The Mumbai bench of the National Company Law Tribunal (NCLT) has held that the proposed acquisition by Mumbai Metropolitan Region Development Authority (MMRDA) did not violate the Insolvency Bankruptcy Code (IBC) moratorium as it was the larger public interest and was not stripping the Corporate Debtor of its assets unlawfully.
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As the Resolution Professional (RP) for Radius and Deserve Land Developers Private Limited, Aegis Resolution Services Private Limited submitted an application in accordance with Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The Mumbai Metropolitan Region Development Authority (MMRDA), the Slum Rehabilitation Authority (SRA), and the Maharashtra government were the targets of the application. The RP’s main goal was to obtain a declaration that the moratorium imposed by Section 14 of the IBC Code 2016 should prevent the Respondents from acquiring ownership and possession of the Corporate Debtor’s property.
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The case started when the SRA sent a notice to the Corporate Debtor directing them to give the land to MMRDA so that a four-lane subterranean road could be built between Thane and Borivali. In response, the RP told the SRA that the corporate debtor was subject to the CIRP, that a moratorium was in place, and that this limited the ability to transfer or alienate its assets. In spite of this, the Maharashtra government published a notice requesting a survey of the property for purchase. In order to protect the corporate debtor’s assets and fulfill its statutory obligation, the RP filed a request for relief in the National Company Law Tribunal (NCLT).
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The tribunal comprising of Ms. Reeta Kohli, Member (Judicial) and Ms. Madhu Sinha, Member (Technical) examined Section 14 of the IBC and stated that moratorium prevents legal proceedings, assets transfers or recoveries against the Corporate Debtor. However, the tribunal acknowledged that the Government of Maharashtra has the authority to acquire land for public purposes through the due process of law. In the following case, the land in question was required for a public infrastructure and any acquisition would be accompanied by compensation.
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The tribunal further cited the decision of the Bombay High Court, wherein while dealing with the issue of staying the acquisition process, the court stated that the IBC provisions should not hinder slum redevelopment or other public infrastructure projects. The court observed that the moratorium should not be misused to prevent public initiatives. The judgement emphasized that corporate revival under IBC should not come at the cost of public welfare projects especially those impacting housing and infrastructure.
While dismissing the appeal, the tribunal concluded that the proposed acquisition by MMRDA did not violate the IBC moratorium as it was the larger public interest and was not stripping the Corporate Debtor of its assets unlawfully. Consequently, the application was dismissed as premature.
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