TaxTMI 
TaxTMI 
2026 (6) TMI 1237
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....2) By this petition, Petitioner-Society challenges Order dated 4 September 2025 passed by the District Deputy Registrar, Co-operative Societies, Mumbai City (4) and Competent Authority (Competent Authority) rejecting Application No. 87 of 2025 seeking deemed conveyance of land and building under Section 11 of MOFA with liberty to file fresh application upon conclusion of Corporate Insolvency Resolution Proceedings (CIRP) pending against Respondent No. 4. 3) Petitioner is a cooperative housing society formed and registered under the provisions of Maharashtra Co-operative Societies Act, 1960 (MCS Act). The Society is formed by purchasers of flats in building constructed at Final Plot No. 746 of T.P.S. III (Old Plot No.723), Opp. Soniwadi Banquets, P.G.S. Kanji Swami Marg, Off. Shimpoli Road, Borivali (West), Mumbai-400 092 (said property). M/s. Gautam Builders (India) was the original owner of the said property who had executed Development Agreement (DA) with M/s. Darshan Enterprises (Respondent No. 3) on 25 August 1983. In pursuance of the DA, Respondent No. 3 got plans sanctioned for construction of building on the said property vide Intimation of Disapproval (IOD) dated 9 Novem....
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....xpress leave granted by the National Company Law Tribunal (NCLT). Petitioner-Society is aggrieved by order dated 4 September 2025 and has accordingly filed the present petition. 7) Ms. Bhatia, the learned counsel appearing for the Petitioner submits that the Competent Authority has erred in not adjudicating Petitioner's application for deemed conveyance. That mere pendency of CIRP against Respondent No. 4 cannot be a reason for the Competent Authority not to exercise jurisdiction under Section 11(3) of the MOFA. That Respondent No. 4 is not the developer/promoter and that Petitioner is entitled to get conveyance of land from Respondent No. 3, who has the statutory duty to execute conveyance under Section 11 of MOFA. That conveyance in favour of Respondent No. 4 is itself void and challenge to the conveyance is pending before the City Civil Court. That the case does not involve layout development and that therefore there is no question of any additional construction being put up on the land. That therefore Respondent No. 4 has not secured any semblance of rights in the said property through the so called indenture of conveyance. 8) Ms. Bhatia further submits that IBC merel....
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....In support of the contention that Petitioner has alternate remedy of securing deletion under Section 60(5) of the IBC, Mr. Khandeparkar relies on judgment of the Apex Court in Tata Consultancy Services Limited Versus. SK Wheels Private Limited Resolution Professional, Vishal Ghisulal Jain (2022) 2 SCC 583. 11) Mr. Khandeparkar submits that conveying the land and building is one of the contractual obligations of the promoter, which the incoming management must be aware of. That property rights are also protected by moratorium imposed under Section 14 of the IBC. That the intention behind IBC is to preserve the assets of the corporate debtor. That the Moratorium has been imposed on 11 March 2024 whereas application for deemed conveyance was filed on 15 April 2025. That therefore application for deemed conveyance cannot be adjudicated till conclusion of CIRP. Petitioner is not remediless and can always file fresh application against the new management of Respondent No. 4 after conclusion of CIRP. Mr. Khandeparkar, however fairly invites the attention of this Court to the judgment of this Court in Santoshkumar Motilal Bhansali Versus. Competent Authority and District Deputy Registra....
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....ILDERS (INDIA) and the Developers shall join as Confirming Parties. 16) Section 11 of MOFA puts a statutory obligation on the promoter to perfect his title in respect of the land and to convey his right, title and interest in the land and the building in favour of the organization formed by the flat purchasers. Rule 9 of Maharashtra Ownership Flats (Regulations of the Promotion of Construction, Sale, Management and Transfer) Rules, 1964 prescribes the period for execution of conveyance as four months from the date of formation of cooperative society or company or association of apartments. Section 11 of MOFA provides thus: 11. Promoter to convey title, etc., and execute documents, according to agreement.- (1)] A promoter shall take all necessary steps to complete his title and convey to the organisation of persons, who take flats, which is registered either as a co-operative society or as a company as aforesaid or to an association of flat takers 5 [or apartment owners], his right, title and interest in the land and building, and execute all relevant documents therefor in accordance with the agreement executed under section 4 and if no period for the execution ....
