piling there are no documents, no lease was ever executed, there is no question of possession in part performance.

48. As against this, in his compilation he takes us through a number of documents from pages 67 to 70. These are electricity bills of 2017 and 2019, telephone bills of 2017, and MCGM license for the gas agency in the year 2017 and perhaps more startlingly, a lineup of gas cylinders on site.

49. Mr Sancheti puts it like this. If AA Estate was in possession, as it claims, he asks, what was it conceivably doing with so many gas cylinders? It certainly could not be running the gas agency while it was doing shoring and piling work. Notably, these are documents of 2017 and 2019 several years before the present CIRP proceedings. They may even overlap the previous insolvency proceedings between November 2019 and September 2020. There is simply no answer to the continuance of billing in the names of the gas agency.

50. Mr Sancheti is quick to add that the fact that he is relying on Apex Gas’s gas cylinder photographs and bills does not mean that the Petitioners have excused them from potential liability. This is only in regard to the question of actual physical possession on site.

51. In addition, he draws our attention to an inspection report at page 84 of the convenience compilation. This is by the MCGM. It is dated 30th January 2019. It bears the name of Apex Gas Services. It has the signature of an inspecting officer. The report is handwritten. The address is given. The report mentions 551 cylinders of 14 kgs each. We reproduce below the text of this report: “R.L. not produced for verification on demand. Findings:- Visited & inspected the premises when Mr. Vijay

There is an open plot on approximately 1000 sq ft area wherein lorry No. MH-46-AR-645 parked with loaded of L.P.G. Cylinders, i.e. 139 empty cylinders each of 14.[2] kg capacity. Also found parked tricycles total No. 5 & loaded L.P.G. Cylinders total Nos. 19 and each cylinders of 19 kg, at the time of inspection Seen provided 2 ABC type fire extinguishers each of 5 kg cap. valid dt 05/10/2019 on the premises”.

52. Page 85 is an even more recent document from the Repair Board. It mentions Govinda Towers. I It mentions the name of the society.

53. The controversy arises, in Mr Sancheti’s submission, because of a misreading of Section 14 of the IBC and the decided law on the subject.

54. Section 14 reads thus: “14. Moratorium (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely— (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. Explanation.— For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period; (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. (2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified; (3) The provisions of sub-section (1) shall not apply to— (a) such transactions, agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority; (b) a surety in a contract of guarantee to a corporate debtor. (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.” (Emphasis added)

55. This section has been amended. For instance, the explanation below sub-section (1) was added by a 2020 amendment. So was subsection (2A). Sub-section (3) was added by a 2018 amendment and sub-sections (a) and (b) to Section 3 were brought in by the 2020 amendment.

56. But we are concerned here with sub-clause (d) of clause (1) of Section 14. This prohibits “the recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate debtor”.

57. Mr Sancheti’s submission even at the threshold is deceptively (and we might be forgiven for saying this) seductively simple. “I am not seeking recovery of possession,” he says, and we think he may well be right. There is no question of seeking recovery because what is on site is not AA Estates or its piling machines or bulldozer but gas cylinders. He would not be seeking possession from himself. He is seeking permission of this court to redevelop.

58. There is no element of recovery of possession involved in this at all either directly or indirectly. The entire case of the RP is founded on a misreading, in his submission, of one judgment of the Supreme Court of India. Mr Sancheti says that this judgment could never have been intended to apply in a situation such as this. We turn to that decision immediately. This is the decision of the Supreme Court in Rajendra K Bhutta v Maharashtra Housing and Area Development Authority & Anr.[2]

