Bombay High Court lets housing society move on from developer A A Estates in insolvency

The Bombay High Court has held that the insolvency of a developer did not stop an arbitrator from freeing a Mumbai housing society to appoint a new developer. In a judgment pronounced on 26 October 2026, the court dismissed an appeal by A A Estates Pvt Ltd, acting through its resolution professional, against an arbitral order in favour of Govind Niwas Co-operative Housing Society Ltd.

What Happened

The society signed a development agreement with A A Estates on 16 April 2010, and its members vacated their flats in 2010 and 2011. According to the judgment, apart from excavation and piling, the developer did no redevelopment work between 2011 and 2016. The society wrote in October 2016 that members had not been paid transit rent since January 2016, and issued a notice terminating the agreement on 7 December 2017.

In 2018 both sides agreed before an arbitrator to keep the status quo. A A Estates was admitted into a second corporate insolvency resolution process on 6 December 2022, and the society has filed its claim with the resolution professional. On 16 January 2025 the arbitrator vacated the status quo order and held that the society was free to appoint a new developer. The developer argued that the insolvency moratorium, which halts proceedings against a company in insolvency, barred this.

The High Court held that the moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code bars proceedings against the company, not proceedings brought by it, such as its counter claim in the arbitration. It held that the terminated agreement is not an asset of the company, since the termination came before both insolvency processes, so the bar on recovering property in its possession did not apply. It also held that the insolvency tribunal's residuary jurisdiction does not cover a termination unrelated to insolvency.

What It Means

The court lifted the stay on the arbitration that it had imposed on 30 April 2025. The parties must appear before the arbitrator within two weeks of the judgment's upload, and the next steps will be fixed for a date after six weeks. For housing societies whose redevelopment has stalled, the ruling shows that a developer's insolvency does not by itself lock them into a terminated agreement where the defaults came before the insolvency.

Source: High Court order