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....eyance, the Sub-Registrar or the concerned appropriate registration Officer shall, notwithstanding anything contained in the Registration Act, 1908 (16 of 1908), issue summons to the promoter to show cause why, such unilateral instrument should not be registered as 'deemed conveyance' and after giving the promoter and the applicants a reasonable opportunity of being heard, may on being satisfied that it was fit case for unilateral conveyance, register that instrument as, 'deemed conveyance'. 17) Sub-sections (2) to (5) were inserted in Section 11 of MOFA by Maharashtra Amendment Act 4 of 2008 w.e.f. 25 February 2008 under which a provision is made for deemed conveyance of the land and the building when promoter fails to carry out statutory duty under sub-section (1). Thus, where the promoter fails to convey land and building within the time stipulated under Rule 9 and as per Section 11(1), the society/company/association can file an application to the Competent Authority, who can make an enquiry and issue a certificate to the Sub-Registrar certifying that the case is fit for enforcing unilateral execution of conveyance deed conveying right, tittle and interest of the promoter in....
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....ry duty to convey the entire land and building in favour of the Petitioner-Society. Therefore, it is highly questionable as to what was left in the land to be purchased by Respondent No. 4. 20) Prima-facie therefore it appears that what is purchased by Respondent No. 4 is merely an obligation to convey the land and building in accordance with Section 11(1) of MOFA. This Court does not appreciate action on the part of Respondent No. 3 in selling land in favour of a third developer when the title therein was statutorily required to be transferred in favour of the Petitioner-Society. Thus, what is done in the present case is purchase of land by Respondent No. 4 which is statutorily meant to be conveyed to the Petitioner-Society. This is apparently done with the aim of exploiting additional development rights either through TDR or out of change in FSI regime due to introduction of Development Control Regulations. However, this Court is not proposing to delve deeper into this aspect since adjudication of Petitioner-Society's application for deemed conveyance is yet to be made by the Competent Authority. The only reason why these observations are made even before adjudication of P....
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....or including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (ii) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (iii) Any action to foreclose, recover or enforce any security interes created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002; (iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. (e) Notwithstanding the above, during the period of moratorium- i. The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period; ii. That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator; (f) The moratorium shall ha....
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....etary claims that get frozen under a resolution plan and statutory obligations that continue despite insolvency. It also holds that Section 14 of the IBC does not bar statutory authorities from discharging statutory functions. 9. Applying that reasoning to the present facts, two points become relevant. First, the petitioner's reliance on Section 14 of the IBC to restrain the Competent Authority from exercising powers under Section 11 of the MOFA Act cannot succeed. The Competent Authority performs a statutory function. It confers a statutory benefit upon flat purchasers. This function is not in the nature of a recovery action. It is not a claim enforcement mechanism. It is an exercise of statutory power to perfect title in favour of an organization of purchasers. Under the logic of Anudan Properties, statutory rights of third parties and statutory duties of authorities continue despite insolvency or moratorium. 10. Second, the argument that the moratorium or the resolution plan extinguishes factual defaults or immunizes the promoter from consequences cannot be accepted. Anudan Properties holds that a resolution plan may extinguish monetary claims but it does n....
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....-monetary regulatory action flowing directly out of breach of obligation by a developer which cannot be treated as a 'claim' or 'debt' as contemplated under IBC. This Court held in paras-37, 38, 40, 47 and 48 as under: 37. At the outset, it is necessary to recognize that the IBC and the Slum Act are legislations enacted with distinct purposes. The IBC is an economic and fiscal legislation. Its object is to facilitate timely resolution of corporate insolvency in a manner that maximizes the value of assets, balances the interests of all stakeholders, and allows for the revival of a failing company. On the other hand, the Slum Act is a social welfare legislation. It is intended to rehabilitate slum dwellers, promote improvement and redevelopment of slum areas, and secure basic housing and dignity for those who live in slums. Although these two statutes operate in separate fields, in certain cases, their objectives may intersect. In fact, in the present case, the two objectives are not in conflict, but rather aligned. The revival of the corporate debtor would necessarily involve the successful implementation of the slum redevelopment scheme undertaken by it. Th....
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....he objectives of the IBC. Rather, it furthers the very aim of keeping the corporate debtor as a going concern by facilitating the completion of the project that forms the basis of the company's revival. It must be noted that the IBC is not merely a tool for liquidation or asset-stripping, but a mechanism for holistic revival of viable companies. In a slum redevelopment project, the success and viability of the corporate debtor hinges on cooperation from slum dwellers and compliance with SRA guidelines. If the developer fails to honour its obligations - such as payment of transit rent or timely completion of rehabilitation buildings - the project collapses not only financially but also socially. In such a situation, the SRA stepping in to rescue the project is a necessary regulatory response and a sovereign function exercised in public interest. The principle of public interest penetrates insolvency law. Certain actions, even if taken post-approval of the resolution plan, may be allowed if they serve broader public purposes - such as environmental protection, safety norms, or statutory compliance. Similarly, the SRA's action in replacing a defaulting developer to protect the interes....
