{"id":369487,"date":"2025-12-10T18:00:40","date_gmt":"2025-12-10T12:30:40","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=369487"},"modified":"2025-12-10T17:41:53","modified_gmt":"2025-12-10T12:11:53","slug":"failure-to-take-meaningful-steps-towards-obligations-under-development-agreement-cant-be-protected-by-s-14-ibc-supreme-court","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/12\/10\/failure-to-take-meaningful-steps-towards-obligations-under-development-agreement-cant-be-protected-by-s-14-ibc-supreme-court\/","title":{"rendered":"Failure to take meaningful steps towards obligations under Development Agreement can’t be protected by S. 14 IBC: Supreme Court"},"content":{"rendered":"
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Supreme Court:<\/span> While considering an appeal revolving around the validity of termination of Development Agreement and Supplementary Agreement prior to the initiation of the second CIRP, the Division Bench of J.B. Pardiwala and R. Mahadevan*<\/span>, JJ., noted that the Corporate Debtor (First Appellant) failed to take any meaningful steps towards fulfilling its obligations under the Development Agreement and Supplementary Agreements. Consequently, the slum dwellers and members of Respondent Society, who are among the most vulnerable sections of society, continue to be deprived of their right to proper housing and rehabilitation. The Court held that such conduct cannot be permitted to take refuge under the moratorium provisions of Section 14<\/a> of the IBC<\/a>. A clear distinction must, therefore, be maintained between corporate debtors who have acted bona fide and those who have merely secured development rights in form but never acted in substance.<\/p>\n

The Court further held that Development rights of a defaulting developer who neither secured possession nor undertook any redevelopment activity cannot be elevated to the status of an “asset” or “property” within the meaning of Section 3(27)<\/a> of the IBC<\/a>.<\/p>\n

Background:<\/h3>\n

In 2005, the Respondent Society executed a registered Development Agreement with the First Appellant redevelopment of the subject project. Pursuant to the same, a Power of Attorney was also executed in favour of First Appellant and its directors. After disputes and negotiations, a Supplementary Development Agreement in 2014 was executed, under which First Appellant was required to complete redevelopment within 40 months from the receipt of the commencement certificate.<\/p>\n

However, due to disputes, redevelopment was stalled. In 2022, a 2nd<\/span> CIRP was admitted against the First Appellant after the first CIRP of 2019 was set aside. In the meanwhile, the Respondent Society purported to terminate the Development Agreement with First Appellant.<\/p>\n

Eventually the matter reached Bombay High Court whereby the Court allowed the petition filed by the Respondent Society.<\/p>\n

Court’s Assessment:<\/h3>\n

Perusing the matter, the Court framed the following issues:<\/p>\n