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TMI Blog2025 (3) TMI 1193X X X X Extracts X X X X X X X X Extracts X X X X ..... State: Ms. Dhruti Kapadia, AGP. For the Respondent No. 5 in WP/2065/2025 & For the Petitioner in WPST/6431/2025: 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 Respondent No. 6-AGRC: Mr. Dinyar Madon, Senior Advocate with Ms. Dhruti Kapadia. JUDGMENT: 1. This petition under Article 226 of the Constitution challenges the legality of orders passed by the Slum Rehabilitation Authority (SRA) under Section 13 (2) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971 (the "Slum Act"). The impugned orders terminate the petitioner's appointment as developer of a slum rehabilitation project and were issued on the ground of the petitioner's failure to pay transit rent arrears and to complete the project within the stipulated time. The petitioner, a real estate developer, underwent insolvency resolution under the Insolvency and Bankruptcy Code, 2016 ("IBC") during the pendency of the project. A resolution plan has been approved under Section 31 of the IBC, which the petitioner contends has extinguished all past dues including the claimed arrears of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative accommodation to 135 members of respondent No. 3 and completed work of rehab building upto 16th floor. 5. Respondent No. 3 on 8 January 2020 executed a supplementary development agreement for implementation of slum scheme on the said property supplementing development agreement dated 5 March 2011 by recording a recital that respondent No. 3 and its members had unconditionally consented for two redevelopment plans. According to the petitioner, erstwhile promoter of the petitioner during their role as Director of the petitioner engaged in multiple transactions which were later as being in nature of "avoidance transactions" in terms of provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the IBC") the erstwhile promoter of the petitioner engaged in transactions which were undervalued without requisite approvals from respondent No. 5. Therefore, implementation of slum scheme on the property under the management of erstwhile promoter was failed. Respondent No. 5 extended secured financial assistance of Rs. 79,90,00,000/- to the petitioner for completion of slum scheme. Despite the financial assistance of respondent No. 5, erstwhile promoters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and obstruction created by respondent No. 3 and its members. 9. The petitioner on 26 May 2023 addressed a letter to respondent No. 3 to provide certain documents, schedule of meeting for conducting KYC of its members so as to enable the petitioner to handover cheques towards their rent. On 29 May 2023, the petitioner issued an email to respondent No. 3 showing its willingness to distribute the amounts to the members of respondent No. 3. By letter dated 17 April 2023 to respondent No. 1, the petitioner requested respondent No. 1 to remove erstwhile architect to enable them to start the revised approval process and the process of changing the designated architect of the petitioner consumed more than three months and ultimately respondent No. 1 by letter dated 31 July 2023 terminated appointment of erstwhile architect and appointed present architect. 10. According to the petitioner, with a view to adhere directives outlined in resolution plan in a timely manner, established an operational infrastructure including setting up of dedicated office facilities equipped with the necessary technological and administrative capabilities along with employee working team of more than 25 people ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner to undertake additional internal work. According to the petitioner, the petitioner agreed to pay Rs. 7,51,00,000/- to respondent No. 3 in staggered manner for paying Rs.1 crore on commencement of work; Rs. 2 crore after 1 year from commencement of work; Rs. 2 crore after two yeas of commencement of work; and Rs. 2.5 crore after three years from commencement of work. Respondent No. 3 circulated draft minutes of meeting dated 3 February 2024 to the petitioner. However, never circulated final minutes of meeting dated 3 February 2024 to the petitioner. 14. The petitioner vide letter dated 16 April 2024 informed respondent No. 1 that it had deposited amount of Rs. 2,31,00,000/- in its separate bank account towards advance eleven months' rent payable to eligible units as per Circular No. 41 issued by respondent No. 1 and deposited additional amount of Rs. 74,80,000/- to make provision for rent payable in the event of inclusion of further eligible units by respondent No. 1, which signifies and notifies petitioner's commitment, willingness and preparedness to fulfil its obligations. 15. On 25 April 2024, respondent No. 3 called a Special General Body Meeting to terminate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to oral submissions before respondent No. 6. Despite no oral arguments were made in the said appeal on 12 December 2024, respondent Nos. 1 and 2 relied upon report dated 26 December 2024 prepared by Assistant Registrar, SRA. Therefore, the petitioner filed additional written statements before respondent No. 6 and requested for opportunity of oral hearing along with written statements showing its readiness to pay arrears of rent as determined by the Assistant Registrar, SRA in its report dated 26 December 2024. The petitioner, by its advocate letter dated 20 January 2025, attempted to circulate application for hearing before respondent No. 6 by serving copy of it on respondent Nos. 1 to 5. However, respondent No. 6 refused to receive letter dated 20 January 2025. Therefore, copy of letter was sent to respondent No. 6 on its official email address. Respondent No. 6, by relying on report dated 26 December 2024, though hearing was closed for order on 13 December 2024, dismissed the petitioner's appeal. Therefore, the petitioner has filed present writ petition under Articles 226 and 227 of the Constitution of India. 