Ghanashyam Mishra And Sons Private ... vs Edelweiss Asset Reconstruction ... on 13 April, 2021
56. The petitioner has relied on the judgment of the Supreme
Court in Ghanshyam Mishra (Supra) to argue that the slum
dwellers can no longer raise any claim for unpaid transit rent,
which is a pre-CIRP (Corporate Insolvency Resolution Process)
liability. According to the petitioner, since the resolution plan has
been approved by the NCLT and is binding on all stakeholders, any
such demand stands extinguished. Further, the petitioner submits
that the approval of the resolution plan "cures" all past defaults,
and therefore, the very basis for invoking Section 13(2) of the
Slum Act - i.e., default by the developer - no longer survives. This
contention, in my considered view, is legally flawed and based on
an incorrect understanding of the law. It conflates two distinct
legal consequences: (i) the extinguishment of monetary claims or
dues, and (ii) the factual occurrence and consequences of a
default. The judgment in Ghanshyam Mishra does not say that past
events, such as defaults or breaches, are erased from legal history.
What it says is that any monetary claims arising from such
defaults, if not dealt with in the resolution plan, cannot be
enforced later. Thus, slum dwellers may be barred from initiating
proceedings to recover unpaid transit rent -- that remedy may be
extinguished. However, the fact that such default occurred remains
relevant, especially when the SRA is considering whether the
developer has lost the confidence of the beneficiaries and whether
the scheme has suffered due to such default. Section 13(2) of the
Slum Act empowers the SRA to act on those facts, not for recovery
of money, but for regulatory correction -- i.e., to change the
developer in public interest.