Bombay High Court Holds Section 96 IBC Moratorium Does Not Stay Society’s Section 34 Challenge to Developer’s Specific Performance Award, Allows Proceedings to Continue Further
Bombay High Court Allows Society’s Section 34 Challenge to Continue; Holds Personal Insolvency Moratorium Covers Proceedings Concerning Developer’s Debts, Not Specific Performance Rights
Facts
The petition was filed by Mangesh Yashwant Parave and other slum dwellers under Article 226 challenging the Assistant Commissioner, ‘E’ Department, BMC’s order dated 13 May 2026 and seeking enforcement of undertakings dated 4 April 2007 and 12 March 2008 allegedly given by the developers.
The petitioners’ structures were situated wholly or substantially on C.S. No. 782, Mazgaon Division, while respondent developers owned adjoining lands at Dr. Compound, Dattaram Lad Marg, Chinchpokli. A redevelopment scheme under Regulation 33(7) of the DCPR, 2034 was being implemented on the developers’ land.
BMC had issued an allotment letter dated 3 February 2026, offering the petitioners permanent alternate accommodation in PAP tenements at Bhandup. The petitioners, however, insisted that they were entitled to in-situ rehabilitation on the developers’ land at Chinchpokli.
The controversy had a long history. In 2008, the petitioners and other slum dwellers had filed a City Civil Court suit seeking similar reliefs against the developers. That suit was dismissed for non-prosecution in 2013, and attempts to restore it were unsuccessful.
A BMC communication dated 12 September 2014 classified 44 hutments and specified which were to be rehabilitated by BMC and which by the developer. Annexure-II dated 4 September 2015 thereafter treated the petitioners as eligible slum dwellers for rehabilitation by BMC under the bottleneck policy.
Issues
The main issues were whether:
- the petitioners had an enforceable legal or fundamental right to in-situ rehabilitation on the developers’ land;
- the 2007 and 2008 undertakings created a binding obligation upon the developers to accommodate these petitioners in the redevelopment scheme;
- the Assistant Commissioner’s order dated 13 May 2026 was arbitrary, non-speaking or violative of natural justice;
- the petitioners were entitled to parity with other allegedly similarly situated occupants;
- the prior civil proceedings barred or weakened the present writ;
- Article 226 jurisdiction could be invoked to decide disputed questions concerning the exact location and entitlement of individual hutments; and
- the BMC’s offer of PAP tenements at Bhandup lawfully satisfied the petitioners’ rehabilitation entitlement.
Petitioners’ Arguments
The petitioners argued that the developers were bound by undertakings dated 4 April 2007 and 12 March 2008, particularly the latter undertaking which stated that eligible hutment dwellers on the developer’s land would be accommodated in the redevelopment scheme.
They contended that these undertakings created a binding obligation in their favour and that the developers could not later refuse in-situ rehabilitation.
They further argued that the impugned order did not properly consider these assurances, lacked adequate reasons and violated natural justice.
The petitioners also relied upon parity, claiming that similarly situated persons had been granted in-situ rehabilitation while they had been denied the same.
Finally, they asserted that in-situ rehabilitation was part of their fundamental right under Article 21, and that shifting them to Bhandup instead of rehousing them at Chinchpokli was arbitrary.
Respondents’ Arguments
BMC argued that Annexure-II dated 4 September 2015 and the allotment letter dated 3 February 2026 clearly established that the petitioners were to be rehabilitated by BMC, not by the private developers.
BMC stated that permanent alternate accommodation at Bhandup was already constructed and that it was ready to execute PAAAs in favour of the petitioners.
It further argued that the petitioners could not insist upon rehabilitation only at Chinchpokli, particularly when part of the relevant land had been taken over for road widening.
The developers separately argued that the writ was not maintainable because a civil suit seeking substantially similar reliefs had already been dismissed and never restored. They described the writ as an attempt to pursue parallel proceedings and take a “second bite at the cherry.”
They also argued that the 2008 undertaking applied only to eligible slum dwellers actually situated on the developers’ land. The petitioners’ structures were entirely or predominantly on BMC land.
