Safiya Malik

The Bombay High Court has upheld the decision of the Slum Rehabilitation Authority (SRA) to terminate a developer’s appointment under Section 13(2) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, despite the developer's revival under the Insolvency and Bankruptcy Code, 2016. A Single Bench of Justice Amit Borkar, while disposing of the writ petitions, observed that “the approval of the petitioner’s resolution plan under the IBC does not per se insulate the petitioner from action under Section 13(2) of the Slum Act”.

The petitioner, Anudan Properties Private Ltd., was appointed to execute a slum rehabilitation scheme at Ramchandra Nagar, Thane (West), pursuant to a Letter of Intent (LoI) dated 7 September 2009 and a subsequent development agreement executed on 5 March 2011 with Rajmudra Co-operative Housing Society (respondent No.3). A supplementary agreement followed in 2020. The petitioner undertook construction of rehabilitation and sale buildings but failed to complete the project and defaulted on transit rent payments to slum dwellers.

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The petitioner underwent Corporate Insolvency Resolution Process (CIRP) before the National Company Law Tribunal (NCLT), Mumbai Bench, which approved a resolution plan submitted by KGK Realty (India) Ltd. on 29 March 2023. The plan proposed a payment of ₹2.5 crore towards arrears of transit rent. The petitioner claimed this extinguished all prior dues and sought to resume project work post-revival.

Despite the revival, delays persisted. Respondent No.3 initiated proceedings under Section 13(2) of the Slum Act, citing non-payment of arrears and default in progress. The Chief Executive Officer, SRA, passed an order dated 13 August 2024 terminating the petitioner’s appointment. The AGRC dismissed the appeal by order dated 31 January 2025. The petitioner challenged these orders through writ petitions, arguing that Section 31 of the IBC provided immunity from past claims and actions inconsistent with the resolution plan.

The Court framed and addressed four legal issues, notably whether the IBC approval insulated the petitioner from regulatory actions under the Slum Act.

On the first issue, the Court held: “What the IBC prohibits is the institution or continuation of proceedings for recovery of past dues after the resolution plan is approved. It does not extinguish statutory duties, especially where public interest or regulatory compliance is involved.”

It further held: “The revival of the corporate debtor would necessarily involve the successful implementation of the slum redevelopment scheme. The IBC and the Slum Act can co-exist in harmony, provided the role and limits of each statute are respected.”

On the nature of transit rent, the Court recorded: “Transit rent is not a mere contractual commitment — it is an integral part of the developer’s public duty under a welfare-driven statutory framework.”

The Court concluded that the SRA’s action under Section 13(2) was justified in law, stating: “The action initiated by the SRA under Section 13(2) of the Slum Act is lawful, reasonable, and justified, having regard to the petitioner’s long-standing failure to pay transit rent, the resulting hardship to slum dwellers.”

On procedural fairness, the Court examined the corrected AGRC order and stated: “The corrected order rectified a misstatement of dates and deposit of transit rent without consent of members of respondent no. 3. No new reasoning or finding was introduced that alters the substance of the decision.” The Court found no violation of natural justice, holding that “only ancillary details were corrected” and that the petitioner had full opportunity to contest the grounds.

Allegations of mala fides were rejected with the observation: “I find no tangible evidence of mala fides or extraneous consideration... Absent any cogent proof of bad faith, the Court must proceed on the presumption that the authority acted bona fide.”

The Court also addressed a procedural objection based on an earlier letter by the Executive Engineer, SRA, and clarified: “The Executive Engineer has categorically stated... that the power to adjudicate and pass orders under Section 13(2)... has not been delegated to him... the earlier communication dated 5th December 2023 must be seen as having no legal effect.”

The Court acknowledged the petitioner’s revival under a resolution plan approved by the NCLT and noted: “Ordinarily, such revival... carries with it a legitimate expectation that the corporate debtor... shall be given a fair opportunity to resume operations and rebuild business with a ‘clean slate’.”

However, the Court distinguished the nature of the project as a welfare scheme, observing: “The stakes involve not only contractual obligations but also vital public interest... the housing rights, shelter security, and socio-economic well-being of slum dwellers.”

The Court found that the slum dwellers had borne the disproportionate burden of delay and non-payment: “These families have remained in transit accommodations for extended periods, facing both physical and financial hardship. In many cases, they have not received the transit rent which they were entitled to.”

It was also noted that the petitioner had failed to comply with the demand for ₹2.5 crore in transit rent, stating: “While some steps have been taken, they fall short of full compliance.” The Court emphasised that “the SRA was duty-bound to afford the petitioner a conclusive and time-bound opportunity to clear the dues — particularly after revival under the IBC — before proceeding to cancel development rights.”

The writ petitions were disposed of with specific directions. The Court sustained the orders passed under Section 13(2) and by the AGRC, subject to the following conditions:

The Slum Rehabilitation Authority is required to grant the petitioner one final opportunity of hearing within four weeks. This is limited to allowing the petitioner to submit, within two weeks, a proposal to substantially address the grievances of slum dwellers. The proposal must include a concrete timeline for project completion, payment of arrears of transit rent as calculated by the SRA, and any ex gratia arrangement to mitigate past rent losses.

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If the SRA, upon such hearing, finds the proposal satisfactory, it may consider whether replacement remains necessary. However, this opportunity is not to be treated as a reinstatement of rights. If no proposal is received, or if the proposal is deemed unsatisfactory, the SRA is at liberty to proceed with induction of a new developer and associated measures, including issuance of a fresh LoI and transfer of project land.

The SRA is also directed to consider imposing conditions on the incoming developer to compensate slum dwellers for the delay. This may include a signing amount distributable towards past rent or provision of rental units until project completion.

Advocates Representing the Parties

For the Petitioners: Mr. Prateek Seksaria, Senior Advocate with Mr. Anuj Desai, Mr. Nishant Chotani, Mr. Siraj Salelkar and Ms. Samiksha Rajput i/by Lexicon Law Partners

For the Respondents: Mr. Pravin Samdani, Senior Advocate with Mr. Mayur Khandeparkar and Mr. Arun Panickar, Mr. G. S. Godbole, Senior Advocate with Ms. Manisha Gawde i/by Ms. Uma Palsuledesai,  Mr. Aspi Chinoy, Senior Advocate with Mr. Chirag Balsara i/by Mr. Sagar R. Gharat, Mr. Abhishek Khare, Ms. Dhruti Kapadia, AGP, Mr. Dinyar Madon, Senior Advocate with Ms. Dhruti Kapadia

Case Title: RE Mumbai Metropolitan Region Slum Rehabilitation Authority & Ors.

Neutral Citation: 2025:BHC-AS:13657

Case Number: Writ Petition No. 2065 of 2025

Bench: Justice Amit Borkar

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