59. The judgment in Rajendra Bhutta is sought to be cited by the RP inter alia on the basis of a parity in facts at least to this extent, that in the case before the Supreme Court there was also a joint Development Agreement between the developer, MHADA and the society. A license was granted to the developer, later the corporate debtor, to enter upon the property, demolish the existing structure and to construct and erect new structures and allot tenements. The emphasis by Mr Khandeparkar is on the ratio or finding returned that once the developer thus entered into the property it would be ‘occupied’ by the developer for the purposes of Section 14(1)(d) of the IBC. The Supreme Court also held that the IBC would have primacy over the MHADA Act. There is no great controversy about the facts of the case before the Supreme Court. Paragraph 2 of the judgment shows us what was the submission by the appellant before the Supreme Court. It was contented that the developer had something more than a mere license to enter. The submission was that there was legal possession to: (1) construct tenements to be handed over to MHADA free of cost; (2) construct tenements for the occupation of 672 original occupant holders and (3) thereafter to recoup costs and profits from the free sale component. The contest, as paragraph 4 shows, was on behalf of MHADA, and the dispute was whether the corporate debtor was ever in possession or occupation so as to attract the applicability of Section 14(1)(d). Reference was then made to a recent judgment of the Supreme

Court (by one of the Judges who was also a member of the Bench that decided Rajendra Bhutta) in Municipal Corporation of Greater Mumbai v Abhilash Lal & Ors.[3] The submission was that if there was a conflict between the MHADA Act and the IBC, the MHADA Act had to prevail. There were submissions made on behalf of some of the home buyers and reference incidentally came to be made to the Supreme Court judgment to which we have earlier referred in Sushil Kumar Agrawal regarding the nature of various development agreements, their categorisation and in which case it could be held that interests in property were or were not created.

60. The Supreme Court inter alia then noted Section 18 of the IBC regarding duties of the RP, Section 31 regarding approval of resolution plans and then portions of Section 36 in the context of liquidation. The provisions of the joint development agreement were noticed in paragraph 12 of the judgment in Rajendra Bhutta. The Supreme Court then went on to hold that Section 14(1)(d) of the IBC does not deal with assets, legal rights or beneficial interests in the assets of the corporate debtor. It only refers to “recovery of any property”. In that particular case the reference was to a certain tract of land together with structures on it and which structures had to be demolished.

61. Paragraph 15 said that the phrase ‘owner or lessor’ used in Section 14(1)(d) had to be understood in the context of property along with the expression ‘occupied or in the possession of’. The Supreme Court said that one way of reading the clause would be to say or to ask whether recovery was sought by a owner or lessor and in such case whether the property should either be occupied or in possession of the corporate debtor. The Supreme Court expressed difficulty with this interpretation because a lessor would not normally seek recovery of property ‘occupied by a tenant’ once the property was leased. The Supreme Court then considered the meaning of the expression ‘occupied’ as explained in various judgments of the Supreme Court. But it is paragraph 23 that is really a distillation of the principles culled out by the Supreme Court. It is here that we find that the Supreme Court said that the phrase “occupied by” in Section 14(1)(d) would: “mean or be synonymous with being in actual physical possession of or being actually used by, in contradistinction to the expression “possession”, which would connote possession being either constructive or actual and which, in turn, would include legally being in possession, though factually not being in physical possession”.

62. It is in this context, and having read the joint development agreement and the license granted under it, that the Supreme Court held that it could not be denied that after the corporate debtor had entered the property, the corporate debtor would be held to have occupied the property.

63. Reference was then made in this context to a termination notice by MHADA — and this is important because that notice not only said that 30 days after receipt of that notice the agreement and other documents would stand terminated but that the corporate debtor would not be allowed to enter the property and its authority license to enter the property or remain on it would be terminated.

64. Now this quotation in paragraph 35 must be seen in the context of the narrative earlier and specifically what is set out in paragraph 1.[7] of the judgment itself. There, it was noted that the corporate debtor would have to ‘hand over possession to MHADA’ which would then ‘enter upon the plot and take possession of the land including all structures thereon’.

65. Mr Khandeparkar’s submission is that these nice distinctions on facts apart, the principle in law is unassailable. His submission is that the moment AA Estate began doing any work on the project pursuant to the DA — and questions of defaults in payment etc., would not be material — then the moratorium under Section 14(1)

(d) would begin to operate immediately.

66. It is in this context that he points out that any attempt to distinguish Rajendra Bhutta and even if it is on the basis of Abhilash Lal can no longer survive in view of the observations of the Supreme Court in Rajendra Bhutta in paragraph 26. He also points out that so far as Sushil Kumar Agrawal is concerned, that was a judgment that dealt with the question of rights or interest in the property. It is only of tangential or secondary relevance.

