The Bombay High Court has clarified a critical intersection between the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA) and the Insolvency and Bankruptcy Code, 2016 (IBC). The Court held that the moratorium imposed under Section 14 of the IBC does not bar the Competent Authority from exercising its statutory duty under Section 11(3) of MOFA to grant deemed conveyance in favour of a co-operative housing society. This judgment reinforces the supremacy of welfare legislation over insolvency proceedings when statutory obligations are involved.
Background & Facts
The Dispute
The Petitioner, Darshan Mandir Co-operative Housing Society Limited, is a co-operative housing society registered under the Maharashtra Co-operative Societies Act, 1960. The Society comprises flat purchasers in a building constructed at Final Plot No. 746, Opp. Soniwadi Banquets, P.G.S. Kanji Swami Marg, Borivali (West), Mumbai. The original owner of the property, M/s. Gautam Builders (India), executed a Development Agreement (DA) with M/s. Darshan Enterprises (Respondent No. 3) on 25 August 1983. Respondent No. 3 constructed the building and sold flats to various purchasers under Agreements for Sale executed under Section 4 of MOFA. The Occupancy Certificate for the building was issued on 3 August 2001.
Key Facts
- Development Agreement: Executed between M/s. Gautam Builders and Respondent No. 3 on 25 August 1983.
- Intimation of Disapproval (IOD): Granted to Respondent No. 3 on 9 November 1985 for construction.
- Occupancy Certificate: Issued on 3 August 2001.
- Society Registration: Petitioner-Society registered on 10 December 1991 under Section 10 of MOFA.
- Conveyance Obligation: Respondent No. 3 failed to execute conveyance in favour of the Society as required under Clause 33 of the MOFA Agreement and Section 11(1) of MOFA.
- Conveyance to Respondent No. 4: Respondent No. 4 (M/s. Vas Infrastructure Ltd) secured conveyance from Respondent Nos. 2 and 3 on 24 September 2007.
- CIRP Initiation: Canara Bank filed an application under Section 7 of IBC against Respondent No. 4, admitted by NCLT on 11 March 2024, appointing an Interim Resolution Professional (IRP) and imposing a moratorium under Section 14 of IBC.
- Application for Deemed Conveyance: Petitioner filed Application No. 87 of 2025 before the Competent Authority seeking deemed conveyance under Section 11(3) of MOFA.
- Impugned Order: Competent Authority rejected the application on 4 September 2025, citing pendency of CIRP against Respondent No. 4 and granted liberty to file a fresh application post-CIRP.
Procedural History
- 15 April 2025: Petitioner filed Application No. 87 of 2025 before the Competent Authority seeking deemed conveyance.
- 11 March 2024: NCLT admitted CIRP against Respondent No. 4 and imposed moratorium under Section 14 of IBC.
- 4 September 2025: Competent Authority rejected Application No. 87 of 2025.
- 22 June 2026: Present Writ Petition allowed by the Bombay High Court.
The Parties' Positions
For the Petitioner:
- The Competent Authority erred in rejecting the application for deemed conveyance.
- Pendency of CIRP against Respondent No. 4 cannot suspend the statutory duty under Section 11(3) of MOFA.
- Respondent No. 4 is not the original promoter and has no semblance of rights in the property.
- MOFA is a welfare legislation, and its objectives cannot be frustrated by Section 14 of IBC.
- The Society is entitled to unilateral deemed conveyance of the property.
For the Respondent (IRP):
- Respondent No. 4 stepped into the shoes of the promoter via conveyance dated 24 September 2007.
- Section 14 of IBC imposes a bar on transfer of property of the corporate debtor.
- The Competent Authority cannot direct conveyance in contravention of Section 14 of IBC.
- Section 238 of IBC gives overriding effect to IBC over MOFA.
- Petitioner has an alternate remedy under Section 60(5) of IBC to seek deletion of the property from CIRP.
- Relied on Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan P. Ltd. & Ors. and Tata Consultancy Services Limited v. SK Wheels Private Limited.
Relief Sought
The Petitioner sought:
- Quashing of the impugned order dated 4 September 2025.
- Directions to the Competent Authority to grant unilateral deemed conveyance of the property in favour of the Society.
The Legal Issue
The central question was whether the moratorium imposed under Section 14 of the IBC bars the Competent Authority from exercising its jurisdiction under Section 11(3) of MOFA to grant deemed conveyance in favour of a co-operative housing society, particularly when the corporate debtor is not the original promoter.
Arguments Presented
For the Petitioner
- Section 11(3) of MOFA imposes a statutory duty on the Competent Authority to grant deemed conveyance upon failure of the promoter to convey title.
- Section 14 of IBC cannot suspend this statutory duty, as MOFA is a welfare legislation aimed at protecting flat purchasers.
