Contractual Development Rights Under Hire Purchase Agreement Can Form Part of Insolvency Estate Even Without Land Ownership: NCLAT Delhi
Case Overview
Case Name: Uttar Pradesh Housing and Development Board Vs K.S.N. Buildwell Pvt Ltd & Anr. (NCLAT Delhi)
Appeal Number: Company Appeal (AT) (Ins) No. 1581 of 2023
Date of Order: 14/07/2026
Forum: National Company Law Appellate Tribunal, Delhi
Background and Factual Matrix
The National Company Law Appellate Tribunal (NCLAT), Delhi Bench, disposed of three interconnected appeals arising out of the Corporate Insolvency Resolution Process (CIRP) of K.S.N. Buildwell Pvt. Ltd. The core disputes in these appeals revolved around two significant issues: first, whether an order directing de-sealing of land owned by the Uttar Pradesh Awas Evam Vikas Parishad (UPAVP) was legally sustainable; and second, whether the resolution plan approved by the Committee of Creditors (CoC) could be remanded back to the CoC for fresh consideration.
The Original Allotment and Hire Purchase Arrangement
UPAVP had originally auctioned a commercial plot bearing No. 16, measuring 6860.959 sq. metres, located at C-1, Sector 16, Vasundhara, Ghaziabad, Uttar Pradesh, to one Mr. Ramesh Kumar Prasad on 23.12.2006. An allotment letter was subsequently issued on 11.04.2008. The total consideration for the plot was fixed at Rs. 25,62,67,693/-, with 50% payable by 30.03.2009 and the remaining 50% to be discharged through 72 monthly instalments carrying interest at 18% per annum.
By a letter dated 24.03.2010, the Corporate Debtor (CD) — K.S.N. Buildwell Pvt. Ltd. — was incorporated as a joint allottee on the request of the original allottee, subject to the express condition that ownership would continue to vest in the original allottee. A hire purchase agreement dated 30.03.2010 was subsequently entered into among UPAVP, Mr. Ramesh Kumar Prasad, and the CD. Under this arrangement, the CD was required to pay quarterly instalments of Rs. 1,68,71,406/- to UPAVP from 01.01.2010. In the event of default, penal interest at 24% per annum was stipulated to apply.
Construction, Defaults, and Pre-CIRP Sealing
A construction map for commercial and group housing up to eight floors was approved on 19.04.2011 upon payment of Floor Area Ratio (FAR) charges of 1:2. However, the CD subsequently defaulted on instalment payments, attracting repeated notices from UPAVP demanding clearance of arrears. Notices relating to unauthorised construction were also issued. A show cause notice was served on 28.10.2017, and following non-appearance by the CD, an order for demolition of illegal construction was passed under Section 28(a) of the Uttar Pradesh City Planning and Development Act, 1973.
Crucially, the property was physically sealed on 27.08.2019 under
Section 51(2)of the Uttar Pradesh City Planning and Development Act, 1973 — this was well before the commencement of CIRP — primarily on account of unauthorised construction involving five additional floors built in violation of the sanctioned plan.
Subsequently, a confiscation/attachment order was passed on 20.07.2021, restraining the CD from transferring the property. A recovery certificate for arrears amounting to Rs. 81,62,95,193/- was also issued on 22.01.2021, and recovery proceedings were initiated through the District Magistrate.
Initiation of CIRP and Resolution Plan
CIRP against the CD was initiated by the Adjudicating Authority vide order dated 11.10.2022 on an application filed by Omkara Assets Reconstruction Company Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016. Mr. Mohit Goyal was appointed as the Interim Resolution Professional (IRP).
Notably, UPAVP itself filed a claim of approximately Rs. 139 crores by submitting Form B on 13.01.2023, acknowledging its status as a creditor in the CIRP. During the insolvency proceedings, a resolution plan was submitted by Bhati Associates, which was approved by the CoC with a 100% voting share. The housing project had been substantially developed by that time — four buildings had been constructed, with 144 flats and 44 commercial shops already allotted to third-party buyers.
The Resolution Professional (RP) filed IA No. 5536 of 2022 seeking directions for de-sealing of the property. The Adjudicating Authority allowed this application vide order dated 17.10.2023 and directed de-sealing. This order was challenged by UPAVP in CA (AT) (Ins) No. 1581 of 2023.
Additionally, the Adjudicating Authority vide order dated 27.03.2025 remanded the approved resolution plan back to the CoC, holding that third-party property (i.e., the UPAVP-owned land) had been included without adequate legal basis and that the plan failed to comply with Sections 18, 25, 29 and 30(2)(e) of the Insolvency and Bankruptcy Code, 2016. This remand order was challenged by the RP in CA (AT) (Ins) No. 820 of 2025 and by the authorised representative of homebuyers in CA (AT) (Ins) No. 926 of 2025.