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Bombay High Court affirms residents' rights over corporate interests in redevelopment

Synopsis

In a significant judgment, the Bombay High Court has approved the redevelopment of a Mumbai housing society by Truearth Developers, rejecting an insolvent builder's claim over the project. The court emphasized that the Insolvency and Bankruptcy Code cannot be used to delay development or deny transit rent payments to displaced residents. It criticized the practice as "absurd" and "inequitable", underscoring that society members should not suffer due to a builder's insolvency. The ruling reaffirms residents' fundamental rights to redevelopment and compensation, setting an important precedent that prioritizes citizens' welfare over narrow corporate interests.

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The Bombay High Court, in a landmark decision, has given its approval for the redevelopment of a Mumbai society by Truearth Developers. The court emphasized that this case is not an isolated incident. It noted a recurring pattern where real estate companies undergoing Corporate Insolvency Resolution Process (CIRP) cite moratorium as a pretext to delay development and default on transit rent payments. The bench strongly criticized this practice, denouncing it as "absurd," "monstrous," and "inequitable," highlighting the perversion of justice, equity, and law within the city.

The High Court's ruling reaffirms the residents' rights to a redeveloped home and transit rent, rejecting any attempt to prioritize corporate interests over these fundamental rights. In a scathing remark, the judges observed the grave consequences of allowing statutory provisions meant for corporate revival to outweigh the welfare of city residents, especially those without means to secure temporary alternative accommodation.

The case stemmed from a petition filed by Tagore Nagar Shree Ganesh Krupa Co-operative Housing Society Ltd in Vikhroli East. The society sought permission for a new builder, Truearth Developers, following the termination of its contract with AA Estates in May 2022. Last July, residents evacuated a dangerous and dilapidated building as per MHADA's directive. Truearth Developers assured compliance with transit rent payments, but MHADA initially denied permission.

Representing AA Estates, advocate Sachit Bhogle argued that the project was the builder's 'asset' and subject to a moratorium under the Insolvency and Bankruptcy Code (IBC). However, the High Court dismissed this claim, clarifying that AA Estates never owned the property, having only conditional rights to free sale flats upon completion of redevelopment. The court underscored the legal impossibility of separating obligations from ownership rights.

Furthermore, the High Court noted AA Estates' attempt to leverage the CIRP argument, citing the 1998 collapse of Govinda Tower as a dramatic example. The court asserted that the IBC should not supersede the basic rights of society members. It emphasized that society members should not suffer displacement or financial hardship due to a builder's insolvency proceedings.

In summary, the Bombay High Court's ruling sets a precedent by prioritizing residents' welfare and rights in redevelopment projects, challenging the prevailing narrative that favors corporate interests over societal well-being.

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