Analysis of the Law
Prior Civil Proceedings Weakened the Writ
The Court first noted that the petitioners had already instituted a civil suit seeking similar reliefs.
That suit had been dismissed for non-prosecution and had never been restored. Even after the Bombay High Court gave liberty in July 2025 to challenge the earlier restoration rejection, no further steps were shown to have been taken.
The Court therefore accepted the developers’ submission that the present writ substantially represented a second attempt to obtain the same relief through another proceeding.
Annexure-II and 2014 Classification Controlled Rehabilitation Responsibility
The Court attached considerable importance to Annexure-II dated 4 September 2015, which had not been challenged by the petitioners.
That document showed that the petitioners were eligible for rehabilitation by BMC. Since Annexure-II continued to hold the field, the petitioners could not ignore it and insist that the developers alone were obliged to rehabilitate them.
The Court also examined BMC’s 12 September 2014 communication, which divided the 44 hutments according to location and rehabilitation responsibility.
The table reproduced on page 12 of the judgment is significant: it shows that only 8 huts were completely on the developers’ land, while 26 huts were partly on BMC and partly on developer land but were to be removed by BMC; the Court later noted that the majority of the hutments, including those of the petitioners, fell within BMC’s rehabilitation responsibility.
Impugned Order Was a Speaking Order
The petitioners’ natural justice challenge was expressly rejected.
The Division Bench found that the Assistant Commissioner’s order contained detailed factual findings, dealt with the parties’ contentions and specifically addressed the 2008 undertaking.
The competent authority had found that the petitioners’ hutments were mainly located on BMC-owned C.S. No. 782 rather than the developers’ land. The High Court held that such fact-based findings did not warrant interference under Article 226.
Writ Court Would Not Decide Intricate Factual Disputes
The Court emphasised that the precise location of each hutment, entitlement against BMC vis-à-vis the developer and extent of land occupation involved contested factual issues.
Those questions could not appropriately be converted into a fact-finding exercise under Article 226.
The Court therefore refused to enter into disputed claims and counter-claims concerning entitlement to particular land.
No Fundamental Right to In-Situ Rehabilitation
This was the most significant legal holding.
The Court relied upon Abdul Majid Vakil Ahmad Patvekari & Ors. v. Slum Rehabilitation Authority & Ors., 2021 SCC OnLine Bom 13719.
It held that merely because a person is a protected slum dweller does not mean that rehabilitation must necessarily occur on the same land or within the immediate vicinity.
The Court expressly stated that a right to rehabilitation cannot be equated with a right of ownership. Where the petitioners are being offered permanent alternate accommodation, they cannot insist upon a particular site merely because it is preferable to them.
Accordingly, the Court rejected the argument that Article 21 creates a fundamental right to be rehabilitated specifically on the developers’ land.
Promissory Estoppel and Legitimate Expectation
The petition contained suggestions of promissory estoppel and legitimate expectation, but the Court held that no specific enforceable representation or promise had been demonstrated.
Without an enforceable right or a clearly established promise in favour of these petitioners, neither doctrine assisted their case.
Precedent Analysis
Abdul Majid Vakil Ahmad Patvekari v. Slum Rehabilitation Authority
This was the primary precedent applied.
The coordinate Bench had held that protected slum-dweller status cannot be stretched into a right to rehabilitation only on the same land or nearby.
The present Division Bench adopted that principle and held that rehabilitation entitlement is not equivalent to ownership or site-specific entitlement.
High Court on Its Own Motion v. State of Maharashtra
The Court referred to this recent suo motu decision concerning implementation of Maharashtra’s slum legislation.
It noted that the coordinate Bench had strongly deprecated claims insisting upon in-situ rehabilitation, observing that such claims find no justification within the constitutional scheme and were “unconscionable.”
Yash Developers v. Harihar Krupa Co-operative Housing Society Ltd.
The judgment notes that the Supreme Court had earlier referred broader issues arising under the Maharashtra Slum Areas Act to the Bombay High Court for performance-audit scrutiny. This formed part of the broader context in which the Court discouraged automatic site-specific rehabilitation claims.
