A A Estates Private Limited Through Its Resolution Professional Mr Harshad Deshpande vs Govind Niwas Cooperative Housing Society
- Court
- Bombay High Court
CNR No : HCBM020128862025
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION (L) NO. 12886 OF 2025
A A Estates Pvt. Ltd., through its Resolution
Professional Mr. Harshad Deshpande
…Petitioner
Versus
Govind Niwas Co-operative Housing Society Ltd. …Respondent
RUTUJA
RAJENDRA
BORSE
Digitally signed by
RUTUJA RAJENDRA
BORSE
Date: 2026.10.26
15:25:36 +0530
Mr. Shadab Jan, a/w Mr. Kartik Irabatti i/b Chinmay Bhojane for the
Petitioner.
Mr. Naushad Engineer, a/w Mr. Rashmin Khandekar, Mr. Y.
Limathwalla, Mr. Amit T., Ms. Fleur D’souza i/b Asahi Legal for the
Respondent.
CORAM: SOMASEKHAR SUNDARESAN, J.
RESERVED ON: OCTOBER 19, 2026
PRONOUNCED ON: OCTOBER 26, 2026
JUDGEMENT:
Context and Factual Background:
1. This is an appeal under Section 37(2)(b) of the Arbitration and
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Conciliation Act, 1996 (“ the Act ”), by which A A Estates Pvt. Ltd. (“ AA
Estates ”), which is undergoing a Corporate Insolvency Resolution Process
(“ CIRP ”) under the Insolvency and Bankruptcy Code, 2016 (“ IBC ”), questions
the very jurisdiction of a Learned Arbitral Tribunal to entertain proceedings
under Section 17 of the Act.
2. AA Estates acting through its Resolution Professional (“ RP ”) questions
the grant of relief to the Respondent, Govind Niwas Co-operative Housing
Society Ltd. (“ Society ”), with which it has a Development Agreement dated
April 16, 2010 (“ DA ”). A Learned Arbitral Tribunal passed an order dated
January 16, 2025 (“ Impugned Order ”), vacating an earlier status quo order
dated May 2, 2018, holding that the Society is at liberty to appoint a new
developer to redevelop its property.
3. AA Estates’ challenge is jurisdictional – it is founded on Section 14 of
the IBC, under which a moratorium prohibits the institution and continuation
1
of proceedings against a corporate debtor once the moratorium is declared;
and also prohibits the recovery of any property by an owner or lessor where
2
the property is in the possession of the corporate debtor .
4. Pursuant to the DA, the Society’s members vacated their flats in 2010
and 2011. Except for excavation and piling, AA Estates did no redevelopment
work between 2011 and 2016. This led to the Society purporting to terminate
1 Section 14(1)(a) of the IBC
2 Section 14(1)(d) of the IBC
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the DA. AA Estates’ stand is that it was in possession of the property and is
covered by the protection under Section 14 of the IBC. The following sequence
of events is noteworthy:
A] On October 10, 2016 , the Society wrote to AA Estates recording
that there was no progress in the redevelopment. It stated that transit
rent had not been paid to its members since January 2016;
B] On October 12, 2017 , the General Body of the Society resolved to
terminate the DA on account of persistent defaults by AA Estates
C] On December 7, 2017 , the Society issued a notice calling upon AA
Estates not to act upon the DA. The Society describes it as the notice of
termination. It states that the DA stood terminated and that all powers
granted to AA Estates stood revoked with immediate effect;
D] On January 10, 2018 , AA Estates replied, contending that the
termination was illegal and bad in law
E] On April 27, 2018 , an order appointing the Learned Sole
Arbitrator to decide the disputes arising under the DA was passed
converting a Section 9 Petition by the Society into an application under
Section 17 of the Act (“ First Interim Application ”);
F] On May 2, 2018 , the Learned Sole Arbitrator disposed of the First
Interim Application in terms of the statements made by both parties to
maintain status quo (“ Status Quo Order ”), which was evidently a pro
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tem measure, without going into merits, as volunteered by the parties.
The Status Quo Order is extracted below:
“1. The Hon’ble High Court has in its Order directed that the Section 9
Application be heard as a Section 17 Application. The Respondent has also
stated that they wish to file a counterclaim and file Section 17 therein.
2. Given the said facts, both parties on instruction of their clients
undertake that status quo is to be maintained by both of them in respect of the
“said property” as described in Exhibit ‘A’ in Arbitration Petition No.468 of
2018. The Claimant’s advocates on instructions state that they have not
created any third party rights after the termination on 7th December, 2017.
The Respondent’s advocate on instructions states that equally they have not
created any third party rights or assigned their rights after the termination on
7th December, 2017.
3. The Section 17 application is disposed of in these terms.”
[Emphasis Supplied]
G] On June 21, 2018 , the Society filed its Statement of Claim,
seeking, among others, relief of a declaration that the DA stood
cancelled and terminated;
H] On August 23, 2018 , AA Estates filed its Counter Claim, seeking,
among others, a declaration setting aside the termination and to grant
specific performance of the DA;
I] On October 4, 2018 , the Learned Sole Arbitrator framed issues.
Issues (i), (ii), (iii), (vi) and (vii) are claimed by AA Estates to be
intertwined with the final reliefs sought by both parties. Issues (viii) to
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(xi) are said to be monetary reliefs for which, AA Estates contends, a
claim ought to have been filed in the CIRP.