21. The operational creditor at whose instance proceedings before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom legal opinion dated 10 July 2023 issued by the Chief Legal Consultant endorsed by respondent No. 1. He submitted that amount of Rs. 4,83,00,000/- was deposited by the petitioner with respondent No. 1 towards transit rent payable to each eligible member of respondent No3-Society quantified at Rs. 10,000/- per month. He submitted that the report furnished by the Assistant Registrar, SRA dated 26 December 2024 which is the date after the proceedings were reserved for orders and hearing before it was concluded on 13 December 2024. The petitioner therefore filed an application with respondent No. 6 for granting opportunity of hearing to show petitioner's bona fide intention to pay arrears of rent of Rs. 18,80,29,882/- as determined by the Assistant Registrar in its report dated 26 December 2024. He submitted that the authorities under the Act failed to consider the fact that rehab building R-2 was completed and 135 members of respondent No. 3-Society have been accommodated and construction work of rehab building R-2 has been completed upto 16th floor. He submitted that total combined expenditure of Rs. 173 crore (Rs. 123 crore pre-approval and Rs.50 crore post approval) demonstrates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment in the case of Ghanashyam Mishra and Sons Private Limited Through The Authorised Signatory (supra), does not help the petitioner as powers of SRA under Slum Act, 1971 cannot be curtailed by mere NCLT and/or because of approval of resolution plan. He submitted that SRA was not even party before NCLT. He submitted that Section 238 of the IBC will not affect the provisions and powers of the Slum Act as both acts are different in their objective and implementation and nature. Even bar under Section 231 will not applicable to SRA. He submitted that the petitioner is under obligation to pay rent to slum dwellers which is a contractual obligation and based on such terms the petitioner was granted permission for development and for completion of rehabilitation scheme. The indemnity and affidavits submitted by the petitioner are towards future liability out of default on the part of the petitioner. 25. He submitted that delay in payment of transit rent is evident. He submitted that resolution plan is approved on 29 March 2023 and even from the date of approval of plan, the petitioner has not paid the amount nor deposited it with respondent No. 2. Except requesting for account detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further submitted that for a prolonged period of 406 days, slum dwellers were deprived of their rightful transit rent during the entire CIRP process, thereby violating their fundamental right to a dignified life and adequate shelter under Article 21 of the Constitution of India. He emphasized that the effective date under the resolution plan was 29 May 2022, i.e., 30 days from the CoC's approval. However, the petitioner did not pay any transit rent to Respondent No. 3 or deposit it with Respondent No. 1 from 29 May 2022 onwards. It was only after Respondent No. 3 passed a General Body Resolution on 25 April 2024 terminating the petitioner's appointment that the petitioner belatedly deposited the rent with Respondent No. 1. Such belated compliance demonstrates mala fide intent and a clear breach of fiduciary and contractual obligations owed to slum dwellers. 28. Mr. Chinoy further submitted that the petitioner had caused an inordinate and unexplained delay of nearly 15 years in the implementation of the slum rehabilitation project, thereby frustrating the fundamental purpose of the scheme. He pointed out the following key delays attributable to the petitioner: Delay of 11 months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation arising under any law is due. In the present case, since the payment to slum dwellers was duly incorporated as part of the resolution plan, any claims raised prior to the approval of the resolution plan stand extinguished and cannot be enforced subsequently. Respondent No. 6 (Apex Grievance Redressal Committee) does not have the jurisdiction to sit in appeal over an approved resolution plan nor can it render any finding in contravention thereof. He contended that the finding recorded in paragraph No. 223 of the impugned order-that the NCLT does not have the power to reduce the rent payable to slum dwellers-is wholly without jurisdiction. The NCLT, as the adjudicating authority under the IBC, has exclusive jurisdiction to approve a resolution plan, and once such a plan is approved, all past claims stand settled. He further argued that the finding in paragraph No. 229 of the impugned order-that the petitioner holds no further rights except recovery of balance compensation from Respondent No. 3-is legally perverse and unsustainable. The petitioner, being a secured financial creditor, has its rights protected under the resolution plan, and repayment of its debt is secured b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framework of the IBC; He lastly submitted that the impugned order passed under Section 13 (2) of the Slum Act is in direct contravention of the binding effect of the resolution plan and is liable to be quashed. 