Moinuddin Pashamiya Shaikh v. Slum Rehabilitation Authority and Bishop John Rodrigues v. State of Maharashtra
These Bombay High Court authorities were cited as reflecting the same judicial approach against treating in-situ rehabilitation as an automatic or constitutional entitlement.
Court’s Reasoning
The Court found several independent reasons to reject the petition.
First, the petitioners had already pursued substantially similar civil proceedings, which remained dismissed.
Second, the unchallenged Annexure-II categorised them as eligible occupants to be rehabilitated by BMC.
Third, the factual material showed that their structures were wholly or substantially situated on BMC land, not the developers’ land.
Fourth, the Assistant Commissioner had already examined these factual disputes and passed a reasoned order.
Fifth, the petitioners were not being denied rehabilitation. On the contrary, BMC had offered ready permanent alternate accommodation at Bhandup and was willing to execute PAAAs.
Sixth, rehabilitation does not create a property right or an entitlement to choose the precise land on which alternate housing must be provided.
Finally, their parity argument failed because the person relied upon as comparator, Kishore Amichand Kharva, had himself filed a similar writ petition which was still pending and in which no interim relief had been granted.
Conclusion
The Bombay High Court declined to interfere and disposed of the writ petition.
It upheld the Assistant Commissioner’s decision and rejected the petitioners’ insistence that they had to be rehabilitated in-situ on the developers’ land at Chinchpokli.
The Court held that the petitioners’ entitlement was to rehabilitation, not to ownership or a site-specific permanent alternate accommodation. Since BMC was offering ready PAP tenements at Bhandup, the petitioners could not claim a fundamental right to be rehoused only on the redevelopment site.
The Court nevertheless left the petitioners free to raise such claims or counter-claims as may be available before an appropriate authority or court in accordance with law.
Case Details
Case: Mangesh Yashwant Parave & Ors. v. State of Maharashtra through Urban Development Department & Ors.
Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction
Case Number: Writ Petition (L) No. 18278 of 2026; CNR No. HCBM020182782026
Judges: Justice Suman Shyam and Justice Advait M. Sethna
Date: 25 August 2026
Result: Writ petition disposed of without interference. Claim for in-situ rehabilitation on developers’ land rejected; BMC’s Bhandup PAP rehabilitation remained available; petitioners given liberty to pursue other remedies permitted by law.
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Strong Recommended Title — 25 Words
Bombay High Court Holds Section 96 IBC Moratorium Does Not Stay Society’s Section 34 Challenge to Developer’s Specific Performance Award, Allows Proceedings to Continue Further
15 Title Options
- Bombay High Court Allows Society’s Section 34 Challenge to Continue; Holds Personal Insolvency Moratorium Covers Proceedings Concerning Developer’s Debts, Not Specific Performance Rights
- Bombay High Court Refuses to Stay Arbitration Challenge Against Insolvent Developer; Finds Specific Performance Award Creates an Asset, Not a Debt Under IBC
- Bombay High Court Holds Section 96 IBC Moratorium Inapplicable to Society’s Challenge Against Redevelopment Award Granting Developer Specific Performance and ₹10 Crore Compensation
- Bombay High Court Allows Section 34 Petition Despite Developer’s Personal Insolvency; Rules Challenge to Specific Performance Is Not Proceeding ‘In Respect of Debt’
- Bombay High Court Says Personal Guarantor Moratorium Is Limited to Debt Proceedings; Permits Society to Challenge Developer’s Redevelopment Arbitration Award
- Bombay High Court Rejects Developer’s IBC Stay Plea; Holds Section 34 Challenge Can Proceed Because Awarded Development Rights Are Assets, Not Her Liabilities
- Bombay High Court Allows Challenge to ₹10 Crore Redevelopment Award; Finds Section 96 Moratorium Does Not Protect Developer’s Contractual Right to Specific Performance
- Bombay High Court Distinguishes Asset From Debt Under IBC; Holds Arbitration Challenge Affecting Developer’s Interest in Society Land Can Continue During Moratorium
- Bombay High Court Holds Section 96 IBC Does Not Create Blanket Stay; Society May Continue Section 34 Challenge to Developer’s Specific Performance Award
