Tribunal holds moratorium under IBC protects only existing enforceable rights; directs exclusion of Worli land development rights from Housing Development and Infrastructure Limited's insolvency estate.
In a significant ruling dated October 15, 2026, the National Company Law Tribunal (NCLT), Mumbai Bench, adjudicated on the inclusion of certain development rights as assets in the Corporate Insolvency Resolution Process (CIRP) of Housing Development and Infrastructure Limited (HDIL). The judgment arose from an interlocutory application filed by Recondo Limited challenging the Resolution Professional's (RP) inclusion of development rights over a parcel of land in Worli, Mumbai, as part of the corporate debtor's asset pool.
Background:
Recondo Limited, the applicant, held a lease from the Municipal Corporation of Greater Mumbai (MCGM) for a large plot in Worli since 1946, used primarily for bitumen manufacturing. In 2004, Recondo entered into a development agreement ("Sapphire DA") with Sapphire Land Developments Private Limited, granting Sapphire development rights over a smaller portion of this property. Subsequently, in 2006, Sapphire assigned these development rights to HDIL through another agreement ("HDIL DA").
The corporate debtor HDIL entered CIRP in August 2019, and the RP included these development rights in the Information Memorandum as assets of HDIL. Recondo contested this inclusion, asserting that the original Sapphire DA was terminated in 2013 due to non-fulfillment of obligations by Sapphire, including partial payment of consideration and failure to obtain necessary permissions, and possession of the property was never handed over to Sapphire or HDIL.
Contentions and Tribunal's Analysis:
Recondo argued that since the foundational Sapphire DA was terminated six years prior to CIRP commencement, no subsisting or enforceable development rights existed in favor of the corporate debtor. They relied on Supreme Court precedents emphasizing that the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016, protects only existing and enforceable rights and does not revive extinguished contractual rights. They further contended that both development agreements were unregistered, insufficiently stamped, and thus not enforceable.
The RP contended that the development rights under the HDIL DA were valid and subsisting, supported by payment of consideration and the confirmation of termination letter by the corporate debtor itself. The RP maintained that the moratorium protects these rights and the Tribunal lacked jurisdiction to adjudicate on the validity of the development agreements, suggesting such matters were for civil courts.
The NCLT examined the jurisdiction issue and observed that under Section 60(5)(c) of the IBC, the Tribunal has broad powers to decide questions arising in relation to insolvency proceedings, including determining whether disputed assets form part of the corporate debtor's estate. The Tribunal rejected the RP's contention that civil courts alone could decide on the asset status.
On merits, the Tribunal found the termination letter dated August 26, 2013, issued by Sapphire and confirmed by HDIL, to be genuine and decisive. It noted that Sapphire had only paid part consideration and failed to fulfill development obligations, possession was never handed over, and the HDIL DA was "acted upon" only superficially. Consequently, the development rights under the HDIL DA, derived from a terminated agreement, did not constitute assets of the corporate debtor as of the insolvency commencement date.
The Tribunal relied on the Supreme Court judgment in A A Estates Pvt. Ltd. v. Kher Nagar Sukhsadan Co-op. Housing Society Ltd. (2025), which held that moratorium protects only existing enforceable rights and does not revive extinguished contracts. It also referred to the principle nemo dat quod non habet ("no one can give what one does not have") to affirm that HDIL could not claim rights that Sapphire itself had lost.
Outcome:
The Tribunal allowed the interlocutory application and directed the Resolution Professional to exclude any reference to the Worli development rights from the assets of HDIL during the CIRP. It further restrained the RP from pursuing possession or interfering with Recondo's peaceful possession of the property.
Significance:
This ruling clarifies that during CIRP, only existing, subsisting, and enforceable rights as on the insolvency commencement date qualify as assets of the corporate debtor. It affirms the Tribunal's jurisdiction to decide on asset inclusion in the Information Memorandum, a foundational step in insolvency resolution. The judgment underscores that moratorium under IBC cannot be used to resurrect terminated or extinguished contractual rights, thus preserving commercial certainty and lawful contract termination.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - NCLT under section 60(5)(c) has jurisdiction to decide whether alleged development rights included in the Information Memorandum are assets of the corporate debtor - Development rights under unacted upon and pre-CIRP terminated development agreements do not constitute assets of the corporate debtor - Moratorium under section 14 protects only existing, subsisting and enforceable rights and does not revive extinguished contractual rights.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Sections 3(27), 14, 25, 29, 60(5)(c); Indian Registration Act, 1908 - Section 49; Specific Relief Act, 1963 - Section 14(1)(d); Limitation Act, 1963 - Article 137; Bharatiya Sakshya Adhiniyam, 2023 - Section 121
