When a Defaulting Developer Goes Insolvent: Can the Society Still Redevelop? Lessons from the Supreme Court in A A Estates v. Kher Nagar Sukhsadan CHS

Lessons from the Supreme Court in *A A Estates Pvt. Ltd. v. Kher Nagar Sukhsadan Co-operative Housing Society Ltd.*

*By Adv. Rajesh Tekale, Senior Counsel, Yeshwant Legal Associates* *Educational update. Draft dated 17 October 2026.*

The problem

Many housing societies in Mumbai and Navi Mumbai face the same story. A developer signs a redevelopment agreement. Years pass. Rent is not paid. Construction does not start. The society terminates the agreement and finds a new developer. Then the old developer enters insolvency, and the authorities stop processing approvals because of the "moratorium".

Is the society stuck? The Supreme Court addressed this question in a reportable judgment delivered on 28 November 2025.

The case at a glance

• Court: Supreme Court of India (Civil Appellate Jurisdiction)
• Case: A A Estates Private Limited (through its Resolution Professional) & Anr. v. Kher Nagar Sukhsadan Co-operative Housing Society Ltd. & Ors.
• Citation: 2025 INSC 1366; also reported as 2025 LiveLaw (SC) 1151
• Arising out of: SLP (C) No. 10758 of 2025
• Bench: Justice J.B. Pardiwala and Justice R. Mahadevan (judgment authored by Justice R. Mahadevan)
• Under challenge: Bombay High Court judgment dated 11.09.2024 in Writ Petition No. 3893 of 2024
• Result: Appeal dismissed; the High Court's directions to be complied with within two months

The facts in brief

The society holds a MHADA lease of land and building at Kher Nagar, Bandra (East), Mumbai. It signed a registered development agreement with A A Estates on 16.10.2005, followed by supplementary agreements (dated 23.12.2005 and 09.04.2014, as recorded by the Court). The supplementary agreement required completion within 40 months of the commencement certificate.

The Court recorded that the developer did not commence or complete any substantial work. Out of 60 members, 41 received no rent and 19 received it only intermittently. The society issued termination notices dated 09.06.2019, 02.12.2019 and 06.11.2021.

A first insolvency process (CIRP) against the developer was set aside in 2020. A second CIRP was admitted on 06.12.2022. The society signed a fresh development agreement with a new developer on 10.12.2023. Approvals then stalled because of the developer's CIRP. The society filed a writ petition before the Bombay High Court, which ruled in its favour. The developer, through its Resolution Professional, appealed.

What the Supreme Court decided

The Court framed four issues. Its conclusions (paragraph 21 of the judgment) are summarised below.

1. The termination was valid. It was effected after due notice and prolonged default. The Court observed that time is of the essence in a redevelopment agreement, because its object is timely rehabilitation of members (para 15.3). It also held that the termination arose from non-performance, not from insolvency (para 15.7).

2. A terminated agreement is not an "asset" under the moratorium. Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) protects the corporate debtor's existing assets. The Court held that the moratorium "does not revive terminated contracts or protect rights that have ceased to exist prior to insolvency" (para 16.11). It also noted that the developer never obtained possession; possession always remained with the society (para 16.9). The developer was left, at best, with a claim for damages (para 16.7).

3. The writ under Article 226 was maintainable. The Court held that the High Court's constitutional jurisdiction is not curtailed by Section 14 of the IBC. Directions to statutory authorities to perform public duties fall in the public law domain. They do not encroach on the NCLT's jurisdiction (paras 17.2 to 17.8). The Court noted that the High Court required the authorities to consider and process the society's proposal in accordance with law (para 17.6).

4. No breach of natural justice. The developer's side was represented throughout and could not show real prejudice (para 18.10).

The Court left it open to the developer to pursue its claim for money spent on the project "in the manner known to law" (para 24).

Why this matters

For societies. A developer's insolvency does not, by itself, freeze redevelopment. This is especially so where the agreement was validly ended before insolvency and possession stayed with the society.

For developers and Resolution Professionals. Development rights depend on performance. The Court described them as contingent on due performance (para 18.8). The moratorium is a shield for existing assets. It is not a tool to stall a project that has already been lawfully terminated.

For writ practice. The judgment confirms that the High Court can direct planning and municipal authorities to act on a pending proposal even while CIRP is pending, so long as the direction stays in the public law domain and does not decide private contractual rights.

Important limits

• The ruling turns on its facts: long default, termination before the second CIRP, and no possession with the developer.
• Where the developer is in possession, or the agreement is still alive on the insolvency date, the analysis may differ. The Court itself distinguished cases on that basis (paras 15.10 and 16.10).
• The writ remedy was directed at statutory authorities. It did not resolve money claims between the society and the old developer.
• Each society's agreement, resolutions and notices must be read on their own terms.

> ### Key takeaways > - A development agreement validly terminated before insolvency is not an "asset" protected by the Section 14 IBC moratorium. > - The moratorium does not revive lapsed or extinguished contractual rights. > - Where possession stayed with the society, Section 14(1)(d) did not apply. > - The High Court's writ jurisdiction under Article 226 is not ousted by the IBC for public law directions to authorities. > - The old developer may still pursue money claims in the manner known to law.

Practical guidance

These points are general and educational. They are not advice on any particular case.

