A company had no land title but got development rights. Now those rights are 'assets' under IBC.

A corporate debtor had no ownership of the land—only development rights. The Supreme Court just decided whether those rights count as 'assets' in insolvency. On a March afternoon, a two-judge bench of the Supreme Court shuffled through a stack of agreements bound in blue ribbon and asked a question that would ripple through every ongoing insolvency proceeding in the country: if a company never held the title to a piece of land, can its development rights still be taken over by the insolvency professional?

The answer, delivered by Justice V. Ramasubramanian and Justice Pankaj Mithal, was a firm yes. The court observed that the definition of property under Section 3(27) is "deliberately wide" — encompassing not just physical land but rights and interests in property. And in that single answer, the court quietly redrew the boundaries of what counts as 'property' under the Insolvency and Bankruptcy Code, 2016.

How a company with no title ended up with development rights

The story begins with a company called Avani Towers — the Corporate Debtor (the company undergoing insolvency proceedings). Avani Towers did not buy land. Instead, it financed another entity, Energy Properties, to purchase 10.19 acres of land from UCO Bank for Rs.2.70 crores. In return for this financing, Avani Towers got two things: a 40% shareholding in Energy Properties, and exclusive development rights over the entire land parcel.

Energy Properties became the legal title-holder — the registered owner on paper. But Avani Towers got possession of the land and the right to develop it, backed by a series of agreements: a Memorandum of Understanding, a Shareholders' Agreement, and multiple memorandums recording that possession had been handed over. The Corporate Debtor then granted 10,000 square feet of this land to Victory Iron Works on a leave-and-license basis (a temporary occupation arrangement where the licensee can use the property but does not get ownership rights).

Then the financial trouble hit. A financial creditor initiated the Corporate Insolvency Resolution Process (CIRP — the formal insolvency proceeding under the IBC) against Avani Towers under Section 7 of the IBC. The NCLT, Kolkata Bench admitted the petition on October 15, 2019.

The fight over who controls the land

When the Resolution Professional (RP — the person appointed to manage the corporate debtor's affairs during insolvency) took charge, he did something that triggered a legal battle. In his office sat a single file marked "Development Rights — Avani Towers." He sought to include those development rights in the Information Memorandum (the document that tells potential buyers what assets the company has) and to protect the Corporate Debtor's possession of the land through the local district administration.

Two parties immediately objected. Energy Properties, the title-holder of the land, argued that the development rights belonged to them, not to Avani Towers. Victory Iron Works, which had the leave-and-license agreement for 10,000 square feet, claimed that the RP was trying to take over the entire land — including the portion Victory occupied.

The NCLT, on February 12, 2020, passed an order that tried to balance both sides: it directed that the RP should not be obstructed from taking control of the development rights, but also protected Victory's possession of its 10,000 square feet. Both Energy Properties and Victory Iron Works appealed to the National Company Law Appellate Tribunal (NCLAT — the appellate body for insolvency cases). The NCLAT dismissed both appeals on April 8, 2021.

That is when the matter reached the Supreme Court.

The core question: are development rights 'assets'?

The legal question was deceptively simple. Section 18(f) of the IBC says the Interim Resolution Professional (IRP) must take control of the Corporate Debtor's 'assets'. Section 25(2)(a) imposes a similar duty on the RP. Section 3(27) defines 'property' broadly to include "every description of property, whether movable or immovable, tangible or intangible, and includes rights and interests in property."

But there was a catch. The Explanation to Section 18 says that 'assets' under that section do not include assets owned by a third party in possession of the Corporate Debtor under a trust or contractual arrangement. Energy Properties argued that the development rights were third-party assets — they belonged to Energy Properties, not to Avani Towers. Victory Iron Works argued that its leave-and-license rights were also third-party assets.

The Supreme Court had to decide: did the development rights, created through a Joint Development Agreement and backed by financial consideration, count as 'property' belonging to the Corporate Debtor? And even if they did, could the RP take custody of them despite the Section 18 Explanation?

Why the court said 'yes'

The bench began by looking at the definition of 'property' under Section 3(27) of the IBC. The definition, the court observed, is "deliberately wide" — it includes not just physical land or buildings, but 'rights and interests in property'. The court noted that the development rights were not a gift or a gratuitous benefit. Avani Towers had paid Rs.2.70 crores to finance the land purchase. In return, it got exclusive development rights and possession. That consideration (the money paid in exchange for the rights) made the development rights a valuable asset — something that could be sold, transferred, or used to generate value.

The court then turned to the Section 18 Explanation. It held that this Explanation — which excludes third-party assets — applies only to Section 18, which deals with the duties of the IRP. It does not extend to Section 25(2)(a), which deals with the duties of the RP. Since the case had moved past the IRP stage, the RP's duty to take custody of all assets was not constrained by the Explanation.

But the court went further. It held that even if the Explanation applied, the development rights were not third-party assets. They were assets of the Corporate Debtor because they had been created specifically in favour of Avani Towers through a series of agreements, and the Corporate Debtor had paid consideration for them. The fact that the legal title to the land stood in the name of Energy Properties did not change this — because 'property' under the IBC includes rights and interests, not just legal title.

The bench balances the scales on possession

The court also addressed the practical question: could the NCLT protect the RP's possession of the land? The Corporate Debtor had physical possession of the land (except for the 10,000 square feet occupied by Victory). The courtroom fell silent as the bench read out its reasoning: under Regulation 30 of the IBBI (CIRP) Regulations, 2016, the NCLT could issue directions to protect such possession, including through the local district administration. This was not an expansion of the NCLT's jurisdiction — it was a necessary power to ensure that the insolvency process could function without physical obstruction.

The court was careful to balance the competing interests. It dismissed both appeals, but with clear protections: Victory Iron Works would keep its 10,000 square feet under the leave-and-license agreement. The RP would take control of the remaining land and include the development rights in the Information Memorandum. The local district administration would assist in protecting the RP's possession.

What this means for insolvency professionals

This judgment is a significant expansion of what insolvency professionals can take custody of. Before this ruling, there was uncertainty about whether development rights — which are not the same as legal title — counted as 'assets' under the IBC. The Supreme Court has now made it clear: if a Corporate Debtor has paid consideration for development rights and has possession, those rights are property under Section 3(27) and must be included in the Information Memorandum.

The ruling also clarifies the relationship between Section 18 and Section 25. The Explanation in Section 18 — which excludes third-party assets — does not apply to the RP's duties under Section 25. This means that even if a particular asset might be excluded from the IRP's control under Section 18, the RP may still have a duty to take custody of it under Section 25.

THE PLAY: If your Corporate Debtor holds development rights backed by consideration and possession, include them in the Information Memorandum — the Supreme Court has confirmed they are 'assets' under the IBC, regardless of who holds the legal title.

The court ended where it began: with a stack of agreements bound in blue ribbon and a single question about what counts as property.