Development Rights Are Fully Covered By Definition Of "Property" U/S 3(27) Of IBC: NCLAT New Delhi

The NCLAT New Delhi Bench of Justices Ashok Bhushan (Chairperson) Barun Mitra (Technical Member) held that it is no more res integra, that the Development Rights are Rights which can be claimed by a Developer in assets. Development Rights are also fully covered by the definition of Property under Section 3(27) of the IBC.Brief FactsThese four Appeals arise out of the order passed by the NCLT in the Corporate Insolvency Resolution Process (CIRP) of the 'M/s. Today Homes and Infrastructure Pvt. Ltd (Corporate Debtor) have been filed against the common order dated 05.12.2023 passed .Company Appeal (AT) (Insolvency) No.336 of 2024 and Company Appeal (AT) (Insolvency) No. 337 of 2024 have been filed against the order dated 22.12.2023 passed in IA No. 4876 of 2020 and IA No.987/2021.The Respondents (owners) own agricultural land admeasuring 35.2062 acres situated in village Behrampur, Gurugram, Haryana. The owners entered into a Development Agreement on 03.03.2007 with New India City Developers Private Limited (Developer) to develop a group housing project and an IT Park on the said land after obtaining the required approvals. On 19.01.2010, the owners executed irrevocable Special Power of Attorney in favour of the developer in order to enable it to approach different authorities for obtaining licences, clearances, approvals etc. On 19.01.2010, the owners executed another irrevocable Special Power of Attorney registered on 20.01.2010 in favour of the Corporate Debtor with respect to the land which is to be developed for the Group Housing Project and the Cyper Park. The rights and obligations in favour of the developer was transferred to the Corporate Debtor as per Development Agreement dated 03.03.2007.The DTCP issued a License to the owners with New India as collaborator for development of the IT Park on area admeasuring 12.55 acres. The Sole Arbitrator as per Consent Award dated 05.09.2009 after obtaining the license on 11.10.2010 by order dated 12.10.2010 directed the joint receivers to handover the possession of the said land to the developer.On 30.08.2019, owners issued a notice to the corporate debtor stating that the Power of Attorney dated 19.01.2010 was revoked on 30.08.2019. On an order passed by the Adjudicating Authority dated 31.10.2019 on a petition under Section 9 of the IBC, CIRP was initiated against the Corporate Debtor. The Corporate Debtor who was assigned the rights and obligation of the developer had carried on a project namely— 'Canary Greens' on developer shares of 10.81 acres. The IRP of the Corporate Debtor had taken possession of the project.The Resolution Professional sought direction against the owners to restore the peaceful, vacant and physical possession of the “Canary Greens” and an interim order was issued on 24.08.2020 by the Adjudicating Authority in IA No.3356 of 2020. After the interim order, the Resolution Professional was again put back in possession on 02.09.2020.The owners filed IA No.5001 of 2021 by which application owners sought a direction to the Resolution Professional to exclude the project land ad-measuring 10.81 acres situated in Village Behrampur from the proposed Resolution Plan.All the aforesaid three IAs were heard by the Adjudicating Authority and by order dated 05.12.2023, Adjudicating Authority disposed all the three applications. The Adjudicating Authority held that the Resolution Professional could not place on record any evidence to show that the physical possession of the land in question was handed over to him and the Resolution Professional is in possession of the land. It was further observed that the issue of possession has to be decided by a Civil Court having jurisdiction on the basis of oral and documentary evidence and the Adjudicating Authority is not competent to decide the same.ContentionsThe appellant in Company Appeal (AT) (Insolvency) No. 1691 of 2023 and Company Appeal (AT) (Insolvency) No. 331 of 2024 submitted that Adjudicating Authority committed error in observing that the Resolution Professional has not been able to prove that it is in Resolution Professional who is in possession. It is submitted that when the corporate debtor has development rights in the land, Resolution Professional is fully entitled in law to take possession. Reference has been made to Sections 18, 20 & 25 of the IBC.It was further submitted that the owners have no right to claim that the area 10.81 acres be excluded from the CIRP of the Corporate Debtor. Area 10.81 acres is the area which fell in the 50% share of the developer it was assigned to the corporate debtor.It was further submitted that there being development rights in favour of the developer which has assigned to corporate debtor, it is the corporate debtor who has rights and obligations in the subject land which requires determination by the Adjudicating Authority and issue of development rights in the land cannot be decided dehorse the IBC proceedings and the Adjudicating Authority committed error...

Development Rights Are Fully Covered By Definition Of "Property" U/S 3(27) Of IBC: NCLAT New Delhi

Mohd Malik Chauhan

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