34. Per contra, Mr. Madon, learned Senior Advocate appearing for Respondent No. 6 (Apex Grievance Redressal Committee), supported the impugned order, contending that the decision rendered by Respondent No. 6 is well-reasoned, fully justified, and does not warrant any interference by this Court in the exercise of its writ jurisdiction under Articles 226 and 227 of the Constitution of India. He submitted that each and every contention raised by the petitioner was duly considered by the statutory authorities, and the impugned orders were passed after recording findings on all relevant issues. According to him, the judgment delivered by Respondent No. 6 is self-explanatory and speaks for itself, demonstrating due application of mind, adherence to principles of natural justice, and compliance with statutory provisions. He further submitted that interference by this Court in the present case is neither warranted nor justified, as the impugned order does not suffer from any jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imely resolution of corporate insolvency in a manner that maximizes the value of assets, balances the interests of all stakeholders, and allows for the revival of a failing company. On the other hand, the Slum Act is a social welfare legislation. It is intended to rehabilitate slum dwellers, promote improvement and redevelopment of slum areas, and secure basic housing and dignity for those who live in slums. Although these two statutes operate in separate fields, in certain cases, their objectives may intersect. In fact, in the present case, the two objectives are not in conflict, but rather aligned. The revival of the corporate debtor would necessarily involve the successful implementation of the slum redevelopment scheme undertaken by it. The company, being a developer under the slum scheme, is expected to complete the rehabilitation component, and only then can it access the free-sale portion of the land, which is likely its sole source of revenue. Therefore, completion of the project is not only in the interest of the slum dwellers but also crucial for the financial revival of the corporate debtor. The IBC does not provide that once a resolution plan is approved, the corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of arrears or damages. Their primary grievance is the failure of the developer to honour the performance obligation of constructing and handing over the rehabilitation units in time, and of paying subsistence rent during the transition. The relief they seek is not money, but action - replacement of the defaulting developer with another capable of completing the project. This is in the nature of specific performance or substitution, not a debt claim. It is well recognized that certain consequences of a debtor's default - especially those involving statutory penalties, criminal liability, or regulatory enforcement - are not discharged merely by approval of a resolution plan. The IBC is not equipped to adjudicate upon or enforce such obligations, as it is primarily designed to deal with insolvency resolution and restructuring of debts. Therefore, such obligations and remedies fall outside the IBC process and continue to subsist. 40. Undoubtedly, Section 238 of the IBC gives it overriding effect over inconsistent provisions of other laws. But in the present scenario, the Slum Act's mandate of ensuring timely rehabilitation of slum dwellers is not inconsistent with the objectives o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the developer. Therefore, the power of the Slum Rehabilitation Authority (SRA) under Section 13 (2) to remove a non-performing developer is a critical tool to prevent development projects from getting stuck indefinitely. 42. When a developer under an SRA scheme enters insolvency proceedings, the question that arises is whether the statutory right to seek a change of developer should be restricted or diluted. In my view, the need to exercise this right becomes even more compelling in such a scenario. Entry into insolvency usually indicates financial distress. If the developer, even prior to insolvency, had failed to pay transit rent or failed to make progress on construction, the slum dwellers' mistrust is not only understandable but also reasonable. Insolvency cannot be used as a shield to erase the developer's past non-performance. It would be illogical to suggest that a developer who could have been removed for delay while financially solvent must now be protected merely because insolvency proceedings have commenced. The Insolvency and Bankruptcy Code (IBC) cannot become a safe harbour for developers who have failed in their public obligations. 