NCLT New Delhi Rules, Development Rights Crystallised Before Termination Of Collaboration Agreement Form Part Of Corporate Debtor's Assets
Pranav B Prem
The New Delhi Bench of the National Company Law Tribunal (NCLT), comprising Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Shri Atul Chaturvedi (Technical Member), has held that development rights which had already crystallised before the termination of a collaboration agreement can be treated as part of the corporate debtor's assets, even if such termination was later upheld by an arbitral tribunal. The Tribunal observed that such crystallised rights, having been exercised in the execution of the real estate project by the corporate debtor, are relevant for the Corporate Insolvency Resolution Process (CIRP) and are liable to be considered while preparing the valuation and Information Memorandum.
The application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, by Mr. Ishan Singh, one of the landowners, seeking exclusion of the unsold inventory in the project 'Spaze Arrow' from the Information Memorandum and its valuation. It was argued that the corporate debtor, Spaze Towers Pvt. Ltd., had no surviving rights over the subject property and, therefore, the unsold units could not be treated as part of its assets. The applicant contended that the development rights, if any, were extinguished upon the termination of the Collaboration Agreement, which had been affirmed through an Arbitral Award dated 14.09.2022. Consequently, it was submitted that including such properties in the valuation exercise and Information Memorandum would amount to misrepresentation before potential resolution applicants.
On the other hand, the Resolution Professional opposed the plea, stating that the Collaboration Agreement had not been cancelled at the time the rights were exercised and that development activity had already taken place under it. The respondent submitted that the arbitral award, which declared the agreement terminated, does not retrospectively negate the development rights that had accrued and been exercised prior to such termination. It was further argued that the applicant, while relying on the arbitral award to support his position, could not now claim that the constructed portion of the project or the unsold inventory must be excluded from the scope of the CIRP.
The Tribunal clarified that it was not sitting in appeal over the arbitral award nor was it adjudicating upon the contractual rights and liabilities under the agreement. Rather, it was solely tasked with determining whether the subject property and the development rights therein qualify as assets of the corporate debtor under the framework of the IBC. Referring to the judgment of the National Company Law Appellate Tribunal (NCLAT) in K.H. Khan & Anr. v. Art Constructions Pvt. Ltd. & Ors [Company Appeal (AT) (Insolvency) No. 1116 of 2024 dated 14.11.2024], the Tribunal held that such issues fall within the adjudicatory domain of the NCLT. It further referred to NCLAT’s decision in Nilesh Sharma, RP of Today Homes v. Mordhwaj Singh & Ors [Company Appeal (AT) (Ins.) No. 1691 of 2023], where it was held that the termination of the Development Agreement and related proceedings did not justify exclusion of the developed property from the Information Memorandum. The NCLAT in that case upheld the inclusion of the developed project within the assets of the corporate debtor for the purpose of CIRP.
Taking a similar view, the Tribunal in the present case held that the development rights which had been crystallised and acted upon prior to the termination of the Collaboration Agreement continue to have relevance for the CIRP. The Tribunal observed that the assertion made by the applicant regarding the termination of the agreement being upheld by the arbitral award does not in itself extinguish the bundle of development rights already exercised by the corporate debtor in the construction of the real estate project. Accordingly, the application seeking exclusion of the subject property and unsold inventory from the valuation and Information Memorandum was dismissed.
Appearance
For the Applicant: Mr. Saurabh Kalia, Mr. Guneet Sindhu, Advs.
For the RP: Mr. Karan Gandhi, Mr. Sikhar Tiwari, Advs.
Cause Title: Mr. Ishan Singh V. Mr. Gaurav Katiyar
Case No: IA 438/2025 IN CP: IB 284/ND/2021
Coram: Shri Manni Sankariah Shanmuga Sundaram [Hon’ble Member (Judicial)], Shri Atul Chaturvedi [Hon’ble Member (Technical)]