- Respondent No. 4 is not the original promoter and has no legitimate claim over the property.
- The moratorium under Section 14 of IBC is intended to preserve assets for creditors, not to defeat statutory obligations.
For the Respondent
- Section 14 of IBC prohibits transfer of assets of the corporate debtor during CIRP.
- Section 238 of IBC gives overriding effect to IBC over inconsistent provisions of other laws, including MOFA.
- The Petitioner has an alternate remedy under Section 60(5) of IBC to seek deletion of the property from CIRP.
- Proceedings for deemed conveyance amount to transfer of property, which is barred under Section 14 of IBC.
The Court's Analysis
The Court undertook a detailed analysis of the interplay between MOFA and IBC, relying heavily on its earlier judgments in Santoshkumar Motilal Bhansali v. Competent Authority and District Deputy Registrar, Co-operative Societies & Ors. and Anudan Properties Private Limited v. Mumbai Metropolitan Region, Slum Rehabilitation Authority.
"The judgment of this court in Anudan Properties Private Limited explains how to deal with conflicts between IBC proceedings and statutory obligations under a welfare statute. It draws a clear distinction between monetary claims that get frozen under a resolution plan and statutory obligations that continue despite insolvency. It also holds that Section 14 of the IBC does not bar statutory authorities from discharging statutory functions."
The Court observed that Section 11 of MOFA imposes a statutory obligation on the promoter to convey title in the land and building to the organization of flat purchasers. This obligation is both contractual (under Clause 33 of the MOFA Agreement) and statutory (under Section 11(1) of MOFA). The Competent Authority performs a statutory function under Section 11(3) and (4) of MOFA, which is not akin to a recovery action or claim enforcement mechanism. Instead, it is an exercise of statutory power to perfect title in favour of the organization of flat purchasers.
The Court rejected the argument that Section 14 of IBC bars the Competent Authority from granting deemed conveyance:
- Statutory Rights vs. Monetary Claims: The Court distinguished between monetary claims, which are frozen under a resolution plan, and statutory obligations, which continue despite insolvency. The proceedings for deemed conveyance under Section 11 of MOFA are not for recovery of money but for enforcement of a statutory obligation.
- Public Interest: MOFA is a welfare legislation aimed at protecting flat purchasers. The objective behind Section 11 - to ensure swift conveyance of title - cannot be defeated by the moratorium under Section 14 of IBC.
- Divesting of Title: The Court noted that the promoter loses title in the land and building upon sale of flats. The Competent Authority merely certifies this divesting of title, which is not a transfer of an asset of the corporate debtor.
- Remedy for Promoter: The promoter retains the right to challenge the certificate of deemed conveyance in a civil suit, ensuring that the statutory scheme of MOFA is not misused.
The Court also addressed the reliance on Section 238 of IBC, which gives overriding effect to IBC over inconsistent provisions of other laws. It held that MOFA and IBC serve distinct purposes - MOFA is a social welfare legislation, while IBC is an economic legislation. There is no inherent inconsistency between the two, and Section 238 of IBC does not override Section 11 of MOFA.
The Verdict
The Petitioner succeeded in full. The Court set aside the impugned order dated 4 September 2025 and restored Application No. 87 of 2025 to the file of the Competent Authority. The Competent Authority was directed to decide the application on merits in an expeditious manner. Parties were directed to appear before the Competent Authority on 1 July 2026 for further directions. All rights and contentions of the parties on merits were kept open.
What This Means For Similar Cases
Statutory Obligations Prevail Over IBC Moratorium
- Non-Monetary Actions: Proceedings for deemed conveyance under Section 11 of MOFA are not barred by Section 14 of IBC, as they are statutory obligations and not recovery actions.
- Welfare Legislation: Courts will prioritize welfare legislations like MOFA over insolvency proceedings when public interest is involved.
- Divesting of Title: Promoters lose title in the land upon sale of flats, and the Competent Authority merely certifies this divesting. This is not a transfer of an asset of the corporate debtor.
Practical Implications for Co-operative Housing Societies
- Expeditious Conveyance: Societies can pursue deemed conveyance even during CIRP against the promoter, ensuring timely acquisition of title.
- Redevelopment: Societies in need of redevelopment can secure conveyance without waiting for the conclusion of CIRP, preventing delays that could endanger occupants.
- Alternate Remedy: Promoters retain the right to challenge the certificate of deemed conveyance in a civil suit, balancing the interests of all parties.
Limits of IBC Moratorium
- Section 14 of IBC does not bar statutory authorities from discharging their duties under welfare legislations.
- Section 238 of IBC does not override provisions of other laws that are not inconsistent with IBC’s objectives.
- Public Interest: Insolvency proceedings cannot be used to defeat statutory obligations aimed at protecting third-party rights.
