CIRP Moratorium Under Section 14 of IBC Does Not Bar Deemed Conveyance Under Section 11 of MOFA: Bombay High Court

Case Background

Case: Darshan Mandir Co-operative Housing Society Limited Vs District Deputy Registrar (Bombay High Court)

The Bombay High Court recently delivered a significant ruling at the intersection of two important statutes — the Insolvency and Bankruptcy Code, 2016 (IBC) and the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA). The central question before the Court was whether the initiation of Corporate Insolvency Resolution Proceedings (CIRP) against a subsequent purchaser of property could serve as a valid ground for the Competent Authority to refuse exercising jurisdiction under Section 11(3) of MOFA. A connected question was whether the moratorium imposed under Section 14 of the IBC legally prohibited the Competent Authority from granting deemed conveyance in favour of a cooperative housing society.

Factual Matrix

The petitioner was a cooperative housing society registered under the Maharashtra Co-operative Societies Act, 1960, comprising flat purchasers of a building situated at Final Plot No. 746 of T.P.S. III, Borivali (West), Mumbai. The original landowner, M/s. Gautam Builders (India), had entered into a Development Agreement on 25 August 1983 with M/s. Darshan Enterprises (Respondent No. 3), who thereafter obtained the necessary Intimation of Disapproval on 9 November 1985, undertook the construction, and sold flats to individual purchasers by executing agreements under Section 4 of MOFA.

Under Clause 33 of the MOFA Agreements, Respondent No. 3 expressly undertook to procure a formal Indenture of Conveyance from M/s. Gautam Builders (India) in favour of the society formed by the flat purchasers, with Respondent No. 3 joining as a confirming party. The Occupancy Certificate was issued on 3 August 2001, and the society itself had been registered as far back as 10 December 1991. Despite both the contractual and statutory obligation being crystal clear, the original promoter never executed the conveyance.

Subsequently, M/s. Vas Infrastructure Ltd. (Respondent No. 4) emerged claiming to have secured a conveyance of the property from Respondent Nos. 2 and 3. The society filed L.C. Suit No. 1425 of 2011 challenging this conveyance and also initially sought conveyance through that suit. Later, the prayer for conveyance was deleted from the suit by order dated 4 April 2025, and a separate Application No. 87 of 2025 was filed before the Competent Authority seeking deemed conveyance under Section 11 of MOFA.

Separately, Canara Bank, acting as a financial creditor, filed an application under Section 7 of the IBC against Respondent No. 4 (M/s. Vas Infrastructure Ltd.), which was admitted by order dated 11 March 2024 by the National Company Law Tribunal (NCLT). An Interim Resolution Professional (IRP) was appointed and a moratorium was imposed under Section 14 of the IBC.

The Impugned Order

The IRP appeared before the Competent Authority and opposed Application No. 87 of 2025. The Competent Authority accepted the IRP's objections and, by order dated 4 September 2025, rejected the society's application. The Competent Authority held that it could not adjudicate the deemed conveyance application in light of the pending CIRP against Respondent No. 4. The society was granted liberty to file a fresh application after conclusion of the CIRP or upon obtaining express leave from the NCLT. Aggrieved by this order, the society approached the Bombay High Court.

Arguments Raised

Petitioner's Contentions

  • The Competent Authority erred in declining jurisdiction under Section 11(3) of MOFA solely on account of pending CIRP.
  • Respondent No. 4 was never the original developer or promoter — it was Respondent No. 3 who bore both the contractual and statutory obligation to convey the land and building.
  • Section 14 of the IBC is essentially a recovery and debt resolution mechanism and cannot extinguish the statutory duty of a promoter under MOFA.
  • Respondent No. 4 at best stands as a trustee obligated to convey the property, and the Competent Authority in exercising powers under Section 11 of MOFA merely performs what the promoter was originally duty-bound to do.
  • MOFA is a welfare legislation, and frustrating the purpose of Section 11 due to CIRP would be contrary to the legislative intent of the 2008 amendment.

IRP's Contentions