67. Where Mr Sancheti takes exception to Mr Khandeparkar’s formulation is not just on facts but on the application of the ratio of Rajendra Bhutta. Mr Sancheti’s submission is that it is impermissible to expand the scope of Rajendra Bhutta in directions never intended and into situations never contemplated. At least two things will distinguish the present case from the case before the Supreme Court in Rajendra Bhutta. It is true, and we readily grant this, that we did not permit Mr Khandeparkar to put in a Rejoinder because we felt none was necessary. We will take his word for it that he could have put on Affidavit material evidencing work orders etc. placed on contractors for shoring and piling work. In any case, there is a compilation of some documentation to this extent.

68. But this is not the point that Mr Sancheti makes. His submission is that correctly read Rajendra Bhutta contemplates a situation where pursuant to a joint development agreement the putative corporate debtor is in actual physical possession of the site to the exclusion of all others. In another manner of speaking, none can re-enter or enter upon that site without recovering possession from the corporate debtor/developer. If it is demonstrated, and he submits that this is amply demonstrated in the present case, that as on the date of the Interim Application the developer was not in fact in possession — and leaving aside all nicer considerations of whether he had abandoned the project or anything of the kind — then the Rajendra Bhutta principle cannot possibly be invoked. Even in the compilation that is shown by Mr Khandeparkar the documents from page 1 onwards are of 2012 (page 1), 2013 and 2014. There are indeed some photographs annexed from page 77. But at least one of them, as Mr Sancheti somewhat cheekily points out, at page 81 furnishes is no answer at all because in this we see a vast assemblage of LPG gas cylinders. Why AA Estate needs quite so many cooking cylinders for shoring and piling work remains unexplained.

69. We return to a closer look at paragraph 23 of Rajendra Bhutta. There is indeed a reason why this position in law came to be enunciated in this fashion and we find it in the judgment itself. The Supreme Court tells us in no uncertain terms that the avowed statutory objective of the IBC is to find a way to rehabilitate the corporate debtor and to make sure that the claims of its creditors are dealt with in the manner contemplated by the IBC. This requires some level of collective organisation and collective decision making by what has come to be known as the Committee of Creditors. The reason is plainly obvious and has been reiterated by the Supreme Court many times. The IBC replaces The Sick Industrial Companies Act, 1985 (“SICA”) which was found to be ineffective in achieving a statutory purpose. A corporate debtor may face claims from several creditors, some secured, some unsecured. It may be able to meet some of its debt obligations or it may not be able to meet any of them. If individual creditors start moving against the corporate debtor and its assets for recovery, other secured creditors find themselves in imminent danger of losing security and chances of recovery and there is resultant chaos. The purpose is not, we believe, only to rescue or salvage floundering corporates for their own sake but to minimise the loss to creditors especially institutional creditors, secured creditors and public sector or government creditors. The protection in Section 14 is therefore intended to prevent a dissipation of assets which might result in an unplanned or inadvertent dilution of available assets to the committee of creditors in the IBC/CIRP process. Section 14 captioned ‘moratorium’ really is a provision that seeks a preservation of the assets in status quo till a decision is taken by the Committee of Creditors on how a distribution of corporate assets is proposed or whether there is a viable resolution plan. Any viable resolution plan is not just one-sided meaning a take-over of the assets of the company, but also involves meeting the claims of creditors. The extent to which those claims will be made, or more accurately, the extent to which creditors will agree to reduce their claims, is part of the CIRP process.

70. Now in Rajendra Bhutta, if the developer was in active development of the project and had physical seizin of the project site, then conceivably, in any resolution plan that project could be utilised to the advantage of a resolution applicant, particularly since there were future gains and profits to be made from completing the development. After all, a resolution applicant would take over the corporate debtor and any permissions in the name of the corporate debtor would continue for the benefit of the successful resolution applicant. But this necessarily meant that possession had to be physical and actual and shown to be so at a proximate time.

71. In the present case, what do we have on the record before us? There are the provisions of the DA, for whatever they are worth. In the compilation we have documents of 2012 to 2014 (and that is perhaps being generous) to show some level of work. But after that and all the way until this Interim Application is filed in August 2022, there is absolutely nothing. As against this, there are far more contemporary records including from authorities to show the continued actual physical possession not of the corporate debtor let alone the RP but of Apex Gas, the lessee from MHADA of the land in question, and the owner/developer of the earlier structure.

