A A Estates Pvt. Ltd. v. Kher Nagar Sukhsadan Co‑operative Housing Society Ltd., 2025 INSC 1366 - S.14 IBC - Moratorium

Insolvency and Bankruptcy Code 2016 - Section 14 - The object of Section 14 is to maintain the corporate debtor’s estate as a going concern and to preserve its assets so as to facilitate resolution. The term “property” under Section 3(27) of the IBC is defined in the widest terms to include money, goods, actionable claims, land and every description of movable or immovable, tangible or intangible property, and extends to deeds and instruments evidencing title or interest therein. However, for the purposes of Section 14, only such property or assets which form part of the corporate debtor’s estate as on the insolvency commencement date are protected. Mere expectant, contingent or uncrystallized contractual rights do not constitute “assets” within the meaning of the Code - the moratorium under Section 14 does not revive terminated contracts or protect rights that have ceased to exist prior to insolvency. The protection is intended to preserve the existing value of the corporate debtor’s estate, not to resurrect lapsed or extinguished interests. Extending moratorium to such non-existent rights would defeat commercial certainty and the sanctity of lawful termination under general law. [Context: Supreme Court held that the Development Agreement and the Supplementary Agreements in this case do not constitute “assets” or “property” of the corporate debtor within the meaning of Section 14 of the IBC, as the same stood terminated prior to initiation of the second CIRP.] (Para 16)

Constitution of India ; IBC - Section 14 - IBC does not oust the constitutional jurisdiction of the High Courts, particularly where intervention is sought against administrative or statutory inaction in the public law domain, provided such intervention does not obstruct or undermine the insolvency process - while Section 14 of the IBC bars the institution or continuation of suits and proceedings during the moratorium, the constitutional jurisdiction of this Court and the High Courts under Articles 32 and 226 cannot be curtailed by statute. (Para 17)

IBC - Section 14 - A defaulting developer cannot invoke the moratorium under Section 14 of the IBC to perpetuate inaction or defeat the legitimate rights of residents. The rights of a developer are purely contingent upon due performance, and no subsisting “asset” or “proprietary right” survives once termination has lawfully occurred. (Para 18.8) A clear distinction must, therefore, be maintained between corporate debtors who have acted bona fide and those who have merely secured development rights in form but never acted in substance. Development rights of a defaulting developer who neither secured possession nor undertook any redevelopment activity cannot be elevated to the status of an “asset” or “property” within the meaning of Section 3(27) of the IBC. (Para 19-20)

Natural Justice - The principles of natural justice act as fundamental safeguards ensuring fairness, equity, and reasonableness in decision making. The twin pillars – nemo judex in causa sua (no one shall be a Judge in their own cause) and audi alteram partem (the right to be heard) – are essential components of the rule of law. However, their application depends upon the context and nature of the proceedings -The principles of natural justice are not rigid rules of universal application; they are flexible, contextual, and aimed at preventing real, not theoretical, injustice. The touchstone is not whether every procedural formality was observed, but whether the party complaining has suffered actual prejudice or denial of a fair opportunity-The principles of natural justice are intended to ensure fairness, not to operate as technical obstacles. They cannot be invoked as empty ritual where no real injustice has occurred.  (Para 18.2-6)

Slum redevelopment - Slum redevelopment projects are not mere commercial ventures but social welfare initiatives aimed at transforming unsafe tenements into dignified homes. The role of a developer in such projects carries a public character; it entails a responsibility to fulfil the collective aspirations of hundreds of families awaiting rehabilitation and cannot be viewed solely through a profit-driven lens - Courts, while dealing with disputes arising from slum redevelopment, must therefore adopt a purposive and welfare-oriented approach, ensuring that the statutory objective of insolvency resolution does not defeat the social purpose of urban renewal. The balance of equities must tilt in favour of the residents who have waited for years for a roof over their heads. The law cannot countenance a situation where insolvency protection becomes an instrument to perpetuate displacement or to defer the promise of dignified housing guaranteed under Articles 19(1)(e) and 21 of the Constitution. (Para 23)