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....e public good, and that too, in accordance with legal process. 48. The legal consequence of the developer's removal - which is a non-monetary regulatory action - is that the corporate debtor loses its role in the project and the chance to earn profits from the free-sale component. However, this consequence flows directly from the breach of obligations by the developer. This is not in the nature of a "claim" or "debt" as contemplated under the IBC. Instead, it is a regulatory forfeiture, which arises when a statutory authority determines that the developer has failed to fulfil its public obligations. The IBC does not grant immunity to a corporate debtor from such regulatory actions unless they are shown to be mala fide or merely intended to recover money - which is clearly not the case here. To allow a defaulting developer to benefit from insolvency proceedings by continuing with the project despite having failed to discharge its duties would be to permit a party to take advantage of its own wrong. This would defeat not only the object of the Slum Act but also broader principles of fairness and public interest. A party cannot walk away from its promises to slum dwellers, un....
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....milk the additional development rights created in the land with passage of time. The developers in cities like Mumbai, Pune etc. were deliberately not conveying land in favour of societies so as to exploit further development potential created in the land due to sanction of additional FSI/TDR etc. The Legislature took note of the ground reality that the provisions of Section 11, as it stood prior to amendment, were not sufficient and it was taking unduly long time for decision of suits for conveyance as there was large scale failure on the part of the developers to perform statutory duty imposed under Section 11. It is with a view to provide a swift mechanism for the societies to secure title in respect of the land and the building that special provision for granting unilateral deemed conveyance was introduced in the form of sub-sections (2) to (5) in Section 11 of MOFA. This statutory objective cannot be permitted to be defeated merely on account of provisions of Section 14 of IBC. 27) What is sought to be done in the present case is an attempt on the part of Respondent No. 4 to circumvent the provisions of Section 11 of MOFA by taking aid of CIRP initiated by an altogether unc....
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....tle in the land. While things may look slightly complicated in respect of multistory towers, one may take into consideration a simple illustration of a developer undertaking construction of four flats on a plot of land. When all four flats in the building are constructed and sold, the four flat purchasers acquire 25% right each in the land and the developer looses its title in the land. In a similar manner, when all flats in a multistorey tower are sold and a cooperative society/company of flat purchasers is formed, the promoter's title in the land gets divested and such society/company becomes entitled to own the land on which the building is constructed. The things may also get slightly complicated in a layout development. However, even qua layout development, similar analogy would apply and the developer loses proportionate title in the land to the extent of completed buildings in the layout. It cannot be that the developer exploits development potential in the land, constructs flats and sells them to the purchasers, but still retains ownership in the land. This concept is unknown to law. On the other hand, provisions of Sections 4 and 11 of MOFA ensure that the developer is div....
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.... 11 of MOFA, it is difficult to hold that the deliberate act of the developer in not transferring the title in the land in violation of statutory duty under Section 11(1) results into holding of any 'asset' by him within the meaning of Section 14 of IBC, which cannot be transferred on account of imposition of a moratorium. What is effected by the Competent Authority is, not transfer of property of the corporate debtor in real sense, but mere certification that the title in the land and building has now vested in the organization of flat purchasers by reason of failure to perform statutory duty by the developer. In my view therefore, provisions of Section 14 of IBC do not come in the way of Competent Authority execrcising powers under Section 11 of MOFA. 30) Applying the above analogy to the present case, Respondent No. 3 is virtually divested of right, title and interest in the land by exploitation of almost the entire development potential in the land. There is a statutory duty on Respondent No. 3 to convey his right, title and interest in the land and building in favour of the Petitioner-Society. All that remained was performance of a formal act of execution of conveyance. Sec....
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.... misplaced. Section 238 of IBC provides thus: 238. Provisions of this Code to override other laws. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. The effect of provisions of Section 238 has already been discussed by this Court in Anudan Properties Private Limited in which it is held that provisions of Slum Act are not inconsistent with the provisions of IBC. The analogy of the judgment in Anudan Properties Private Limited is borrowed by this Court and is applied even in relation to Section 11 of MOFA in Santoshkumar Motilal Bhansali. In that view of the matter and also in view of the discussions made above, it is difficult to hold that the provisions of Section 11 of MOFA empowering Competent Authority to grant unilateral deemed convenance of land and the building upon failure of promoter to perform statutory duty is inconsistent with the provisions of IBC. 33) Mr. Khandeparkar has relied upon provisions of Section 60(5) of the IBC in support of his contention that Petitioner can exercise a re....