J] On November 14, 2019 , the Adjudicating Authority under the IBC
admitted AA Estates to CIRP (“ First CIRP Order ”);
K] On March 9, 2020 , the Section 29A Court refused to extend the
mandate of the Tribunal in view of the moratorium visited by Section 14
of the IBC;
L] On June 12, 2020 , the First CIRP Order was set aside under
Section 12A of the IBC;
M] On September 27, 2021 , the Section 29A Court extended the
mandate of the Learned Arbitral Tribunal for a year i.e. until September
27, 2022 ;
N] On December 6, 2022 , AA Estates was admitted to another CIRP
(“ Second CIRP Order ”), which is still pending. The Society has filed its
claim before the RP;
O] On January 17, 2024 , the Section 29A Court passed an order
extending the mandate of the Learned Arbitral Tribunal by one year
(“ Section 29A Order ”) on the premise that the moratorium did not come
in the way of proceedings initiated by the corporate debtor and it only
affected proceedings against the corporate debtor – the Counter Claim
being proceedings initiated by the corporate debtor, it was held that the
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mandate of the Learned Arbitral Tribunal could be extended for pursuit
of the Counter Claim;
P] On May 17, 2024 , the Society filed an Interim Application under
Section 17 of the Act (“ Second Interim Application ”) seeking to vacate
the Status Quo Order of May 2, 2018 and to enable appointment of a
new developer;
Q] On September 16, 2024 , AA Estates submitted to the Learned
Arbitral Tribunal that the IBC bars the filing of the Second Interim
Application;
R] On January 16, 2025 , the Learned Sole Arbitrator passed the
Impugned Order allowing the Second Interim Application;
S] On April 24, 2025 , this Section 37 Petition was filed and on April
30, 2025 , the arbitral proceedings were stayed. On July 1, 2025 , the
petition was briefly heard and it was stated by the Society that no
further steps would be taken towards the appointment of a new
developer.
Impugned Order:
5. In the Impugned Order, the Learned Sole Arbitrator framed three
questions: (i) whether the Tribunal could relieve the Society of its statement
3
recorded in the Status Quo Order ; (ii) whether the Second Interim
3 This very issue is also repeated as the fourth issue by the Learned Arbitral Tribunal
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Application could be heard, considering the CIRP and the resultant
moratorium; and (iii) whether the relief could be granted considering Section
14(1)(d) of the IBC.
6. The Learned Sole Arbitrator held that the Learned Arbitral Tribunal had
the power to relieve the Society of the statement recorded in the Status Quo
4
Order . The Learned Arbitral Tribunal held that there was no impediment to
continuing with the proceedings, particularly in view of the findings in the
5 6
Section 29A Order . Section 14(1)(d) of the IBC was held not to be attracted ,
because AA Estates had abandoned the site and was not in physical possession
at the time proximate to the CIRP.
7. It was found that there had been two CIRPs, facts had changed and only
excavation work had been done, indicating that there was no readiness and
willingness to perform the DA, and that the residents had been without homes
7
for six years . The Learned Sole Arbitrator found that the Society need not
remain bound by the Status Quo Order and that it could move on.
Section 29A Order:
8. The reliance by the Learned Arbitral Tribunal on the Section 29A Order
makes it necessary to engage with it. The Society had applied for an extension
4 Paragraphs 13 to 17 of the Impugned Order
5 Paragraph 18 of the Impugned Order
6 Paragraphs 19 to 36 of the Impugned Order
7 Paragraphs 37 to 45 of the Impugned Order
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of the mandate of the Learned Arbitral Tribunal under Section 29A of the Act,
which was allowed on the following line of reasoning:
A] The Learned Arbitral Tribunal had recorded in minutes dated
October 4, 2023 that AA Estates had filed a Counter-Claim, to which the
moratorium would not apply. Evidence in the Claim and Counter-Claim
were to be taken together and that the matter must be proceeded with;
B] The Learned Arbitral Tribunal received a first extension of six
months by consent. After the First CIRP Order, an extension was
refused on March 9, 2020 because of the moratorium. After AA Estates
came out of the First CIRP, the mandate was extended until September
27, 2022. The Second CIRP followed and on October 4, 2023, the
Learned Arbitral Tribunal allowed an application for continuation and
directed the parties to seek an extension;
C] Relying on decisions to the effect that Section 14(1)(a) is intended
to prohibit debt recovery action against the assets of a corporate debtor,
the Section 29A Court extended the mandate by one year holding as
follows:
“Since the counter claim is filed by the Corporate debtor, the Arbitrator
has rightly concluded that the moratorium shall not come in its way, though
the claim of the claimant against the corporate debtor will have to await the
outcome of the proceedings under the Insolvency Bankruptcy Code.
In the wake of the above, I deem it appropriate to extend the mandate
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of the Arbitral Tribunal by a period of one year from today.
Petition is allowed in the aforesaid terms.”
[Emphasis Supplied]
9. This led to the Second Interim Application being filed by the Society.
Paragraph 7 of the Second Interim Application reads thus:
“7. The Claimant states that it is well aware that the Respondent has undergone
CIRP for the second time on 6th December, 2022 and as per section 14 of the
Insolvency and Bankruptcy Code, 2016, the Respondent has been safeguarded by an
implicit moratorium from continuing with any proceedings being initiated or
th
continued but as per the order of the Hon’ble High Court passed on 17 January, 2024
in Commercial Arbitration No. 35451 of 2023, the Arbitration Proceedings has been
reinstated on the basis of the Counter Claim filed by the Respondent. For the sake of
brevity, the Counter-Claim of the Respondent inter alia seeks: (i) a declaration that
termination of the DA is null and void; (ii) seeking specific performance of the DA
and the alleged supplementary DA; (iii) in the alternative, payment of the entire
alleged investment amounts made by the Respondent for redevelopment and (iv)
payment of alleged damages and loss.”
[Emphasis Supplied]
Analysis and Findings:
10. Against this backdrop, I have heard Mr. Shadab Jan, Learned Advocate
for AA Estates, and Mr. Naushad Engineer, assisted by Mr. Rashmin
Khandekar, Learned Advocates for the Society. I have perused the record, the
notes filed by AA Estates, the written submissions filed by the Society and the
judgements placed before me. Due to efflux of time since the matter was last
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heard, with the consent of the parties, the matter was fixed for a short
refresher hearing on October 19, 2026.