- Bombay High Court Permits Arbitration Award Challenge During Personal Insolvency; Says Section 96 Protects Debts of Insolvent, Not Contractual Assets Granted to Them
- Bombay High Court Rejects Moratorium Objection in Redevelopment Arbitration; Finds Setting Aside Award Would Remove Developer’s Asset Without Creating Liability Against Her
- Bombay High Court Allows Society to Challenge Developer’s ₹10 Crore Award; Holds Compensation Was Incidental to Specific Performance and Moratorium Did Not Apply
- Bombay High Court Says Section 34 Court Cannot Impose Fresh Liability on Insolvent Developer; Therefore Section 96 Moratorium Does Not Bar Award Challenge
- Bombay High Court Applies Saranga v Bhavesh to Developer’s Insolvency Plea; Holds Personal Moratorium Narrower Than Corporate Moratorium and Allows Arbitration Challenge
- Bombay High Court Clears Section 34 Petition for Hearing; Holds Developer’s Personal Insolvency Cannot Freeze Challenge to Redevelopment Agreement Specific Performance Award
Judgment Summary
Facts
Nav Munjal Co-operative Housing Society Ltd. filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award dated 25 May 2017 passed in favour of Saranga Anil Agarwal, proprietor of M/s Rockline Construction Company.
The parties had entered into a Development Agreement dated 24 July 2006 and a supplementary agreement dated 12 July 2012 for redevelopment of the Society’s property. The project subsequently stalled, with the developer blaming a dissenting group of society members for obstructing redevelopment. The Society terminated the Development Agreement on 21 July 2014.
The arbitral tribunal nevertheless declared the Development Agreement to be valid and subsisting, granted specific performance in favour of the developer, awarded her ₹10 crore as compensation, and granted ₹50 lakh as costs. The Society’s counterclaim was rejected entirely.
While the Section 34 petition remained pending, personal insolvency proceedings were commenced against the developer under the Insolvency and Bankruptcy Code, 2016 in her capacity as a personal guarantor of a company undergoing corporate insolvency. This triggered the interim moratorium under Section 96 IBC.
The developer argued that the Section 96 moratorium automatically stayed the Society’s pending Section 34 petition. The Court therefore first decided this threshold issue before considering the merits of the award.
Issues
The principal issue was:
Whether the interim moratorium under Section 96 of the IBC barred continuation of the Society’s Section 34 petition challenging the arbitral award in favour of the developer.
This required the Court to determine:
- whether a Section 34 challenge to an award granting specific performance is a proceeding “in respect of any debt”;
- whether the ₹10 crore compensation and ₹50 lakh costs transformed the proceeding into one concerning a debt;
- whether the Society’s rejected counterclaim attracted the moratorium;
- whether the developer’s contractual right to redevelop the property was an asset rather than a liability;
- how the expression “debt” under Sections 3(11) and 3(6) of the IBC should be interpreted; and
- how the narrower personal insolvency moratorium under Section 96 differs from the corporate moratorium under Section 14.
Petitioner’s Arguments
The Society raised three principal arguments.
First, it argued that the arbitral award principally granted specific performance of the Development Agreement. A challenge to that relief was not a legal proceeding “in respect of any debt” because specific performance does not constitute a payment obligation owed by the developer.
Second, the monetary award was in favour of the developer, not against her. Thus, even insofar as compensation had been awarded, the developer was a creditor rather than a debtor of the Society.
Third, the Society argued that its counterclaim concerned damages for breach of contractual obligations and therefore constituted an “excluded debt” under Section 79(15) of the IBC.
Accordingly, the Society submitted that Section 96 could not prevent its Section 34 petition from proceeding.
Respondent’s Arguments
The developer relied upon the commencement of personal insolvency proceedings and argued that Section 96 creates a statutory interim moratorium immediately upon filing of a Section 95 application.