43. The petitioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts such as lack of progress or a valid resolution by a majority of slum dwellers. The Act also requires that the concerned developer be given an opportunity to show cause before any action is taken. Therefore, procedural fairness is built into the statute. Merely because a developer has undergone Corporate Insolvency Resolution Process (CIRP) does not mean that it is exempt from the consequences under the Slum Act. A conflict between the two statutes would arise only if exercising powers under the Slum Act results in undoing or frustrating the resolution plan approved under the IBC. The petitioner argues that the resolution plan assumed that the project rights would remain with it, and thus, removal under Section 13 (2) affects the viability of the plan. This contention has some weight, but it does not lead to the conclusion that the SRA's statutory powers are extinguished. 46. In most resolution plans, the continuation of business operations is made subject to legal compliances and necessary approvals. The petitioner and its resolution applicant ought to have proactively addressed the slum project during CIRP. They could have approached the slum society and SRA, proposed pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises only if the development scheme is implemented. Therefore, if the project is taken away due to breach, the associated land no longer holds the same developmental value for the corporate debtor. Moreover, the acquisition of land in this context is for a public purpose - namely, to ensure that the slum rehabilitation project is completed and the rights of slum dwellers are protected. As per law, compensation would be payable to the outgoing developer, and such compensation would become part of the insolvency estate. Thus, the corporate debtor is not being dispossessed without remedy; rather, it is being divested of an asset which it was unable to utilise for the public good, and that too, in accordance with legal process. 48. The legal consequence of the developer's removal - which is a non-monetary regulatory action - is that the corporate debtor loses its role in the project and the chance to earn profits from the free-sale component. However, this consequence flows directly from the breach of obligations by the developer. This is not in the nature of a "claim" or "debt" as contemplated under the IBC. Instead, it is a regulatory forfeiture, which arises when a statutory autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resolution plan. Unless the resolution plan specifically addresses the cancelled licence and the law permits such revival, the cancellation stands. 50. Similarly, in the present case, the SRA's action of removing the petitioner as developer is a regulatory decision made in furtherance of the statutory scheme under the Slum Act. This decision is not rendered invalid merely because the developer has undergone insolvency or that a resolution plan has been approved. The two statutes operate in distinct spheres - the IBC deals with debt resolution and revival of the corporate debtor, while the Slum Act is aimed at protecting the interests of slum dwellers and ensuring timely completion of rehabilitation projects. The observations in Rajan Garg (Supra) and the Supreme Court's refusal to interfere with that judgment (by dismissing the Special Leave Petition) underline a legal position - a developer cannot use the IBC as a tool to escape the consequences of failure in executing a slum redevelopment scheme. The IBC is not a refuge for those who have failed in their public responsibilities. The approval of a resolution plan does not and cannot bind independent statutory authorities like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be nullified simply because it disturbs the commercial equilibrium of the resolution plan. In fact, Section 31 (1) of the IBC makes it clear that once a resolution plan is approved by the NCLT, it becomes binding on all stakeholders, including the corporate debtor, its creditors, employees, shareholders, and even governmental and statutory authorities. This ensures that all claims and interests which are part of the insolvency process are finally resolved. Section 238 of the IBC further contains a non-obstante clause, giving the Code overriding effect in case of inconsistency with any other law. 53. However, and this is crucial, the real question is whether the obligations of a slum scheme developer - such as building tenements or providing transit accommodation - are in the nature of "claims" or "debts" which are discharged or compromised under a resolution plan. In my view, they are not. The obligations imposed on a developer under the Slum Act are of a special nature. They are not merely financial obligations owed to a creditor, but statutory duties owed to third-party beneficiaries - the slum dwellers - who have no role in the insolvency process but whose rights arise from a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own statutory duties. The IBC and the Slum Act can co-exist in harmony, provided the role and limits of each statute are respected. The IBC may restructure the financial balance sheet of a corporate debtor, but it cannot erase its statutory duties under welfare legislation, unless specifically and lawfully provided. 