11. The core issue cutting across the points for determination is whether the
Learned Arbitral Tribunal had jurisdiction to consider the Second Interim
Application and pass the Impugned Order.
12. In a nutshell, the contention of AA Estates is that the Second Interim
Application was filed on May 17, 2024, when the CIRP was admittedly
pending. The moratorium under Section 14 of the IBC was in force. AA
Estates would submit that the reliefs sought in the Second Interim Application
are in aid of the reliefs sought in the Statement of Claim, and therefore, the
continuation of proceedings against AA Estates is explicitly prohibited under
8
Section 14(1)(a) of the IBC. Placing reliance on Alchemist , it is contended
that the bar in Section 14(1)(a) being absolute, a step taken in breach is non est
and void ab initio , necessitating intervention of the Section 37 Court.
13. That apart, the contention is that the only forum with jurisdiction to
examine any facet of the matter was the Adjudicating Authority under the IBC
by virtue of an ouster provision in Section 63 of the IBC and the positive
jurisdictional provision in Section 60(5)(c) of the IBC.
14. In sharp contrast, the Society would contend that Section 14(1)(a) of the
IBC only prohibits proceedings against the corporate debtor and not
proceedings by the corporate debtor. The undertaking of the Society resulting
8 Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan (P) Ltd., (2018) 16 SCC 94.
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in the Status Quo Order is a protection given to AA Estates in aid of the
Counter Claim. The Second Interim Application only sought to be relieved of
that statement in the course of pursuit of the Counter Claim. Therefore,
nothing in the bar set out in Section 14(1)(a) was attracted. The Section 29A
Order, not having been challenged, has attained finality on the ability to
continue with the Counter Claim. That apart, the termination of the DA
preceded both the triggers of the moratorium under the two CIRPs, and
9
therefore, in reliance on the law declared in Kher Nagar , it is submitted that a
terminated DA cannot constitute an asset of AA Estates for purposes of
Section 14(1)(d) of the IBC.
10
15. Relying on Tata Consultancy , the Society would submit that as a
matter of declared law, Section 60(5)(c) would have no role to play as an all-
consuming jurisdiction to deal with anything where a corporate debtor
undergoing CIRP is involved.
Points for Determination:
16. Having heard the parties and having examined the record with their
assistance, the following points arise for determination:
A] Whether the Learned Sole Arbitrator had jurisdiction to pass the
9
A.A. Estates (P) Ltd. v. Kher Nagar Sukhsadan Co-operative Housing Society Ltd., (2026)
263 Comp Cas 417 : 2025 SCC OnLine SC 2579.
10 Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain, Resolution Professional, SK
Wheels (P) Ltd., (2022) 2 SCC 583.
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Impugned Order modifying the Status Quo Order, with the CIRP of AA
Estates admittedly being pending. Put differently, whether the Second
Interim Application and the proceedings initiated by it could at all have
been filed and continued during the CIRP, having regard to: (i) Section
14(1)(a) of the IBC; Section 14(1)(d) of the IBC; and (ii) the pending
Counter Claim filed by AA Estates;
B] Whether the only forum with jurisdiction was the Adjudicating
Authority under the IBC, particularly in view of Section 60(5)(c) read
with Section 63 of the IBC; and
C] Whether the Impugned Order misreads the Section 29A Order
and whether the mischaracterisation renders the Impugned Order
invalid and liable to be set aside.
Statutory and Contractual Provisions:
17. At the threshold, the provisions of Section 14(1), Section 60(5)(c) and
Section 63 of the IBC must be noted. They are extracted below:
Section 14(1) of IBC:
“14. Moratorium
(1) Subject to provisions of sub-sections (2), (2A) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare moratorium
for prohibiting all of the following, namely—
(a) the institution of suits or continuation of pending suits or proceedings against
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the corporate debtor including execution of any judgment, decree or order in any court
of law, tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor
any of its assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by the
corporate debtor in respect of its property including any action under the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (54 of 2002);
(d) the recovery of any property by an owner or lessor where such property is
occupied by or in the possession of the corporate debtor.”
[Emphasis Supplied]
Section 60(5)(c) of IBC:
“Section 60 - Adjudicating Authority for corporate persons
(5) Notwithstanding anything to the contrary contained in any other law for the
time being in force, the National Company Law Tribunal shall have jurisdiction to
entertain or dispose of—
(c) any question of priorities or any question of law or facts, arising out of
or in relation to the insolvency resolution or liquidation proceedings of the
corporate debtor or corporate person under this Code.”
[Emphasis Supplied]
Section 63 of IBC:
“63. Civil court not to have jurisdiction. –
No civil court or authority shall have jurisdiction to entertain any suit or proceedings
in respect of any matter on which National Company Law Tribunal or the National
Company Law Appellate Tribunal has jurisdiction under this Code.”
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[Emphasis Supplied]
18. A plain reading of the foregoing would indicate that the moratorium
imposed under Section 14 of the IBC is unequivocal and absolute. Under
Section 14(1)(a) of the IBC, the institution and continuation of proceedings
against the corporate debtor is prohibited while under Section 14(1)(d), the
recovery of any property in the possession of the corporate debtor, by the
owner, is prohibited.
19. Under Section 60(5)(c) of the IBC, the Adjudicating Authority has been
positively conferred with jurisdiction to answer all questions of law relating to
the CIRP while Section 63 makes provision for ouster of jurisdiction of all civil
courts and authorities where the Adjudicating Authority has jurisdiction under
the IBC.
20. Having noticed the statutory provisions, it would be fruitful to examine
the provisions of the DA to get a sense of what they entailed for AA Estates.
Clauses 36, 38 and 43 of the DA are extracted below:
“36. The consideration of the Developer for agreeing to construct the new building
and their Agreement to incur the cost and expenditure in relation thereto in the right to
develop and construct and retain and sell and appropriate sell proceed of the balance
area remaining after accommodating Society and the members herein as per the terms
and conditions of these presents.”