She contended that the pending Section 34 petition was a legal proceeding against her and therefore stood automatically stayed.
The underlying premise of her objection was that the award, including specific performance and monetary compensation, involved rights and liabilities sufficient to bring the proceeding within the expression “in respect of any debt” under Section 96.
Analysis of the Law
Section 96 Does Not Stay Every Proceeding Against an Individual
The Court began with the language of Section 96.
Section 96(1)(b) does not impose a blanket prohibition on every proceeding involving the debtor. It stays only legal actions or proceedings “in respect of any debt.”
The expression “debt” under Section 3(11) means a liability or obligation in respect of a claim which is due from any person.
A “claim” under Section 3(6) fundamentally involves a right to payment, including a contractual remedy where the breach gives rise to such payment.
The Court therefore focused not merely on whether proceedings were pending “against” the developer but whether they concerned a payment liability owed by the developer.
Section 34 Court Has Limited, Binary Jurisdiction
A significant part of the Court’s reasoning arose from the restricted nature of Section 34 jurisdiction.
The Court emphasised that a Section 34 court does not exercise appellate jurisdiction and cannot substitute its own relief for that granted by the arbitral tribunal.
Its role is essentially binary: it may either uphold the award or set it aside, subject to severability of an invalid portion.
Accordingly, even if the Society succeeded, the Section 34 Court could not itself direct the developer to pay damages or grant the Society’s rejected counterclaim.
This feature became central to determining whether continuation of the petition could create or disturb any “debt” owed by the insolvent developer.
Specific Performance Is Not a Debt
The award principally conferred upon the developer a right to specific performance of the Development Agreement.
The Court held that this right does not constitute a debt owed by the developer. Rather, it is a contractual right granted to her.
If the Society succeeded in setting aside the award, the consequence would be that the developer would lose her adjudicated right to specifically perform the contract. The Society would not become her creditor, nor would any fresh payment liability arise against her.
The Court therefore held that the Section 34 proceeding was effectively concerned with an asset or contractual entitlement of the developer, rather than with her debts.
That fell outside the scope of Section 96.
Compensation and Costs
The award also granted the developer ₹10 crore compensation and ₹50 lakh costs.
The Court held that these monetary components were incidental and supplemental to the grant of specific performance.
If the specific performance award were set aside, the compensation and costs dependent upon it would also fall. Conversely, if specific performance survived, the monetary components would continue with it.
Either way, adjudication of the Section 34 petition would not impose any payment liability upon the insolvent developer.
Accordingly, the existence of monetary relief in the award did not convert the Section 34 proceeding into one “in respect of a debt” owed by the developer.
Counterclaim and Excluded Debt
The Society had also challenged rejection of its counterclaim.
However, the Court reiterated that even if that part of the award were set aside, the Section 34 Court could not itself allow the Society’s counterclaim.
The maximum consequence would be that the award was set aside and the parties returned to their subsisting arbitration agreement for fresh adjudication.
The Court examined the concept of “excluded debt” under Section 79(15), which includes liability to pay damages for negligence or breach of statutory, contractual or other legal obligations.
However, the Court ultimately found that the Section 34 jurisdiction itself made it unnecessary to rest the decision entirely upon the excluded-debt argument. Since a Section 34 court could not itself create a payment liability against the developer by allowing the counterclaim, continuation of the petition did not offend Section 96.
Developer’s Interest in Land Was an Asset
The arbitral award had held that the Development Agreement created an interest in the Society’s land in favour of the developer.
The High Court observed that such an interest was an asset, not a liability.
The Section 96 moratorium is meant to protect and stabilise the debtor’s liability structure during personal insolvency. Staying the Section 34 petition in this case would not protect the developer from a debt; it would merely delay adjudication of whether her asserted contractual asset had been validly recognised by the arbitral tribunal.
The Court therefore concluded that Section 96 could not be stretched to protect every asset or contractual entitlement of an insolvent individual from judicial scrutiny.
Precedent Analysis
Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth, 2025 (4) SCC 629
This was the most significant precedent, particularly because it concerned the same developer.