72. There is also the emphasis by Mr Sancheti on the public notice issued by the RP. It is clear that the body of the notice does not mention the Govinda Towers project site at all. Mr Khandeparkar would have it that the Expression of Interest (“EoI”) public notice does not contain all details but is at best a generalised summary. It is his submission that in other more detailed documentation this particular DA would be mentioned. But that does not meet the test of Rajendra Bhutta in paragraph 23 at all. At best it remains an assertion and it is nothing beyond that.

73. The other point that Mr Khandeparkar makes is that this case stands on a stronger footing than even Rajendra Bhutta because there was at least a case of termination. In the present case there is no termination. The response of Mr Sancheti (apart from a smile) is to say that it is difficult to contemplate how a society could terminate an order of the court from which everything emanates. It is for that precise reason that this Interim Application comes to be made in the first place.

74. What Mr Sancheti has been in some pains to show is three things above all: (1) that there is a persistent an undisputed failure by AA Estate to discharge its obligations both under the Minutes of the Order and the resultant or consequential DA; (2) that this default has been acknowledged and has gone unchallenged from 2016 by a Division Bench of this court which found AA Estate to be liable; and (3) that there is not a single piece of incontrovertible evidence or material to show that AA Estate had or has actual possession within the meaning of the interpretation in Rajendra Bhutta.

75. If this be so, Mr Sancheti submits, all that the application today seeks is for leave of the court for the society to appoint another developer.

76. We believe Mr Sancheti is justified and correct in these submissions. There is no evidence before us of actual continued physical possession. An odd entry for this or that work will not suffice for the purposes of Section 14 of the IBC. It will most especially not suffice when possession of either the society or of Apex Gas is shown, i.e., not of the corporate debtor. The other factors that Mr Sancheti has outline are also of appeal and we find in his favour on all of those.

77. Perhaps a little late in the day it occurred to us to ask Mr Sancheti why he had troubled to make this application at all. After all, there is no restraint against the society from appointing any developer. His answer was that the appointment of AA Estate came not purely by agreement of parties. Had this been a simple agreement, then perhaps the society would have set itself at liberty to appoint any other developer and it would then have been for the RP to adopt appropriate proceedings. This might have been so even if there had been Consent Terms. But this application becomes necessary, he submits, because the entire involvement of AA Estate emanates from Minutes of the Order, i.e., an order of the court. Not just probity and propriety, but the law demands that an order of the court should not be trucked with and there should not be deviation or departure from it except by another order of the court on an application properly made. Again, we must note our appreciation of the care and thought that has gone into the fashioning of this Interim Application and the reliefs. We believe Mr Sancheti is completely correct. Once there were Consent Minutes and these were taken and made an order of the court on 28th June 2012, specifically bringing AA Estate into the frame, then whatever be the subsequent events, if some other developer had to be brought in or if the society had to be set at liberty to make its own choice, then this did need an order of this court.

78. It is in view of this discussion that we have no hesitation in making the following order. (a) Prayer clause (b) of the Interim Application is necessary because the heirs of the original 11th Respondent RV Kothavle have sold their rights in the property and moved on. (b) Accordingly, we make the Interim Application absolute in terms of prayer clauses (a), (b) and (c) quoted above.

79. Obviously, despite the length of arguments there is no question of making an order of costs. But we do clarify that it is open to the Applicants to pursue their civil remedies for damages subject to the saving of limitation that we have indicated above.

80. On 25th August 2023 we had clarified that the MCGM/MHADA would not insist on an NOC or a release document from any previous developer or architect as and when the society decides on a developer and either in its name or through the name of the developer’s architect submits a proposal. We reinstate and reiterate that direction. The planning authorities will process any such application on request without insisting on an NOC from AA Estate or its architect. The planning authorities will act on production of an authenticated copy of this order. As Apex Gas Services was the original allottee from MHADA, the lease will now be in the name of the society. (Kamal Khata, J) (G. S. Patel, J)