[Emphasis Supplied]
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“38. In consideration of the Developer having agreed to carry out, execute and
complete the said construction work free of cost, Society and the members herein
grants to the Developer irrevocable development rights, permission and authority to
carry out the work of construction hereby envisaged by using balance FSI and TDR as
permissible and approved by MCGM and to allot the said area available for sell,
reaming after providing permanent alternate accommodation to Society and the
Members herein that the society and its members agree and undertake to admit the
proposed new flat purchasers/allottees as the member of the society after receiving
letter of intimation from the Developer herein. The Developer is authorized to enter
into Agreement/ with the proposed buyers of the premises hereby envisaged. It is
expressly clarified that such right of Developer to allot the flats in the additional
construction thus proposed on the said plot of land shall also include right to mortgage
and/or give consent for mortgaging, creating lien and dispose of any of such premises
in favour of any financial Institution/s as the Developer in his absolute discretion may
deem fit. However the land shall not be mortgaged to any financial institution.”
[Emphasis Supplied]
“43. It is agreed, declared and confirmed that on execution of this Agreement
Society and the Members herein shall put the Developer in possession of the said plot
of land and premises only after developer shall get the building plans duly approved
and sanctioned and obtain IOD in respect of the re-development of the said property
at their own costs, charges and expenses to enable him to carry out, execute and
complete the construction work hereby contemplated in accordance with the terms
and conditions contained herein.”
[Emphasis Supplied]
21. These provisions document the consideration and the reciprocal
promises of the parties. Under the DA, AA Estates agreed to redevelop the
property of the Society at no further cost to the Society’s members. In return,
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AA Estates received the right to develop, construct, retain and sell the
redeveloped area after accommodating the Society and its members at its will.
AA Estates obtained irrevocable development rights, permission and authority
to build using balance Floor Space Index and Transferable Development
Rights, which it may allot and sell to third parties for sale, after providing
permanent alternate accommodation to the Society’s members. Such premises
to be created may be mortgaged but not the land belonging to the Society.
Under Clause 43, possession was to be put in the hands of AA Estates only
after it got the building plans duly approved and sanctioned and obtained the
IOD for the redevelopment, at its own costs, charges and expenses.
Section 14 of the IBC and its Implications:
22. Whether such rights obtained by AA Estates constitute an asset of the
corporate debtor or whether the possession by AA Estates of the Society’s
property can be taken back by the Society without falling foul of Section 14(1)
(d) of the IBC is a question that arises. That apart, quite simply, whether the
Second Interim Application could have at all been pursued without falling foul
of Section 14(1)(a) of the IBC also must be answered.
23. The law declared in Alchemist is clear. The Supreme Court ( R.F.
Nariman and Sanjay Kishan Kaul, JJ. ) held way back in October 2017 that
when an insolvency petition was admitted, the moratorium under Section 14
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took effect. Arbitration was initiated after that event and an arbitrator came to
be appointed. The moratorium under Section 14(1)(a) interdicts the
institution or continuation of pending suits or proceedings against corporate
debtors, and therefore proceedings instituted after the moratorium are non est
in law. Paragraphs 4 and 5, on which Mr. Jan relies, read thus:
“4. The mandate of the new Insolvency Code is that the moment an insolvency
petition is admitted, the moratorium that comes into effect under Section 14(1)(a)
expressly interdicts institution or continuation of pending suits or proceedings against
corporate debtors.
5. This being the case, we are surprised that an arbitration proceeding has been
purported to be started after the imposition of the said moratorium and appeals under
Section 37 of the Arbitration Act are being entertained. Therefore, we set aside the
order of the District Judge dated 6-7-2017 and further state that the effect of Section
14(1)(a) is that the arbitration that has been instituted after the aforesaid moratorium
is non est in law.”
[Emphasis Supplied]
24. There can be no quarrel with the aforesaid proposition. However, the
jurisdictional facts in the case in hand are a bit more nuanced. In the instant
case, when the arbitration commenced, no CIRP was underway. However, the
CIRP indeed commenced later and indeed the first extension of mandate
sought under Section 29A had also been repelled by reason of the CIRP having
commenced. The Section 29A Order came to be passed on the premise that
the Counter Claim was capable of legitimate pursuit by AA Estates, which was
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happy with being able to pursue the Counter Claim even while the Society’s
Statement of Claim remained barred. The Section 29A Order was not
challenged by either party. In the course of adjudication of the Counter Claim,
the Impugned Order was passed.
25. At this juncture it is worth noting that the Learned Arbitral Tribunal
stated that the pursuit of both the Statement of Claim and the Counter Claim
had been approved in the Section 29A Order. This is erroneous. The
Impugned Order characterises the Section 29A Order twice (Paragraph 7 and
Paragraph 18) as having permitted the pursuit of both the Society’s Statement
of Claim and AA Estates’ Counter Claim. This appears to have been driven by
the Society’s contention to that effect (as recorded in Para 10(i) of the
Impugned Order).
26. These characterisations, whether by the Society or by the Learned
Arbitral Tribunal, are clearly erroneous. An independent reading of the
Section 29A Order would indicate that the Counter Claim was permitted to be
pursued as being proceedings not filed against the corporate debtor. Whether
this error is fatal to the jurisdiction of the Learned Arbitral Tribunal is what I
have to consider in exercise of jurisdiction under Section 37 of the Act.
27. It is also noteworthy that the Section 29A Order has attained finality
without challenge. Therefore, the Learned Arbitral Tribunal had the
jurisdiction to hear the parties. It is not for this Court, with jurisdiction under
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Section 37 of the Act to second-guess the declarations made by a coordinate
Bench in the Section 29A Order, and that too when AA Estates did not
challenge it. When this scope of jurisdiction was available to the Learned
Arbitral Tribunal, the necessary corollary would be that even while being
restricted to consideration of the Counter Claim, what appropriate
interlocutory measures should continue, would be a field available to the
Learned Arbitral Tribunal.
