Court Rules Deemed Conveyance Under MOFA Not Barred by IBC Moratorium
In a significant ruling, the Bombay High Court has held that the pendency of Corporate Insolvency Resolution Proceedings (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) does not prevent the Competent Authority from granting deemed conveyance of property under the Maharashtra Ownership Flats Act, 1963 (MOFA). The decision was rendered in the case of Darshan Mandir Co-operative Housing Society Limited v. District Deputy Registrar, Co-operative Society, Mumbai.
The petitioner, Darshan Mandir Co-operative Housing Society, challenged an order by the District Deputy Registrar rejecting their application for deemed conveyance of land and building. The rejection was based on the ongoing CIRP against a third-party entity, Vas Infrastructure Ltd., which had acquired conveyance of the disputed property.
Justice Sandeep V. Marne, presiding over the matter, emphasized that the moratorium under Section 14 of the IBC, which aims to protect the assets of a corporate debtor during insolvency proceedings, does not extend to statutory functions under welfare legislations like MOFA. The court clarified that deemed conveyance is a statutory mechanism to perfect the title in favor of flat purchasers and is not a recovery action, thus falling outside the ambit of the IBC moratorium.
The court further highlighted that MOFA, being a welfare legislation, imposes a statutory obligation on promoters to convey title to flat purchasers, and this duty persists despite insolvency proceedings. Justice Marne cited previous judgments, including Santoshkumar Motilal Bhansali v. Competent Authority, to bolster the argument that statutory duties under welfare legislations are not overridden by IBC provisions.
The ruling reinstates the application for deemed conveyance, directing the Competent Authority to decide on its merits expeditiously. This decision is poised to impact numerous housing societies embroiled in similar legal quandaries, reinforcing the priority of flat purchasers' rights in Maharashtra.
Bottom line:-
The pendency of Corporate Insolvency Resolution Proceedings (CIRP) under the Insolvency and Bankruptcy Code (IBC) does not bar the Competent Authority from exercising its powers under Section 11 of the Maharashtra Ownership Flats Act (MOFA) to grant deemed conveyance of property.
Statutory provision(s): Section 11 of Maharashtra Ownership Flats Act, 1963; Section 14 of Insolvency and Bankruptcy Code, 2016; Section 238 of Insolvency and Bankruptcy Code, 2016.