56. The petitioner has relied on the judgment of the Supreme Court in Ghanshyam Mishra (Supra) to argue that the slum dwellers can no longer raise any claim for unpaid transit rent, which is a pre-CIRP (Corporate Insolvency Resolution Process) liability. According to the petitioner, since the resolution plan has been approved by the NCLT and is binding on all stakeholders, any such demand stands extinguished. Further, the petitioner submits that the approval of the resolution plan "cures" all past defaults, and therefore, the very basis for invoking Section 13 (2) of the Slum Act - i.e., default by the developer - no longer survives. This contention, in my considered view, is legally flawed and based on an incorrect understanding of the law. It conflates two distinct legal consequences: (i) the extinguishment of monetary claims or dues, and (ii) the factual occur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot automatically negate the slum dwellers' or the SRA's powers under the Slum Act. Their rights to act under Section 13 (2), especially to safeguard the public interest and ensure that the scheme moves forward, cannot be extinguished merely because the debtor has exited CIRP. 58. Secondly, even the so-called "clean slate" principle has its boundaries. The judgment in Ghanshyam Mishra was primarily concerned with legal claims - that is, rights to demand payment or other reliefs that are admissible in insolvency proceedings. However, the slum dwellers' plea for removing the developer is not a claim in that sense. It is not a demand for money or enforcement of a contractual debt. It is the exercise of a statutory right under a welfare law, which seeks to ensure better implementation of a government-backed rehabilitation scheme. Such a right cannot be brushed aside under the guise of insolvency discharge. 59. Thirdly, even if we assume that the resolution applicant who took over the corporate debtor intended to continue the slum project, such intention cannot override the SRA's discretion under law. The SRA is not a stakeholder in the resolution plan approval process in the same way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of third parties such as slum dwellers. The IBC is not a magic wand that automatically cures every legal or moral consequence of a debtor's past non-performance. Its reach is primarily in the field of debt resolution - it does not and cannot override welfare obligations or statutory responsibilities imposed by other laws. 61. In this case, the SRA is not trying to recover money from the petitioner. If it had attempted to do so - for example, by initiating recovery proceedings for unpaid transit rent - such action would indeed be barred after approval of the resolution plan. But that is not the purpose of the SRA's action. The SRA is instead focused on ensuring that the slum rehabilitation project moves forward and that the slum dwellers are not left in a state of limbo. If, based on the petitioner's past default and poor track record, the SRA forms an honest and reasonable opinion that the petitioner can no longer be trusted to deliver on its obligations, the SRA is fully entitled to initiate steps to replace the petitioner and bring in another developer. This is not an act of punishment - it is a regulatory and welfare-driven step to achieve the core purpose of the Slum Act: ensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand that this is not a matter of private negotiation but a statutory duty arising from the scheme sanctioned under the Slum Act. Having considered the rival contentions, I find merit in the respondents' submissions, for the reasons discussed below: Source of the Obligation: 65. When a slum rehabilitation scheme is sanctioned under the Slum Act, it is not a mere private arrangement between a builder and slum dwellers. It is a public welfare scheme governed by statutory provisions, detailed guidelines of the Slum Rehabilitation Authority (SRA), and formal conditions set out in the Letter of Intent (LoI) and other regulatory documents such as Annexure II and Regulation 33(10) of the Development Control Regulations (DCR) applicable in Maharashtra. A critical condition of such schemes is that the developer must provide either alternate transit accommodation or monthly transit rent to every eligible slum dweller from the date of vacating their hutments until permanent rehabilitation units are handed over. This is not an optional or negotiable term that can be bargained away. It is a mandatory requirement, forming part of the very structure of the slum redevelopment scheme, and is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual slum dwellers or the co-operative housing society to implement the project. These are usually in the form of tri- partite agreements involving the developer, the slum dweller, and the SRA or society. These contracts do include a promise to pay transit rent. However, these agreements are not ordinary commercial contracts freely negotiated between equal parties. Rather, they merely formalise a statutory obligation. In administrative law, it is well-recognised that some obligations, although implemented contractually, are statutory in origin. Transit rent is one such obligation. Even if a slum dweller were to sue the developer for breach of contract in a civil court, the Court would ultimately be enforcing a duty that arises from public law. The developer cannot ignore or belittle this obligation merely because it appears in a contract. It is a duty owed not just to an individual, but to a class of beneficiaries protected by a welfare law. Accordingly, even if unpaid transit rent qualifies as an "operational debt" under the IBC for accounting purposes, this classification does not dilute the developer's continuing obligation to ensure that transit rent is regularly paid goi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Section 13 (2) of the Slum Act does not set out an elaborate procedure to be followed while exercising this power, it is a settled principle of administrative law that when any authority exercises a power that affects legal rights or vested interests, it must follow the principles of natural justice. This includes at minimum: (i) issuance of a notice to the concerned party, (ii) clear intimation of the allegations or grounds for proposed action, and (iii) an opportunity to be heard before any final decision is taken. The overall scheme of the Slum Act, when read along with the SRA's internal guidelines, clearly contemplates that a developer facing proposed removal must be given a fair and meaningful opportunity to respond. These safeguards are in place to ensure that the power under Section 13 (2) is not exercised arbitrarily or unfairly. Factual basis for invoking Section 13 (2): 71. In the present case, the SRA has invoked this power citing two main grounds - (a) extraordinary delay in execution of the project, and (b) failure to pay transit rent, causing hardship to slum dwellers. I will examine if these grounds are factually and legally substantiated: Delay: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the issuance of fresh Letters of Intent on 5th June 2024 and 16th July 2024. These revised LoIs grant the petitioner a fresh timeline of 72 months (6 years) to complete the project. It is important to note that this new period has not yet expired and the time for performance, under the latest approvals, is still running. Despite these developments, the respondent authorities have sought to invoke Section 13 (2) of the Slum Act to propose substitution of the petitioner as developer, primarily citing historical delays. Their justification is that the scheme was initially approved in 2009, but even by 2019, only partial progress had been achieved. They further point out that while half of the eligible members have been accommodated in R-2, the remaining beneficiaries are still in transit accommodation. 74. However, this Court is of the considered view that the invocation of Section 13 (2) solely on the basis of delays, without accounting for the revised agreements and extended timelines, is legally unsustainable in the facts of the present case. It is important to highlight that the Supplementary Development Agreement of 2020 and the fresh LoIs of June and July 2024 have redefine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble slum dwellers, could not be expected to tolerate such a situation indefinitely. 77. The data placed on record by the respondents shows that the arrears of transit rent ran into several crores of rupees and affected more than 200 slum families. While it may be true that, in legal terms, those arrears exceeding Rs. 2.50 crores stood extinguished under the resolution plan approved under the Insolvency and Bankruptcy Code (IBC), the human impact of such a prolonged default has not been addressed or remedied. The legal discharge of financial claims does not erase the fact that these families lived without rent support for several months, if not years, due to the petitioner's default. 78. What further compounds the issue is that even after the petitioner's revival through the resolution plan, there was no concrete or meaningful step taken by the new management to clear the arrears of transit rent or demonstrate any sincere commitment to restore the trust of the slum dwellers. The only steps pointed out are certain communications calling upon slum dwellers to submit their KYC documents. However, no actual evidence of disbursal of dues has been produced. In fact, the record reflects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al commitment - it is an integral part of the developer's public duty under a welfare-driven statutory framework. When a developer enters into a slum rehabilitation scheme and takes over the responsibility of displacing and relocating vulnerable families, it also assumes a binding legal and moral duty to ensure that those families are adequately supported during the transition period. This duty cannot be taken lightly or reduced to a question of administrative formality. In the present case, the petitioner's failure to fulfil this obligation, even after corporate revival, has undermined the confidence of the SRA and the beneficiaries. The persistent default, coupled with an absence of credible corrective action, justifies the SRA's view that the petitioner cannot be relied upon to carry forward the scheme in a manner consistent with public interest. Opportunity and procedure: 82. Upon a careful perusal of the record, this Court finds that the Slum Rehabilitation Authority (SRA) has followed due process and complied with the requirements of natural justice prior to passing the impugned order under Section 13 (2) of the Maharashtra Slum Areas (Improvement, Clearance and Redevelopme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, it is evident that the SRA considered all relevant factors. Notably, the authority took into account the petitioner's defence, including the approval of the resolution plan under IBC, the alleged improvement in financial capacity, and the fresh LoIs issued in 2024. However, the SRA ultimately found that on-ground progress remained unsatisfactory, and more importantly, that transit rent dues remained unpaid, thereby causing hardship to slum dwellers. 