28. On the premise that Section 14(1)(a) of the IBC interdicts pursuit of
proceedings against the corporate debtor and not proceedings initiated by the
corporate debtor, it would be difficult to hold that the Learned Arbitral
Tribunal was totally devoid of jurisdiction when it had clearly been declared
that the Counter Claim could be pursued. Alchemist is not a declaration of the
law on a situation where a claim by the corporate debtor was being pursued –
by all accounts from the order, it appears it was purely a case of making a
claim against the corporate debtor and harassment of the resolution
professional with criminal prosecution, which the Supreme Court was pleased
to quash.
29. It would also be difficult to attribute the Second Interim Application to
just the Statement of Claim and not to the Counter Claim. Mr. Jan’s
submission that the bundle of facts underlying the Claim and the Counter
Claim being interlinked is indeed appealing and true. However, by no stretch
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is that logic being used to pursue the Claim against AA Estates. Mr. Jan would
submit that continuing the Counter Claim without adjudicating the issues in
the Claim is impractical and impossible. This too is true, and yet, even if the
Counter Claim is permitted to be proceeded with (while holding up the Claim),
it can never follow that the adjudication could lead to any new liability being
imposed on the corporate debtor.
30. I am not inclined to take a view that Section 14(1)(a) of the IBC must be
read to mean that a claim by the corporate debtor should be barred if it were a
counter to a claim against the corporate debtor. Neither side has indicated
any authority differentiating between claims made by the corporate debtor in
this manner. It would be unreasonable to make this distinction in the absence
of a legislative stipulation.
31. The principles underlying the relevance of Section 14 have been well
11
summarised by the Supreme Court in Mohanraj in Paragraphs 29 to 32 to
clearly indicate that the object of Section 14 is to prevent depletion of the
corporate debtor’s assets and keep it running as a going concern (Paragraph
30). Section 14(1)(a) deals with monetary liabilities and Section 14(1)(b) with
assets. Together they “ shield the corporate debtor from pecuniary attacks
against it ” (Paragraph 32). The test is the impact on the corporate debtor’s
estate. A proceeding that can result in payment by the corporate debtor falls
within the bar (Paragraph 31).
11 P. Mohanraj & Ors. v. Shah Brothers Ispat (P) Ltd., (2021) 6 SCC 258.
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32. A counter claim by the corporate debtor if allowed, would add to its
estate rather than depleting it. A counter claim by the corporate debtor, if
disallowed, would have no pecuniary attack on the estate. Indeed, one could
argue that a cause of action is an asset and disallowing it could lead to a
depletion of the cause of action and thereby a firm adverse outcome in the
counter claim would erode the assets, but this would need a legislative
stipulation rather than to let Courts make such stipulation, and that too in the
light of the law already declared. Moreover, at this juncture, it would be
appropriate to consider the articulation by the Supreme Court about
terminated development agreements and that too in the case of none other
than AA Estates.
Section 60(6) of IBC and its Implications:
33. There is one other element to be borne in mind. Section 60(6) of the
IBC provides as follows:
(6) Notwithstanding anything contained in the Limitation Act, 1963 or in any
other law for the time being in force, in computing the period of limitation specified
for any suit or application by or against a corporate debtor for which an order of
moratorium has been made under this Part, the period during which such moratorium
is in place shall be excluded.
[Emphasis Supplied]
34. Mr. Jan would submit that the aforesaid provision is a pointer to how
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even the Counter Claim is indeed inextricably linked to the Claim and both are
barred. He would submit that if the Counter Claim could proceed without the
Claim, there would be no reason to provide for the suspension of limitation in
respect of claims made by the corporate debtor. While this is attractive at first
blush, I am not persuaded to take a view that the expression “ by or against a
corporate debtor ” positively used in Section 60(6) of the IBC can be used to
judicially insert the words “ by or ” into the expression “ suits or proceedings
against the corporate debtor ” used in Section 14(1)(a) of the IBC.
35. This view is somewhat fortified by the observations made by the
Supreme Court ( K.M. Joseph and Hrishikesh Roy, JJ. ) in New Delhi
12
Municipal Council when it dealt with a corporate debtor filing an application
under Section 11 of the Act when a moratorium was pending. The Supreme
Court held that the RP would conduct proceedings in all matters pursued by
the corporate debtor as he should and what is “tabooed” is only proceedings
initiated against the corporate debtor. The reason for suspending limitation
period is to adjust for the management of the corporate debtor being
displaced, the Supreme Court ruled, noting that it is not impossible to
contemplate that the RP may end up not doing this timely. Therefore, the
Supreme Court ruled, holding that the wisdom of the lawmaker cannot be
questioned. The following extracts are noteworthy:
12 New Delhi Municipal Council v. Minosha India Ltd., (2022) 8 SCC 384.
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“31. Under the IBC, by virtue of the order admitting the application, be it under
Sections 7, 9 or 10, and imposing moratorium, proceedings as are contemplated in
Section 14 would be tabooed. This undoubtedly does not include an application under
Section 11(6) of the 1996 Act by the corporate debtor or for that matter, any other
proceeding by the corporate debtor against another party. At least there is no express
exclusion of the jurisdiction of the Court or authorities to entertain any such
proceeding at the hands of the corporate debtor.
[…] However, we must not be oblivious to the other provisions as well. Under
Section 17, the management of the affairs of the corporate debtor is taken over by the
interim resolution professional. […] Therefore, on the one hand, an application under
Sections 7, 9 or 10, does bring in a period which is intended to bring a corporate
debtor back to life if possible, “a period of calm”, in the words of the respondent. But
this is a period during which the management of the corporate debtor is displaced,
ironically, a period of turbulent churning. While it may be true that proceedings by the
corporate debtor through the resolution professional are contemplated, it is not
impossible to contemplate that the resolution professional for whatever reason it may
be, does not discharge his duties and conduct proceedings in all matters as he should.