The Supreme Court had distinguished the corporate moratorium under Section 14 IBC from the personal guarantor moratorium under Section 96 IBC.
Section 14 is considerably broader and stays proceedings against a corporate debtor generally. Section 96, by contrast, is deliberately narrower and stays only legal actions or proceedings “in respect of any debt.”
The Supreme Court had also held that liabilities falling within the category of excluded debts, including certain damages, do not receive Section 96 moratorium protection.
Justice Somasekhar Sundaresan held that although Saranga v. Bhavesh arose from consumer compensation and was not factually identical, its interpretation of the limited scope of Section 96 strongly supported the Court’s conclusion.
Indeed, the present case was even clearer because the developer was not being pursued as a debtor at all; she had been declared entitled to an asset in the form of an interest in land.
Court’s Reasoning
The Court’s reasoning can be reduced to a central distinction between debts and assets.
Section 96 protects the debtor against proceedings concerning her debts. It does not operate as a blanket procedural immunity from every proceeding in which she happens to be a party.
Here, the developer had obtained an arbitral award granting:
- specific performance;
- an enforceable interest under a redevelopment contract;
- ₹10 crore compensation; and
- ₹50 lakh costs.
The Society’s Section 34 petition challenged those rights.
If the Society succeeded, the result would be removal of the developer’s adjudicated contractual rights; it would not create a debt payable by her.
Further, even the Society’s counterclaim could not be allowed directly by the Section 34 Court.
Thus, whichever way the Section 34 petition was decided, the proceeding could not alter or disrupt the developer’s debt structure in the manner contemplated by Section 96.
The Court therefore held that the personal insolvency moratorium simply did not apply.
Conclusion
The Bombay High Court decided the threshold question in favour of the Society.
It expressly held that:
the continuation of the Section 34 petition was not prohibited by the interim moratorium under Section 96 of the IBC.
The Court did not decide the merits of the Society’s Section 34 challenge to the arbitral award at this stage.
Because the roster had changed after the matter was heard, the parties were directed to mention the Section 34 petition before the Bench presently assigned Section 34 jurisdiction so that the challenge to the award could proceed on merits.
Case Details
Case: Nav Munjal Co-operative Housing Society Ltd. v. Saranga Anil Agarwal
Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction, Commercial Division
Case Number: Commercial Arbitration Petition No. 456 of 2017; CNR No. HCBM020205282017
Judge: Justice Somasekhar Sundaresan
Date: 25 August 2026
Result: Threshold objection rejected. Section 96 IBC interim moratorium held not to bar continuation of the Society’s Section 34 challenge; merits of the arbitral award left for determination by the appropriate Section 34 Bench.
Facts
Nav Munjal Co-operative Housing Society Ltd. filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award dated 25 May 2017 passed in favour of Saranga Anil Agarwal, proprietor of M/s Rockline Construction Company.
The parties had entered into a Development Agreement dated 24 July 2006 and a supplementary agreement dated 12 July 2012 for redevelopment of the Society’s property. The project subsequently stalled, with the developer blaming a dissenting group of society members for obstructing redevelopment. The Society terminated the Development Agreement on 21 July 2014.
The arbitral tribunal nevertheless declared the Development Agreement to be valid and subsisting, granted specific performance in favour of the developer, awarded her ₹10 crore as compensation, and granted ₹50 lakh as costs. The Society’s counterclaim was rejected entirely.
While the Section 34 petition remained pending, personal insolvency proceedings were commenced against the developer under the Insolvency and Bankruptcy Code, 2016 in her capacity as a personal guarantor of a company undergoing corporate insolvency. This triggered the interim moratorium under Section 96 IBC.
The developer argued that the Section 96 moratorium automatically stayed the Society’s pending Section 34 petition. The Court therefore first decided this threshold issue before considering the merits of the award.
Issues
The principal issue was:
Whether the interim moratorium under Section 96 of the IBC barred continuation of the Society’s Section 34 petition challenging the arbitral award in favour of the developer.