103. In such a situation, the authority was justified in taking a pragmatic decision to protect the welfare of slum dwellers, which is the central objective of the Slum Act. The decision to allow the society to appoint a new developer is not punitive, but rather remedial, to break the stagnation and ensure that the scheme is taken to its logical conclusion. This Court finds no perversity, irrationality, or illegality in the impugned order. It cannot be said that the action of the SRA was arbitrary or in breach of procedural fairness. On the contrary, the process followed appears fair, thorough, and in alignment with the statutory scheme's objective of timely and effective rehabilitation of slum dwellers. Conclusion on Issue ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project. I find no tangible evidence of mala fides or extraneous consideration. The slum society's impatience and desire for a new developer is understandable given the long delay - that by itself does not make the SRA's action malafide; if anything, it reinforces that the beneficiaries were aggrieved and seeking redress. SRA as a public authority is expected to listen to the beneficiaries. There is nothing to suggest any collusion or corrupt motive in choosing the new developer (which, as per the policy, was nominated by the society and scrutinized by SRA). Absent any cogent proof of bad faith, the Court must proceed on the presumption that the authority acted bona fide. The impugned decision appears solely guided by the interests of completing the scheme, and not by any irrelevant factor. 89. The petitioner has also raised an additional objection regarding the maintainability of the impugned order, contending that the Executive Engineer, SRA had earlier rejected the application of respondent No. 3-society by way of a communication dated 5th December 2023, and therefore, respondent No. 2 (the Chief Executive Officer of SRA) could not have passed the subsequent impugned order all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legitimate expectation that the corporate debtor, under its new management, shall be given a fair opportunity to resume operations and rebuild business with a "clean slate". However, the facts of the present case are not limited to a standard commercial transaction. The project in question is a Slum Rehabilitation Scheme, where the stakes involve not only contractual obligations but also vital public interest, particularly the housing rights, shelter security, and socio-economic well-being of slum dwellers. These beneficiaries are among the most vulnerable sections of society. Their rights, under a welfare statute like the Slum Act, must be treated with the highest regard in any balancing exercise between commercial interests and public duties. 91. In this context, it must be acknowledged that the cost of failure in implementation of the project has been disproportionately borne by the slum dwellers. 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 under the scheme. At the same time, the resolution applicant, while stepping int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000/- for April 2023 to March 2024. However, the failure to deposit Rs. 2.50 crores as initially demanded by the SRA remains a material lapse, which undermines the petitioner's credibility. While some steps have been taken, they fall short of full compliance. 94. It must be reiterated that the petitioner is not merely an implementing agency or contractor, but also the owner of the land on which the slum rehabilitation scheme is being implemented. This dual role brings with it a greater degree of responsibility and accountability. The burden of compliance is higher, especially when the land has been granted for a public welfare scheme under beneficial terms. In such a situation, 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 record indicates that the AGRC did not extend such a final opportunity to the petitioner before concurring with the CEO's decision to terminate the petitioner's rights. In the respectful view of this Court, this constitutes a procedural lapse - not one that invalidates the SRA's substantive powers or its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew developer and vesting development rights, the SRA shall give the petitioner one final opportunity of hearing (within 4 weeks) strictly for the limited purpose of considering any proposal the petitioner may submit within in two weeks to substantially address the grievances of the slum dwellers (such as a concrete timeline for completion, payment of arrears of transit rent as per calculation of SRA, and any ex gratia mechanism to mitigate past rent losses). If the petitioner makes a proposal that, in SRA's opinion, adequately secures the interests of the slum dwellers, the SRA may consider whether it is still necessary to replace the petitioner. However this shall not be taken as an indefinite reinstatement of the petitioner's rights - it is merely an opportunity to present a plan of action. (iii) If no such proposal is received from the petitioner within two weeks or if upon consideration the SRA finds the proposal unsatisfactory, the SRA is at liberty to proceed with induction of the new developer and all ancillary steps (including transfer of the project land, issuance of fresh LoI, etc.), in accordance with law. All interim orders/ statement made by SRA in this petition shal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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