• Keep a clean record. Preserve the agreement, supplementary agreements, rent records, reminders and default notices. In this case, the Court relied on the documented history of default.
• Follow the agreement's termination clause. Check notice periods, cure periods and who must decide. Record general body and committee resolutions properly.
• Watch the timeline. The date of termination relative to the insolvency commencement date was central. Note both dates carefully.
• Track possession. Whether possession was handed to the developer can change the legal position under Section 14(1)(d) of the IBC.
• Respond to the Resolution Professional in writing. If an RP raises the moratorium, reply with documents rather than ignoring the letter.
• Choose the right forum. Approval delays by authorities may raise public law questions. Money or contractual disputes may belong to arbitration, civil courts or the NCLT. Seek professional review before choosing.
• Act transparently with members. Share notices and decisions with all members to reduce later disputes.

मराठी सारांश

विकासक दिवाळखोरीत गेला तर सोसायटीचा पुनर्विकास थांबतो का?

सर्वोच्च न्यायालयाने २८ नोव्हेंबर २०२५ रोजी *A A Estates विरुद्ध खेर नगर सुखसदन को-ऑप. हौसिंग सोसायटी* (2025 INSC 1366) या प्रकरणात महत्त्वाचा निकाल दिला.

या प्रकरणात जुन्या विकासकाने अनेक वर्षे काम सुरू केले नाही. बहुतेक सदस्यांना भाडेही मिळाले नाही. त्यामुळे सोसायटीने नोटिसा देऊन करार रद्द केला आणि नवीन विकासक नेमला. नंतर जुन्या विकासकावर दिवाळखोरीची (IBC) प्रक्रिया सुरू झाली. त्या कारणाने परवानग्या अडकल्या.

न्यायालयाने स्पष्ट केले की दिवाळखोरी सुरू होण्याआधीच वैधपणे रद्द झालेला करार हा विकासकाची "मालमत्ता" राहत नाही. IBC च्या कलम १४ खालील स्थगिती (moratorium) रद्द झालेले हक्क पुन्हा जिवंत करत नाही. इमारतीचा ताबा सोसायटीकडेच होता, हा मुद्दाही महत्त्वाचा ठरला.

उच्च न्यायालय कलम २२६ खाली संबंधित प्राधिकरणांना सोसायटीचा प्रस्ताव कायद्यानुसार तपासण्याचे निर्देश देऊ शकते, असेही न्यायालयाने मान्य केले. जुन्या विकासकाला खर्चाबाबत कायदेशीर मार्गाने दावा करण्याची मुभा ठेवली आहे.

सोसायट्यांनी करार, नोटिसा, ठराव आणि भाडे नोंदी व्यवस्थित जपाव्यात. प्रत्येक प्रकरणाची वस्तुस्थिती वेगळी असते, म्हणून निर्णय घेण्यापूर्वी व्यावसायिक सल्ला घ्यावा.

Sources

• Supreme Court of India, *A A Estates Pvt. Ltd. v. Kher Nagar Sukhsadan Co-operative Housing Society Ltd.*, 2025 INSC 1366, judgment dated 28.11.2025 (official PDF): https://api.sci.gov.in/supremecourt/2025/7272/7272_2025_4_1503_66367_Judgement_28-Nov-2025.pdf
• LiveLaw, "IBC | Terminated Contract Not Corporate Debtor's Asset; Moratorium Won't Revive Extinguished Contractual Rights : Supreme Court": https://www.livelaw.in/supreme-court/ibc-terminated-contract-not-corporate-debtors-asset-moratorium-wont-revive-extinguished-contractual-rights-supreme-court-311596
• LiveLaw, 2025 LiveLaw (SC) 1151 (headnote PDF): https://www.livelaw.in/pdf_upload/2025-livelaw-sc-1151-aa-estates-v-kher-nagar-sukhsadan-co-operative-housing-society-ltd-28-nov-2025-641157.pdf
• LiveLaw, report on the Bombay High Court judgment in WP No. 3893 of 2024: https://www.livelaw.in/ibc-cases/bombay-high-court-holds-redevelopment-rights-of-society-not-part-of-moratorium-process-issues-writ-of-mandamus-for-redevelopment-upholding-right-to-shelter-272389
• Insolvency and Bankruptcy Board of India, Insolvency and Bankruptcy Code, 2016: https://ibbi.gov.in/en/legal-framework/act

Paragraph references are to the official Supreme Court judgment. Status note: as of 17 October 2026, our searches found no report of a review or curative petition, stay or reversal of this judgment. This should be re-confirmed on the Supreme Court case-status page before publication.

Disclaimer

This article is for general educational and informational purposes only. It is not legal advice and does not create an advocate-client relationship. It summarises a reported judgment; readers should refer to the full text. Laws and their interpretation may change. Please obtain professional review on the facts of your own matter before acting. This article is not an advertisement or solicitation.

अस्वीकरण: हा लेख केवळ सर्वसाधारण शैक्षणिक माहितीसाठी आहे. हा कायदेशीर सल्ला नाही आणि यामुळे वकील-अशील संबंध निर्माण होत नाही. निकालाचा मूळ मजकूर वाचावा. आपल्या प्रकरणातील वस्तुस्थितीनुसार कृती करण्यापूर्वी व्यावसायिक सल्ला घ्यावा. हा लेख जाहिरात किंवा आमंत्रण नाही.

*Adv. Rajesh Tekale, Senior Counsel, Yeshwant Legal Associates, Navi Mumbai. Email: yeshwantlaw@gmail.com*