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Issues: (i) whether the resolution professional's application under Sections 19(2) and 60(5) of the Insolvency and Bankruptcy Code, 2016 was maintainable against the developer; (ii) whether the development arrangement, power of attorney and consortium agreement conferred ownership rights in the project or only development rights; (iii) whether the resolution professional was entitled to access, information and documents and to supervisory relief in aid of the corporate insolvency resolution process; (iv) whether the mortgage created in favour of the lender continued to subsist over the project notwithstanding the later development arrangements; and (v) whether the developer was entitled to complete construction of the project.
Issue (i): whether the resolution professional's application under Sections 19(2) and 60(5) of the Insolvency and Bankruptcy Code, 2016 was maintainable against the developer?
Analysis: Section 19(2) is attracted not only to personnel and promoters of the corporate debtor, but also to any other person required to assist or cooperate with the resolution professional. The developer's claim flowed from its agreement with the corporate debtor and its continued involvement in the project during CIRP. The resolution professional's duty under Sections 18 and 25 to take custody, preserve and protect assets and continue business operations justified seeking directions for cooperation and information.
Conclusion: The application was maintainable.
Issue (ii): whether the development arrangement, power of attorney and consortium agreement conferred ownership rights in the project or only development rights?
Analysis: The development documents showed that the corporate debtor remained the owner of the land and project, while the developer was given rights to undertake development and deal with unsold areas subject to contractual terms. The documents also acknowledged the existing mortgage and the need for lender consent. Unregistered instruments could not, by themselves, transfer title or create ownership in immovable property. The rights created were development rights, not ownership rights.
Conclusion: The developer acquired no ownership rights in the project and could claim only development rights.
Issue (iii): whether the resolution professional was entitled to access, information and documents and to supervisory relief in aid of the corporate insolvency resolution process?
Analysis: The resolution professional was entitled to preserve and protect the project as part of the corporate debtor's assets and to obtain all relevant information, records and access necessary for CIRP. However, stopping the construction was not warranted because completion of the project served the interests of all stakeholders, including homebuyers. Supervisory access and disclosure were justified, but disruption of ongoing construction was not.
Conclusion: The resolution professional was entitled to information, documents and access, but not to stoppage of construction.
Issue (iv): whether the mortgage created in favour of the lender continued to subsist over the project notwithstanding the later development arrangements?
Analysis: The mortgage deed covered the entire land, unsold units, receivables and related rights. The later development arrangement itself recognized the existing charge and contemplated lender consent, which was not obtained. The later agreements could not extinguish the lender's security interest in the absence of release or consent.
Conclusion: The lender's mortgage charge continued over the project.
Issue (v): whether the developer was entitled to complete construction of the project?
Analysis: The construction was substantially advanced and completion of the project was in the interest of the existing allottees and other stakeholders. The continuing development arrangement supported the developer's role in completing the project, while the resolution professional retained authority to supervise and obtain information for CIRP.
Conclusion: The developer was entitled to complete construction of the project.
Final Conclusion: The impugned order was interfered with in part: the rejection of the resolution professional's application and the finding treating the project as the developer's asset were set aside, the lender's charge was affirmed, the developer's right to continue construction was preserved, and the directions concerning disclosure and access to the resolution professional were maintained.
Ratio Decidendi: A development arrangement executed by a corporate debtor, even if it confers contractual development rights on a third party, does not divest the corporate debtor of ownership or extinguish an existing mortgage unless title is lawfully transferred or the secured creditor's charge is released; in CIRP, the resolution professional may compel cooperation and disclosure from such a developer under Sections 19 and 60(5) while preserving ongoing project completion in the interest of stakeholders.
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