The Bombay High Court rejected a petition filed by the resolution professional of Truly Creative Developers Pvt Ltd, which is facing insolvency proceedings, to stop the Slum Rehabilitation Authority from acquiring a land parcel in Mumbai. The builder had acquired the land in the 1990s for a slum rehabilitation project but failed to complete it for over 16 years. In 2021, the slum society terminated Truly Creative as the builder and appointed a new one. The High Court observed that the resolution professional failed to explain how the land could be used to rehouse slum dwellers and deemed the petition an abuse of the legal process.
The Bombay High Court rejected a builder's request to stop the Slum Rehabilitation Authority (SRA) from acquiring land owned by the builder. The builder, Truly Creative Developers Pvt Ltd, is currently facing insolvency and bankruptcy proceedings.
Rajan Garg, the resolution professional appointed by the National Company Law Tribunal (NCLT) for Truly Creative Developers, had filed a petition with the HC to stop the SRA's acquisition process. The court noted that Garg failed to mention how the land could be used to rehouse the slum dwellers, who the builder was originally supposed to rehabilitate when it was granted project approval in 2003.
The builder had acquired the encroached land in Borivali for the slum project in the 1990s and received revised approval in 2003. But no further work was done after 2006. The slum rehabilitation project on the plot had not progressed for 16 years.
The slum society's grievance committee terminated the builder in 2021 and allowed a new one, Western Habitat, to take over. In 2021, the slum society had also asked SRA to acquire the land from Truly Creative. By the end of 2022, NCLT admitted a proceeding under IBC against Truly Creative for a Corporate Insolvency Resolution Process (CIRP) and appointed the RP. In the meantime, SRA continued with its acquisition process. Then the RP sought to stay the process. His counsel, Devansh Shah, cited a Supreme Court ruling to argue IBC protects corporate debtor's assets.
The builder defaulted on its obligations under the 2003 approval but still believes it is entitled to "free sale" benefits. The HC added that land value comes from development potential, not from encroachment status. This was a key point the resolution professional missed, as ownership is not the only consideration, observed the HC. The HC order said there are at least four other projects by this developer that have failed completely. Based on these findings, the HC deemed Garg's petition as a "complete abuse" of the legal process.
In another case recently involving a builder named A A Estates, the HC had criticized the builder for invoking the Corporate Insolvency Resolution Process (CIRP). The HC said IBC provisions can never override concerns for those meant to be protected under welfare laws like the Slum Act. Otherwise, defaulting companies could use IBC to stop rehabilitation of slum dwellers, which would be "most unjust", the HC noted.
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