NCLAT Delhi Rules Unregistered Development Agreement Cannot Defeat CIRP Rights Over Ananta Residency

The New Delhi Bench of the National Company Law Appellate Tribunal on 25 May partly allowed a batch of appeals concerning the Ananta Residency project, holding that Halwasiya Developments Pvt. Ltd. could not claim ownership or exclusive rights under an unregistered Development Agreement executed in 2018.

Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra noted that the project continued to form part of the Corporate Insolvency Resolution Process (CIRP) despite the 2014 mortgage and initiation of insolvency proceedings against the Corporate Debtor. The Bench held:

“Ownership rights of the Corporate Debtor is undisputed and the mere fact that development right as obtained by Development Agreement dated 19.01.2018, the assets cannot go out of the CIRP process.”

The appeals were filed by Financial Creditor Phoenix ARC Pvt. Ltd., CIS Infrastructure LLP, homebuyers' representative Dr. Shravan Kumar Vishnoi, and the Resolution Professional of Andes Town Planners Pvt. Ltd., challenging the common order of the National Company Law Tribunal, Delhi Bench dated 17 December 2024.

Andes Town Planners Pvt. Ltd. (Corporate Debtor) had mortgaged its entire land parcel measuring 73,018.74 sq. mtrs. along with unsold units to Dewan Housing Finance Corporation Ltd. (subsequently Piramal Capital and later assigned to Phoenix ARC) to secure a Rs 90 crore loan.

In 2018, the Corporate Debtor entered into a Development Management Agreement and Power of Attorney with Halwasiya Developments Pvt. Ltd., followed by a Consortium Agreement in 2020, authorising it to complete construction of the Ananta Residency project over part of the land admeasuring 4,623.92 sq. mtrs.

Upon commencement of CIRP in March 2023, the Resolution Professional sought possession of the project and records from Halwasiya. The National Company Law Tribunal rejected the RP's application, allowed Halwasiya to continue construction, and dismissed homebuyers' objections, prompting the present appeals.

Phoenix ARC argued that the Development Agreement was unregistered and executed without lender consent, rendering it unenforceable against the mortgage. CIS Infrastructure LLP, an allottee of 16 units, contended that its rights were ignored and that conversion of the project from residential-cum-commercial to purely commercial was undertaken without consent.

The Resolution Professional submitted that Halwasiya was bound under Section 19 of the Insolvency and Bankruptcy Code to cooperate and provide all records necessary for CIRP, while homebuyers' representatives argued that their vested rights had been disregarded.

Halwasiya Developments Pvt. Ltd. claimed rights under the 2018 agreement, stating it had invested over Rs 32 crore and completed nearly 96% of construction. It conceded it had no ownership rights but asserted entitlement over unsold units, and argued that continuation of construction was necessary to protect stakeholders, with 92% of allottees consenting to conversion into commercial units.

The NCLAT held that the Resolution Professional's application was maintainable under Sections 19(2) and 60(5) of the Insolvency and Bankruptcy Code, as Halwasiya was a person required to assist in CIRP. It observed that the Resolution Professional, while carrying on the Corporate Debtor's business, must interact with all parties having contractual arrangements with the Corporate Debtor.

The Bench also held that Halwasiya could not claim ownership rights over Ananta Residency, as unregistered agreements cannot create any interest in immovable property under the Registration Act. It further noted that although the Consortium Agreement was registered, it did not confer any proprietary interest in favour of Halwasiya.

Moreover, the Tribunal emphasised that completion of construction was necessary to protect homebuyers and stakeholders and permitted Halwasiya to complete the project under the supervision of the Resolution Professional and subject to full disclosure of records. It further held that the mortgage charge over the project continued, as no lender consent or NOC had been obtained.

On the issue of conversion of residential units into commercial units, the Bench declined to adjudicate, noting that the matter was pending before the Allahabad High Court.

Accordingly, the NCLAT partly allowed the appeals, directing Halwasiya to furnish all project-related documents and information to the Resolution Professional and permitting completion of the project under CIRP supervision, while affirming that Ananta Residency remained an asset of the Corporate Debtor.