This required the Court to determine:
- whether a Section 34 challenge to an award granting specific performance is a proceeding “in respect of any debt”;
- whether the ₹10 crore compensation and ₹50 lakh costs transformed the proceeding into one concerning a debt;
- whether the Society’s rejected counterclaim attracted the moratorium;
- whether the developer’s contractual right to redevelop the property was an asset rather than a liability;
- how the expression “debt” under Sections 3(11) and 3(6) of the IBC should be interpreted; and
- how the narrower personal insolvency moratorium under Section 96 differs from the corporate moratorium under Section 14.
Petitioner’s Arguments
The Society raised three principal arguments.
First, it argued that the arbitral award principally granted specific performance of the Development Agreement. A challenge to that relief was not a legal proceeding “in respect of any debt” because specific performance does not constitute a payment obligation owed by the developer.
Second, the monetary award was in favour of the developer, not against her. Thus, even insofar as compensation had been awarded, the developer was a creditor rather than a debtor of the Society.
Third, the Society argued that its counterclaim concerned damages for breach of contractual obligations and therefore constituted an “excluded debt” under Section 79(15) of the IBC.
Accordingly, the Society submitted that Section 96 could not prevent its Section 34 petition from proceeding.
Respondent’s Arguments
The developer relied upon the commencement of personal insolvency proceedings and argued that Section 96 creates a statutory interim moratorium immediately upon filing of a Section 95 application.
She contended that the pending Section 34 petition was a legal proceeding against her and therefore stood automatically stayed.
The underlying premise of her objection was that the award, including specific performance and monetary compensation, involved rights and liabilities sufficient to bring the proceeding within the expression “in respect of any debt” under Section 96.
Analysis of the Law
Section 96 Does Not Stay Every Proceeding Against an Individual
The Court began with the language of Section 96.
Section 96(1)(b) does not impose a blanket prohibition on every proceeding involving the debtor. It stays only legal actions or proceedings “in respect of any debt.”
The expression “debt” under Section 3(11) means a liability or obligation in respect of a claim which is due from any person.
A “claim” under Section 3(6) fundamentally involves a right to payment, including a contractual remedy where the breach gives rise to such payment.
The Court therefore focused not merely on whether proceedings were pending “against” the developer but whether they concerned a payment liability owed by the developer.
Section 34 Court Has Limited, Binary Jurisdiction
A significant part of the Court’s reasoning arose from the restricted nature of Section 34 jurisdiction.
The Court emphasised that a Section 34 court does not exercise appellate jurisdiction and cannot substitute its own relief for that granted by the arbitral tribunal.
Its role is essentially binary: it may either uphold the award or set it aside, subject to severability of an invalid portion.
Accordingly, even if the Society succeeded, the Section 34 Court could not itself direct the developer to pay damages or grant the Society’s rejected counterclaim.
This feature became central to determining whether continuation of the petition could create or disturb any “debt” owed by the insolvent developer.
Specific Performance Is Not a Debt
The award principally conferred upon the developer a right to specific performance of the Development Agreement.
The Court held that this right does not constitute a debt owed by the developer. Rather, it is a contractual right granted to her.
If the Society succeeded in setting aside the award, the consequence would be that the developer would lose her adjudicated right to specifically perform the contract. The Society would not become her creditor, nor would any fresh payment liability arise against her.
The Court therefore held that the Section 34 proceeding was effectively concerned with an asset or contractual entitlement of the developer, rather than with her debts.
That fell outside the scope of Section 96.
Compensation and Costs
The award also granted the developer ₹10 crore compensation and ₹50 lakh costs.
The Court held that these monetary components were incidental and supplemental to the grant of specific performance.
If the specific performance award were set aside, the compensation and costs dependent upon it would also fall. Conversely, if specific performance survived, the monetary components would continue with it.
Either way, adjudication of the Section 34 petition would not impose any payment liability upon the insolvent developer.
Accordingly, the existence of monetary relief in the award did not convert the Section 34 proceeding into one “in respect of a debt” owed by the developer.
Counterclaim and Excluded Debt
The Society had also challenged rejection of its counterclaim.
