Contractual and Development Rights Under Hire Purchase Agreement Constitute Insolvency Assets Despite Ownership Vesting with Statutory Authority; Resolution Plan Remanded for Reconsideration
In a landmark judgment dated July 14, 2026, the National Company Law Appellate Tribunal (Principal Bench, New Delhi) delivered a detailed verdict in the matter of Uttar Pradesh Housing and Development Board (UPAVP) versus K.S.N. Buildwell Pvt. Ltd., addressing the complex interplay between statutory ownership rights and contractual development rights under the Insolvency and Bankruptcy Code, 2016 (IBC).
The case arose from a Hire Purchase Agreement executed between the UPAVP, a statutory authority, and K.S.N. Buildwell Pvt. Ltd. (the Corporate Debtor), under which the latter was allotted a commercial plot in Vasundhara, Ghaziabad. While ownership of the land remained with UPAVP until full payment was made, the Corporate Debtor was granted possession, development, and commercial rights, including the construction of a substantial residential-commercial project comprising 144 flats and 44 shops.
The controversy escalated when the Corporate Debtor defaulted on payments, and the UPAVP initiated actions including sealing the property for alleged unauthorized construction. Subsequently, insolvency proceedings commenced against the Corporate Debtor under the IBC. The Resolution Professional (RP) included the land and contractual rights in the Resolution Plan, which was approved by the Committee of Creditors (CoC). However, the UPAVP challenged this inclusion, contending that the land being a statutory asset could not be part of the insolvency estate.
The NCLAT, after extensive analysis, held that while ownership of the land remained with the UPAVP and could not be divested via a Resolution Plan under the IBC, the contractual and development rights conferred upon the Corporate Debtor under the Hire Purchase Agreement were valuable assets capable of being dealt with under Sections 18 and 25 of the IBC. The Tribunal emphasized that the Resolution Professional cannot claim a superior title to that of the Corporate Debtor but must preserve the assets and rights existing on the Insolvency Commencement Date.
Importantly, the Tribunal clarified that the alleged termination of the Hire Purchase Agreement due to payment defaults did not attain legal finality before the insolvency proceedings commenced, especially since no formal cancellation order was passed by UPAVP. Further, the sealing of the property was primarily for regulatory violations related to unauthorized construction and not for non-payment, and therefore, did not amount to termination of contractual rights.
The Tribunal also underscored the recognition of homebuyers as financial creditors under the IBC, highlighting their significant stake due to payments made to the Corporate Debtor and allotment of flats and shops. The judgment stressed the need to balance the proprietary rights of the statutory authority with the contractual rights of the Corporate Debtor and the interests of homebuyers.
Consequently, the NCLAT set aside the order directing de-sealing of the property during moratorium and remanded the Resolution Plan back to the CoC for reconsideration to adequately address the statutory ownership, contractual rights, regulatory compliances, and interests of all stakeholders. The judgment draws upon and distinguishes from precedents like Municipal Corporation of Greater Mumbai v. Abhilash Lal, Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, and Embassy Property Developments Pvt. Ltd. v. State of Karnataka.
This decision clarifies that in insolvency proceedings involving development projects on statutory land, the Resolution Professional must carefully delineate and protect contractual and development rights without encroaching upon statutory ownership, ensuring compliance with applicable laws and balancing competing interests.
Bottom line:-
Contractual and development rights arising under a Hire Purchase Agreement executed by a statutory authority in favor of a corporate debtor constitute assets capable of being dealt with under the Insolvency and Bankruptcy Code (IBC), 2016, notwithstanding that legal title in the land remains with the statutory authority.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 14, 18, 25, 30(2)(e), 31, 53, 60(5); Transfer of Property Act, 1882 Section 105; Uttar Pradesh City Planning and Development Act, 1973 Section 28(a), Section 51(2); Uttar Pradesh Public Premises (Eviction of Unauthorised Occupants) Act, 1972; Uttar Pradesh Awas Evam Vikas Adhiniyam, 1965 (repealed provisions); Registration Act, 1908.