We are noting this as this can be the rationale for the law giver excluding the period
of limitation in regard to suits or applications at the instance of the corporate debtor
under Section 60(6).
34. In other words, notwithstanding the period of limitation under the Limitation
Act, the law giver has thought it fit to provide that in respect of a corporate debtor if
there has been an order of moratorium made in Part II, the period during which such
moratorium was in place shall be excluded. “For which an order of moratorium”
cannot bear the interpretation which is sought to be placed by the appellant. The
interpretation placed by the appellant is clearly against the plain meaning of the words
which have been used. We have already undertaken the task of understanding the
purport of the Code and the context in which Section 60(6) has been put in place. This
Court cannot possibly sit in judgment over the wisdom of the law giver. The period of
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limitation is provided under the Limitation Act. The law giver has contemplated that
when a moratorium has been put in place, the said period must be excluded. We
cannot overlook also the employment of words “any suit or application”. This is apart,
no doubt, from the words “by a corporate debtor”. Interpreting the statute in the
manner which the appellant seeks would result in our denying the benefit of extending
the period of limitation to the corporate debtor, a result, which we think, would not be
warranted by the clear words used in the statute.”
[Emphasis Supplied]
36. While this may not directly address the nuance pursued by Mr. Jan,
New Delhi Municipal Council clearly points to the fact that only proceedings
against the corporate debtor are barred. The suspension of limitation even for
proceedings initiated by the corporate debtor is related to adjusting for
displacement of the management and nothing else. If the intention of the
legislature was to also bar proceedings that may be pursued by the corporate
debtor as a counter claim to claims against the corporate debtor, the
legislature could have used the same formulation of “by or against” in Section
14(1)(a) of the IBC, in much the same manner it used it in Section 60(6) of the
IBC. I am not inclined to read into Section 14(1)(a) a bar on prosecution of
proceedings that may be pursued by the corporate debtor, in reliance on
Section 60(6) of the IBC. Such an approach can have far-reaching and
unintended repercussions, and if at all this element will need a legislative
amendment and not a judicial expansion in interpretation.
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Kher Nagar and Implications:
37. In Kher Nagar , the Supreme Court ( J.B. Pardiwala and R. Mahadevan,
JJ. ) dealt with an appeal by AA Estates under the RP’s watch, where AA
Estates had executed a development agreement in 2005 with supplemental
agreements in 2005 and later in 2014. The society involved terminated them
for alleged defaults by a resolution of June 2019 and notices sent in December
2019 and November 2021. The very same CIRP proceedings were involved –
the first one between November 14, 2019 and June 12, 2020 and the second
one on December 6, 2022. The society entered into a fresh development
agreement with another developer on December 10, 2023 and when its
agreement was not being recognised by the municipal and planning
authorities, it filed a writ petition seeking a mandamus to process the
applications made pursuant to the new development agreement, which was
allowed by the High Court.
38. While, purely as a technical matter, there was no specific prayer sought
against AA Estates or the RP (it was a writ petition aimed at statutory action
being triggered), the adjudication of the writ petition had to squarely deal with
the interests of the estate of AA Estates. Allowing the authorities to process
applications under the new development agreement would necessarily mean
holding that the development was not an asset of the corporate debtor and
adjudication of the writ petition in this manner would necessarily mean AA
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Estates had to be heard – in fact, it was AA Estates that was the appellant in
the Supreme Court.
39. On Section 14 of the IBC, the Supreme Court held that only property
forming part of the corporate debtor’s estate on the insolvency
commencement date is protected. Mere expectant, contingent or
uncrystallised contractual rights (such as those flowing from a development
agreement that had been terminated before commencement of CIRP) are not
“assets” forming part of the estate of the corporate debtor. Indeed, the
Supreme Court held that the provisions of the development agreement have to
be considered to see if their terms convey any interest in the land.
40. The following extracts are noteworthy:
“16.2. 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 Insolvency and Bankruptcy Code 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.
16.6. Similarly, in Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain,
Resolution Professional, S.K. Wheels P. Ltd., this court held that the resolution
professional cannot compel continuation of a contract that was validly terminated
prior to initiation of the corporate insolvency resolution process. Once a contract
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stands lawfully terminated, it ceases to exist and cannot be treated as an “asset” or
“property” of the corporate debtor. The moratorium under section 14 does not have
the effect of reviving or re-creating contractual rights that have been extinguished
before insolvency.
16.7. As already stated, in the present case, it is evident that the development
agreement dated October 16, 2005 and the supplementary agreements dated
December 23, 2005 and April 9, 2014 stood terminated by respondent No. 1-Society
on account of persistent default and failure of the developer to commence or complete
the project. The termination was duly communicated through letters dated June 9,
2019, December 2, 2019 and November 6, 2021—each preceding the initiation of the
second corporate insolvency resolution process on December 6, 2022. No subsisting
challenge to such termination was pending when the corporate insolvency resolution
process commenced. Upon such termination, the corporate debtor was left, at best,
with a claim for damages, which is a mere unsecured monetary claim and not a
proprietary right capable of protection under section 14.
16.9. The record further reveals that possession of the property at all times remained
with respondent No. 1-Society. No actual, constructive, or juridical possession was
ever transferred to appellant No. 1. The developer never commenced demolition,
construction, or payment of rent and compensation as required under the agreement.
In absence of possession or any incident of ownership, section 14(1)(d) has no
application.
16.10. Reliance on Victory Iron Works Ltd. v. Jitendra Lohia is misconceived and
inapplicable to the present case. In that case, the corporate debtor had a demonstrable
proprietary and financial interest in the project property, having advanced funds and
obtained development rights. Whereas, the present case is materially different; the
agreements here were purely executory, conditional upon performance, and never
resulted in any proprietary or possessory right being created in favour of the
developer.
16.11. It is well settled that the moratorium under section 14 does not revive
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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.”
