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Informist, Friday, Nov. 28, 2025

 

NEW DELHI – The Supreme Court Friday observed that courts, while dealing with disputes arising from slum redevelopment, must adopt a purposive and welfare-oriented approach, ensuring that the statutory objective of insolvency resolution does not defeat the social purpose of urban renewal. The balance of equity must tilt in favour of the residents who have waited for years for a roof over their heads, it said.

 

"The law cannot countenance a situation where insolvency protection becomes an instrument to perpetuate displacement or to defer the promise of dignified housing guaranteed under Articles 19(1)(e) and 21 of the Constitution," said a bench of Justice J.B. Pardiwala and Justice R. Mahadevan. The Insolvency and Bankruptcy Code, 2016, was never designed to serve as a refuge for corporate debtors who, by their conduct, display no bona fide intention of fulfilling contractual or statutory obligations, the bench said. Its purpose is to revive viable entities and ensure equitable resolution of insolvency, not to extend protection to those who have persistently defaulted, abandoned performance, or frustrated projects of public significance, the bench added.

 

The Supreme Court said urban redevelopment projects, particularly those involving cooperative housing societies, are exercises in social rejuvenation that seek to restore dignity, safety, and belonging to citizens. The law must, therefore, balance commercial rights with human realities and ensure that economic revival does not eclipse the constitutional promise of dignified living. 

 

Slum redevelopment projects are not mere commercial ventures but social welfare initiatives aimed at transforming unsafe tenements into dignified homes, the court said. The role of a developer in such projects carries a public character; it entails a responsibility to fulfil the collective aspirations of hundreds of families awaiting rehabilitation and cannot be viewed solely through the lens of profit, it said.

 

When such projects are delayed or abandoned, it is the residents--often living in hazardous or temporary conditions--who suffer the greatest hardship, the court said. In this context, the invocation of insolvency proceedings or the moratorium under the Insolvency and Bankruptcy Code, 2016, cannot become a legal device to indefinitely stall redevelopment or obstruct the legitimate rights of slum dwellers and cooperative housing societies, it said. The 2016 Code was never intended to be used as a shield for non-performance at the cost of human rehabilitation, it added.

 

The apex court held that the termination of the redevelopment agreement by Kher Nagar Sukhsadan Co-operative Housing Society Ltd. with developer A.A. Estates Pvt. Ltd. was valid, having been carried out after due notice and in consequence of prolonged and inexcusable default by the developer. The court upheld the society's move to revoke the contract and appoint a new developer to protect the interests of its members.

 

The development agreement and supplementary agreements between the parties do not constitute "assets" or the "property" of A.A. Estates within the meaning of Section 14 of the 2016 Code, relating to a moratorium, the court said. The  agreements were validly terminated prior to initiation of the second insolvency proceedings against A.A. Estates and so no subsisting or enforceable right survived in favour of the corporate debtor, it said.

 

The case has its genesis from the society, composed of members belonging to lower-income groups, cancelling redevelopment agreements with A.A. Estates due to repeated delay in redeveloping a building in Mumbai and appointing a new developer to take over the task. A.A. Estates, which had gone into insolvency thereafter, argued that the redevelopment agreements were its assets and properties under the 2016 Code and so a moratorium applied on those.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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