Bombay HC says a developer cannot use insolvency law to dodge slum-rehab duties

In a significant ruling, the Bombay High Court clarified that developers cannot use insolvency law to bypass their responsibilities under the Slum Rehabilitation Scheme (SRS). The court ruled that the developer’s appointment could be terminated by the Slum Rehabilitation Authority (SRA),  even if a resolution plan (RP) has been approved under the Insolvency and Bankruptcy Code (IBC). However, the ruling also clarified that such termination cannot be used to recover prior debts.

This decision came after the court dismissed a petition filed by Anudan Properties Pvt Ltd, which challenged the SRA’s decision to terminate its appointment as the developer for a slum rehabilitation project in Thane (West). The termination followed Anudan’s prolonged failure to pay transit rent arrears and meet the project completion deadlines. The SRA had previously approved the project in 2009, and a revised approval was granted in 2018. However, despite completing one rehab building for 135 slum dwellers, the second building was only 75% complete.

In 2021, the builder was dragged into insolvency proceedings by a finance company, LICHFL Trustee Company, over unpaid dues of Rs. 158 crore. Despite this, Anudan Properties argued that the resolution plan approved in 2023 had wiped out all past dues, including transit rent arrears. However, the SRA defended its decision, stating that the termination was based on the statutory provisions of the Slum Rehabilitation Act, which aims to expedite the completion of slum projects and ensure the welfare of slum dwellers.

The court noted that the developer’s claims for arrears of transit rent, pre-resolution, had been extinguished but emphasized that the SRA could still use non-performance as a ground for termination. The HC further ruled that while the resolution plan bound all stakeholders, it did not override the SRA’s authority, especially when it pertains to the welfare of slum residents.

As a part of th