However, the Court reiterated that even if that part of the award were set aside, the Section 34 Court could not itself allow the Society’s counterclaim.
The maximum consequence would be that the award was set aside and the parties returned to their subsisting arbitration agreement for fresh adjudication.
The Court examined the concept of “excluded debt” under Section 79(15), which includes liability to pay damages for negligence or breach of statutory, contractual or other legal obligations.
However, the Court ultimately found that the Section 34 jurisdiction itself made it unnecessary to rest the decision entirely upon the excluded-debt argument. Since a Section 34 court could not itself create a payment liability against the developer by allowing the counterclaim, continuation of the petition did not offend Section 96.
Developer’s Interest in Land Was an Asset
The arbitral award had held that the Development Agreement created an interest in the Society’s land in favour of the developer.
The High Court observed that such an interest was an asset, not a liability.
The Section 96 moratorium is meant to protect and stabilise the debtor’s liability structure during personal insolvency. Staying the Section 34 petition in this case would not protect the developer from a debt; it would merely delay adjudication of whether her asserted contractual asset had been validly recognised by the arbitral tribunal.
The Court therefore concluded that Section 96 could not be stretched to protect every asset or contractual entitlement of an insolvent individual from judicial scrutiny.
Precedent Analysis
Saranga Anilkumar Aggarwal v. Bhavesh Dhirajlal Sheth, 2025 (4) SCC 629
This was the most significant precedent, particularly because it concerned the same developer.
The Supreme Court had distinguished the corporate moratorium under Section 14 IBC from the personal guarantor moratorium under Section 96 IBC.
Section 14 is considerably broader and stays proceedings against a corporate debtor generally. Section 96, by contrast, is deliberately narrower and stays only legal actions or proceedings “in respect of any debt.”
The Supreme Court had also held that liabilities falling within the category of excluded debts, including certain damages, do not receive Section 96 moratorium protection.
Justice Somasekhar Sundaresan held that although Saranga v. Bhavesh arose from consumer compensation and was not factually identical, its interpretation of the limited scope of Section 96 strongly supported the Court’s conclusion.
Indeed, the present case was even clearer because the developer was not being pursued as a debtor at all; she had been declared entitled to an asset in the form of an interest in land.
Court’s Reasoning
The Court’s reasoning can be reduced to a central distinction between debts and assets.
Section 96 protects the debtor against proceedings concerning her debts. It does not operate as a blanket procedural immunity from every proceeding in which she happens to be a party.
Here, the developer had obtained an arbitral award granting:
- specific performance;
- an enforceable interest under a redevelopment contract;
- ₹10 crore compensation; and
- ₹50 lakh costs.
The Society’s Section 34 petition challenged those rights.
If the Society succeeded, the result would be removal of the developer’s adjudicated contractual rights; it would not create a debt payable by her.
Further, even the Society’s counterclaim could not be allowed directly by the Section 34 Court.
Thus, whichever way the Section 34 petition was decided, the proceeding could not alter or disrupt the developer’s debt structure in the manner contemplated by Section 96.
The Court therefore held that the personal insolvency moratorium simply did not apply.
Conclusion
The Bombay High Court decided the threshold question in favour of the Society.
It expressly held that:
the continuation of the Section 34 petition was not prohibited by the interim moratorium under Section 96 of the IBC.
The Court did not decide the merits of the Society’s Section 34 challenge to the arbitral award at this stage.
Because the roster had changed after the matter was heard, the parties were directed to mention the Section 34 petition before the Bench presently assigned Section 34 jurisdiction so that the challenge to the award could proceed on merits.
Case Details
Case: Nav Munjal Co-operative Housing Society Ltd. v. Saranga Anil Agarwal
Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction, Commercial Division
Case Number: Commercial Arbitration Petition No. 456 of 2017; CNR No. HCBM020205282017
Judge: Justice Somasekhar Sundaresan
Date: 25 August 2026
Result: Threshold objection rejected. Section 96 IBC interim moratorium held not to bar continuation of the Society’s Section 34 challenge; merits of the arbitral award left for determination by the appropriate Section 34 Bench.
