CASE NAME: Uttar Pradesh Housing and Development Board v. K.S.N. Buildwell Pvt. Ltd. & Anr.
CITATION: Company Appeal (AT) (Ins) No. 1581 of 2023, 820 of 2025, & 926 of 2025
CASE NUMBER: Comp. App. (Nos. 1581 of 2023, 820 of 2025, 926 of 2025
COURT: National Company Law Appellate Tribunal, Principal Bench: New Delhi
DATE OF JUDGMENT: 14th July, 2026
QUORUM: Hon’ble Justice Mohd. Faiz Alam Khan, Member (Judicial) and Hon’ble Mr. Naresh Salecha, Member (Technical)
FACTS
In the present case, in 2006, a plot of 6860.959 sq. meters in Vasundhara, Ghaziabad was allotted to an original allottee by the Uttar Pradesh Housing and Development Board (UPAVP) and then in 2010, the Corporate Debtor (CD), K.S.N. Buildwell Pvt. Ltd. was a joint allottee.
The CD defaulted on the payment of instalments and built five more floors without adhering to the planned building. Hence, UPAVP issued notices for demolition the unauthorized structure on 10th November, 2017. Later this property was sealed on 27th August, 2019. UPAVP also issued an order of confiscation of property prior to commencement of the Corporate Insolvency Resolution Process (CIRP) on 13th May, 2022.
The Resolution Professional then filed an application for de-sealing of the property granted by the Adjudicating Authority by its order dated 17th October, 2023. UPAVP opposed this de-sealing order by filing a CA (AT) (Ins) No. 1581 of 2023. The CD meanwhile had already substantially built 4 buildings, of which 144 flats and 44 shops were allocated to third party buyers. UPAVP submitted a claim of about Rs. Balance Land Value, compounding fees, other charges contributed 139 Crores to the CIRP.
The Committee of Creditors (CoC) having 100% voting share, had submitted a Resolution Plan for approval of the adjudicating authority. The Adjudicating Authority on 27th March, 2025 remitted the Resolution Plan back to the CoC and held that the third-party property (UPAVP land) cannot be part of the resolution plan. The RP and the authorised representative of the home buyers opposed this remand order in CA (AT) (Ins) No. 820 of 2025 and CA (AT) (Ins) No. 926 of 2025 respectively.
ISSUES
- Notwithstanding legal title to the land being held by a statutory development authority, it may be possible to deal with any right arising from a Hire Purchase Agreement entered into by the statutory authority in favour of a Corporate Debtor in the light of a Resolution Plan.
- Whether the Adjudicating Authority was right in ordering the de-sealing of the property on the assumption it was sealed during the CIRP moratorium.
- Was the Adjudicating Authority correct in returning the CoC approved Resolution Plan for an unlawful violation of the statutory authority’s third-party property and an avoidance of public laws?
LEGAL PROVISIONS
- Sections 14, 18, 25, 30(2)(e), and 238 of the Insolvency and Bankruptcy Code, 2016 (IBC).
- By Section 105 of the Transfer of Property Act, 1882.
- Sub Section 28(a) of Uttar Pradesh City Planning and Development Act, 1973.
Cases Referred to:
- Municipal Corporation of Greater Mumbai (MCGM) v. Abhilash Lal and Ors.
- State Bank of India v. Union of India.
- Victory Iron Works Ltd. v. Jitendra Lohia and Anr.
- Greater Noida Industrial Development Authority v. Prabhjit Singh Soni & Anr.
- Embassy Property Developments (P) Ltd. v. State of Karnataka.
ARGUMENTS
APPELLANT
The UPAVP contended that the provisions of the statutory rights under the various special enactments are overriding the provisions of IBC and that matters pertaining to public interest can’t fall within the ambit of the insolvency adjudicatory process. They argued that assets held by a third party (UPAVP) under a contractual agreement will not be considered to be “assets” under Section 18 of the IBC. Moreover, UPAVP claimed that the tenancy rights and the Hire Purchase Agreement came to an end with the non-payment of three successive instalments by the CD before the CIRP, therefore no rights remained for the CD.
RESPONDENT
The RP and the Homebuyers contended that the Hire Purchase Agreement gave the CD valuable possessory, developmental and contractual rights, which amounted to “assets” under Section 18 of the IBC. They pointed out that there was no formal termination of the agreement by UPAVP, as UPAVP had been persistently demanding of the instalments and finally in the CIRP they had recognized the subsistence of the agreement. They also pointed out that nullification of these rights would leave 144 flat buyers and 44 shop buyers with no remedy.
ANALYSIS
The Appellate Tribunal pointed out that the property had been sealed for illegal construction in 2019, which is prior to the beginning of the CIRP in 2022, and the Adjudicating Authority had made an incorrect finding that the property was being sealed during the moratorium period. Thus, the de-sealing order could not survive.
The Tribunal noted that ownership of the land never passed to the CD, but the CD had valuable rights under the Hire Purchase Agreement such as possession, construction, commercial exploitation of the project and induction of the purchasers.
UPAVP submitted that the contract was terminated by implication if the balance consideration and compounding fees were not paid. The Tribunal did not agree. It was of the view that the contract was not terminated by UPAVP and that it had made a financial claim for the balance consideration and compounding fees, as if the contract was continuing.
But the Tribunal noticed issues in the Resolution Plan. The plan misled that the land of the UPAVP belongs to the CD and tried to force the UPAVP to transfer the land to the CD and regularize/compound the illegal constructions without applying the charges. In this regard, the Tribunal held that no construction which is illegal can be validated by the insolvency jurisprudence or around statutory town planning laws.
The Tribunal relied upon the decision of the Supreme Court in Embassy Properties which was decided earlier. “Only the statutory authority under the public law can take the decision for inclusion of illegal constructions in the compounding.
JUDGMENT
The NCLAT (CA (AT) (Ins) No. 1581 of 2023) allowed UPAVP to de-seal the property by setting aside the order of the Adjudicating Authority. The Tribunal dismissed the appeals of the RP and the Homebuyers. The Tribunal found that the Adjudicating Authority had committed the following errors in remanding the Resolution Plan back to the CoC: (1) treating the land as the property of the CD when it was not; and (2) mandating the compensation of illegal structures without compliance with the law.
CONCLUSION
The decision introduces an important dichotomy in the Insolvency and Bankruptcy Code jurisprudence: a Resolution Plan may not be a tool to encroach upon the statutory authority’s legal rights to contractual and developmental rights in third party land, even if the same are valid assets under the IBC. In addition, any insolvency cannot overrule public law or order and cannot order the making of statutory improvements to rectify unauthorised building which contravenes the local town planning controls.
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WRITTEN BY: SHEEN
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Uttar Pradesh Housing and Development Board Vs K.S.N. Buildwell Pvt. Ltd. & Anr.
