NCLT Mumbai Declines to Adjudicate HDIL–Unity Bank Land Rights Dispute, Vacates Interim Injunction

The Mumbai Bench of the National Company Law Tribunal (NCLT) has ruled that disputes arising out of pre-insolvency contractual arrangements concerning development rights cannot be adjudicated under the Insolvency and Bankruptcy Code, 2016, holding that such matters fall within the domain of civil courts.

Background

HDIL had entered into a Joint Venture Agreement (JVA) in September 2015 with My Palace Mutually Aided Cooperative Society for development of nearly 100 acres of land in Shamsguda, Telangana. Under the agreement, HDIL was entitled to 55% of the sale receivables from the proposed real estate project. In 2018, HDIL assigned these future receivables to its lender (then Punjab and Maharashtra Cooperative Bank, later Unity Small Finance Bank) as security for loan facilities. Following initiation of insolvency proceedings against HDIL, the land-owning society executed fresh development agreements in 2023 with third-party developers. This prompted the Resolution Professional and the bank to approach NCLT seeking declarations recognising HDIL’s subsisting development rights and injunctions restraining any third-party transactions over the land.

Issues: The principal question before the Tribunal was whether contractual development rights and assigned future receivables created under agreements executed prior to CIRP could be treated as insolvency assets and adjudicated under Section 60(5) of the IBC.

Findings

The NCLT held that the Joint Venture Agreement and assignment arrangements were purely contractual in nature and pre-dated the commencement of insolvency proceedings. Disputes concerning their subsistence, enforceability, alleged repudiation, and legal effect required detailed evidence and trial — matters outside the summary jurisdiction of insolvency forums. Relying on the Supreme Court’s decisions in Gujarat Urja Vikas Nigam Ltd v Amit Gupta and Tata Consultancy Services Ltd v Vishal Ghisulal Jain, the Tribunal reiterated that NCLT’s residuary jurisdiction under Section 60(5) extends only to disputes directly arising out of insolvency resolution and cannot be used to resolve independent commercial disputes. The Bench further observed that HDIL never owned the land in question and its entitlement was contingent upon development and sale, neither of which had materialised. As such, no crystallised proprietary right could be treated as part of the insolvency estate.