[Emphasis Supplied]
41. In the instant case, the possession was to move only after plans were
sanctioned. The record does not show any plans being sanctioned and the
Learned Arbitral Tribunal has recorded that even a Commencement
Certificate had not been obtained. Therefore, when seen through the lens of
Clause 43 of the DA (extracted above), arguably the milestones necessary for
possession had not been met.
42. Mr. Jan submits that in Kher Nagar there had been no subsisting
challenge to the termination of the development agreement when the CIRP
commenced. The Supreme Court also discussed how a writ petition directed
against public authorities would not encroach upon Section 14 of the IBC.
These distinctions are relied upon to indicate that the ruling can be
distinguished.
43. However, to my mind, these are distinctions without a difference,
simply because at the heart of the law declared by the Supreme Court is
whether a terminated development agreement could lead to a substitute
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developer being appointed. In fact, Kher Nagar notices that AA Estates
invoked arbitration in October 2021. If AA Estates had not been aggrieved by
the termination, there would have been no case for the litigation even for
damages. It was AA Estates that filed the appeal in the Supreme Court.
44. In the matter in hand, it was the Society that took the initiative to
litigate with a view to getting such a declaration. AA Estates followed suit with
the Counter Claim seeking such a declaration in the converse i.e. that the DA
had not been validly terminated. AA Estates also sought an alternative prayer
for damages. These constituted the Counter Claim. The pursuit of the
Counter Claim not being barred, as explained above, and the Learned Arbitral
Tribunal being within jurisdiction to decide what the appropriate interim
relief would be, it cannot be held that the Learned Arbitral Tribunal was
without jurisdiction or that it fell foul of Section 14(1)(a) of the IBC.
45. Kher Nagar is also a pointer (as extracted above) to how the terminated
DA is not an asset of AA Estates. Indeed, in this case, the Status Quo Order
had granted protection to AA Estates. A plain reading of the Status Quo
Order would show that it was purely a pro tem measure volunteered by the
parties and not a reasoned judgement of an interlocutory measure. That pro
tem arrangement without going into merits was arrived at voluntarily by the
parties when the Claim and the Counter Claim were both in play. The First
Interim Application was disposed of by the Status Quo Order. When the
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position changed with only the Counter Claim being capable of moving
forward, it was open to the parties to engage with the Learned Arbitral
Tribunal about what appropriate interlocutory measure would best preserve
the subject matter of the arbitration agreement under Section 17 of the Act.
This is the subject matter of adjudication under the Second Interim
Application, which is referable to the Counter Claim. Therefore, it was open to
the Learned Arbitral Tribunal to revisit the interlocutory arrangement and
make appropriate arrangements.
46. For completeness, I must say that the interlocutory arrangements may
well have also been referable to the Claim as well but that would not mean that
the Counter Claim must proceed without any interlocutory arrangement. An
interlocutory arrangement that would otherwise be appropriate for the
Counter Claim that can run its course without being prohibited by Section
14(1)(a) of the IBC, would not cease to be appropriate merely because of the
Claim having become prohibited by that provision.
Section 60(5)(c) and Section 63 of IBC:
47. This takes me to the next issue as to whether the right forum to deal
with this issue is the Adjudicating Authority under Section 60(5)(c) read with
Section 63 of the IBC.
48. On this facet of the law too, the Supreme Court has provided guidance in
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Kher Nagar since this was clearly raised as an issue by AA Estates. In
Paragraphs 15.1 to 15.14, the Supreme Court considered the limits of the
jurisdiction of the Adjudicating Authority under Section 60(5)(c) of the IBC,
13
relying on Gujarat Urja and Tata Consultancy . The power to restrain or set
aside a termination is confined to cases where the termination is solely on
account of insolvency, such as under an ipso facto clause, and where the
termination would result in the corporate death of the corporate debtor by
depriving it of a sole or central contract essential to the success of the CIRP.
The jurisdiction cannot be invoked where the termination arises from grounds
unrelated to the insolvency of the corporate debtor.
49. Applying these principles, in Kher Nagar the Supreme Court held that
the termination of the development agreement was occasioned by persistent
non-performance and not by insolvency, the defaults having occurred well
before the CIRP. The development agreement was not the sole or life-
sustaining contract of AA Estates, which was engaged in multiple projects.
The termination was held to be valid, lawful and effective, and the
Adjudicating Authority was held to lack jurisdiction under Section 60(5)(c) of
the IBC to interfere with it (Paragraphs 15.7 to 15.14).
50. The jurisdiction under Section 60(5)(c) of the IBC has been held to be a
limited residuary jurisdiction. To my mind this would cover issues arising in
the course of implementing the CIRP but cannot be expanded to mean that
13 Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, [(2021) 7 SCC 209]
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any and every cause of action including those pursued by the corporate debtor
against the world at large would have to be pursued before the Adjudicating
Authority under the IBC. In Tata Consultancy , the Supreme Court ( Dr. D.Y.
Chandrachud and A.S. Bopanna, JJ .) was presented with the exercise of
jurisdiction by the Adjudicating Authority under the IBC in connection with
termination of a contract with the corporate debtor, effected by a
counterparty. Two concurrent decisions, in the first instance and in appeal
held that termination of a contract by a counterparty can be stayed by the
Adjudicating Authority under the IBC.
51. The Supreme Court held that Section 60(5)(c) is a residuary jurisdiction
over any question of law or fact arising out of or in relation to the insolvency
resolution of the corporate debtor. While an arbitration clause does not oust
this jurisdiction (Paragraph 21), it was held that such residuary jurisdiction
extended only to disputes that arise solely from or relate to the insolvency of
the corporate debtor. The nexus with the insolvency must exist as a necessary
jurisdictional fact, without which the jurisdiction cannot be invoked,
particularly if the termination was based on grounds unrelated to the
insolvency (Paragraph 26).
