The Supreme Court has held that a redevelopment contract, which already stood lawfully terminated before initiation of the Corporate Insolvency Resolution Process (CIRP), cannot be treated as an “asset” or “property” of the corporate debtor so as to attract the protection of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC). 3
The Bench emphasized that once a contract stands validly terminated, it ceases to exist in the eyes of law and cannot be revived or clothed with moratorium protection during insolvency. 3 The Court noted that a defaulting developer cannot use Section 14 to obstruct redevelopment or perpetuate non-performance while residents continue to suffer. 3
Upholding the Bombay High Court’s direction permitting the housing society to proceed with redevelopment through a newly-appointed developer, the Court directed authorities to continue processing necessary approvals. 3
Key Observations
- The Development Agreement of 2005 and Supplementary Agreements of 2014 were lawfully terminated between 2019–2021, well prior to the second CIRP on 06.12.2022. 3
- After termination, the corporate debtor retained no proprietary or possessory right — only a potential damages claim.
- The Society and its members remained in continuous possession; no physical possession was ever granted to the developer. Thus, Section 14(1)(d) was inapplicable. 3
- Moratorium cannot resurrect extinguished contractual rights or be used as a shield against legitimate rehabilitation needs. 3
Background
AA Estates Pvt. Ltd., appointed as developer in 2005, failed to commence or complete redevelopment for nearly two decades. Defaults included non-payment of transit rent and failure to provide alternate accommodation, forcing residents to continue living in a dangerous building. 3
The Society resolved to terminate the developer’s rights and later appointed Tri Star Development LLP in December 2023. When approvals were stalled due to the pending insolvency, the Society approached the High Court, which allowed redevelopment to proceed. 3
The Resolution Professional challenged this decision before the Supreme Court.
Decision
Dismissing the appeal, the Court held:
“Once the contract stands lawfully terminated, no asset or property survives in favour of the corporate debtor to attract Section 14 protection.” 3
The Court reiterated that the IBC is not intended to stall urban redevelopment or deprive residents of habitable accommodation due to a developer’s inertia
Case Title: A A Estates Pvt. Ltd. v. Kher Nagar Sukhsadan CHS Ltd. & Ors.
Citation: 2025 INSC 1366