52. On facts, the termination had followed alleged deficiency in service that
the counterparty had communicated before commencement of the CIRP. The
Supreme Court held that the jurisdiction under the IBC was not attracted and
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dismissed the proceedings for want of jurisdiction. The Supreme Court held
that a party could be restrained from terminating a contract only if the
contract was central to the success of the CIRP. The following extracts are
noteworthy:
“27. It is evident that the appellant had time and again informed the Corporate
Debtor that its services were deficient, and it was falling foul of its contractual
obligations. There is nothing to indicate that the termination of the Facilities
Agreement was motivated by the insolvency of the Corporate Debtor. The trajectory
of events makes it clear that the alleged breaches noted in the termination notice dated
10 June 2019 were not a smokescreen to terminate the agreement because of the
insolvency of the Corporate Debtor. Thus, we are of the view that the NCLT does not
have any residuary jurisdiction to entertain the present contractual dispute which has
arisen dehors the insolvency of the Corporate Debtor. In the absence of jurisdiction
over the dispute, the NCLT could not have imposed an ad-interim stay on the
termination notice. The NCLAT has incorrectly upheld the interim order of the
NCLT.
28. While in the present case, the second issue formulated by this Court has no
bearing, we would like to issue a note of caution to the NCLT and NCLAT regarding
interference with a party’s contractual right to terminate a contract. Even if the
contractual dispute arises in relation to the insolvency, a party can be restrained from
terminating the contract only if it is central to the success of the CIRP. Crucially, the
termination of the contract should result in the corporate death of the Corporate
Debtor.”
[Emphasis Supplied]
53. Applying the aforesaid principles to the facts of this case, it is clear that
here too, the notices of default from the Society preceded the CIRP. The
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issuance of the termination notice was indeed prior to the CIRP. The
termination was not connected to the CIRP and the deficiencies alleged did
not arise because of the insolvency but had arisen well prior to the CIRP.
Applying the very same principles articulated above, I have no hesitation in
rejecting the submission that Section 60(5)(c) of the IBC is the jurisdictional
provision. The ouster in Section 63 would arise only if jurisdiction under
Section 60(5)(c) is found to exist. Therefore, on this count too, I have to hold
against the contention made on behalf of AA Estates.
54. I must mention that Mr. Engineer would press into service multiple
judgements including Ghatalia , Tagore Nagar and Ranjan Garg , all passed in
the course of fashioning interlocutory measures, and indeed on the point of
counter claims by the corporate debtor not being barred. Some of these have
also been noticed in the Impugned Order and in the Section 29A Order.
However, for the reasons already expressed by me on the basis of the case law
referred to above, and bearing in mind the core ground pressed by AA Estates
being that of jurisdiction, I do not find it necessary to lengthen this judgement
further by dealing with every judgement sought to be pressed into service in
defence of the Impugned Order.
55. Finally, I must also mention that Mr. Jan has responsibly pressed only
the jurisdictional issue for my consideration. Therefore, purely for
completeness, I must mention that I am not getting into the merits of the
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factual position as dealt with in the Impugned Order. Suffice it to say, the
Learned Arbitral Tribunal is the best judge of what is an appropriate
interlocutory measure for the best preservation of the subject matter of the
arbitration agreement. It is not for the Section 37 Court to substitute the
Learned Arbitral Tribunal’s view with its own view merely because another
view can be taken. So long as the views expressed by the Learned Arbitral
Tribunal on facts and on the protective measures adopted, are reasonable, the
Section 37 Court although being an appellate court cannot be interventionist
merely because the power to interfere exists.
Summary of Conclusions:
56. Therefore, I summarise my conclusions thus:
A] Section 14(1)(a) of the IBC interdicts the institution and
continuation of proceedings against the corporate debtor. It does not
bar proceedings initiated by the corporate debtor, including a Counter
Claim;
B] Alchemist does not address a claim pursued by the corporate
debtor. Mohanraj and New Delhi Municipal Council indicate that only
proceedings against the corporate debtor are tabooed. The words “ by
or ” used in Section 60(6) of the IBC cannot be imported by Courts into
Section 14(1)(a) of the IBC;
C] The Section 29A Order has attained finality. The Impugned
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Order erroneously states that the Section 29A Order permitted pursuit
of both the Claim and the Counter Claim. However, that error is not
fatal, since the Second Interim Application is referable to the Counter
Claim, which could be pursued;
D] The terminated DA is not an asset of AA Estates. The termination
preceded both CIRPs. In light of Kher Nagar , Section 14(1)(d) of the
IBC is not attracted;
E] The Status Quo Order was a pro tem arrangement volunteered by
the parties. It was open to the Learned Arbitral Tribunal to revisit it in
aid of the best-balanced preservation measure appropriate pending
adjudication of the Counter Claim;
F] Section 60(5)(c) of the IBC confers a limited residuary
jurisdiction. As held in Tata Consultancy and Kher Nagar , it is not
attracted where the termination is unrelated to insolvency. The
termination here preceded the CIRP. Therefore, the ouster in Section
63 of the IBC does not arise;
G] The Section 37 Court must not interfere with reasonable views of
the Learned Arbitral Tribunal on interlocutory measures. However,
since only the jurisdictional issue was pressed and has been rejected, the
merits on appropriateness of the measures need not be pronounced
upon.
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57. For the aforesaid reasons, the Petition, in my view, deserves to be finally
disposed of without any interference . The stay on the arbitration proceedings
imposed on April 30, 2025 is hereby vacated. The parties are directed to
appear before the Learned Arbitral Tribunal within two weeks of the upload of
this Judgement on the Court’s website. The Learned Arbitral Tribunal shall
give directions on how to proceed further, taking care to fix the next steps in
the proceedings for any date after six weeks from the upload of this Judgement
on the Court’s website.
58. All actions required to be taken pursuant to this order shall be taken
upon receipt of a downloaded copy as available on this Court’s website.
[SOMASEKHAR SUNDARESAN J.]
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