The Slum Rehabilitation Scheme (SRS) and the Insolvency and Bankruptcy Code (IBC) are different frameworks that are used to address housing issues and insolvency. 

Slum Rehabilitation Scheme (SRS) 

  • A PPP scheme that encourages private developers to invest in slum rehabilitation projects
  • The Slum Rehabilitation Authority (SRA) oversees, coordinates, and approves the SRS
  • The SRS offers extra Floor Square Index (FSI) to developers in exchange for their investment Insolvency and Bankruptcy Code (IBC) 
  • A structured framework that helps resolve insolvencies 

The IBC aims to recover maximum asset value and resolve distressed entities quickly. The IBC has a stipulated resolution time of 330 days, including litigations 

 POWERS OF SRA

 Attachment of property

The SRA (Slum Rehabilitation Authority)  may want to attach property under the PMLA, but the IBC’s Section 32A protects property from confiscation.

  • Pre-CIRP electricity dues

The SRA shouldn’t be held liable for pre-CIRP electricity dues once a resolution plan is approved.

  • Stay of acquisition process

The RP may want to stay the SRA’s acquisition process, but the HC ruled that the IBC doesn’t allow staying the operation of another law  remove defaulting developers under the Insolvency and Bankruptcy Code (IBC).

How the SRA can pursue avoidance applications

  • If the Resolution Plan gives the SRA the power to pursue avoidance applications, then the SRA can do so.
  • The SRA can pursue avoidance applications that were filed by the erstwhile Administrator and are pending before the NCLT.

How the IBC prevails over other laws 

  • The IBC’s Section 238 states that the IBC prevails over other laws in cases of conflict.
  • In the case of Rakesh Kumar Gupta v. Mahesh Bansal, the NCLT ruled that the IBC’s Section 7 can be applied even if there are proceedings pending under other laws.
  • The IBC is a more recent special legislation, so it prevails over earlier laws.
  • However, the IBC is a special legislation that prevails over other laws, including the SRA, in cases of conflict.

the Insolvency and Bankruptcy Code (IBC) of 2016 prevails over other laws if there is a conflict, according to Section 238 of the IBC. This means that the IBC takes precedence over any other law, including state enactments.

How IBC prevails over other laws. Section 238 includes a “non-obstante clause” that neutralizes any contrary provisions.  The IBC’s provisions have effect notwithstanding anything inconsistent with any other law. The IBC’s overriding effect has been upheld by the Supreme Court.

Examples of IBC overriding other laws:

  • In Leo Edibles & Fats Ltd v. the Income-tax Department, the court ruled that the IBC overrides the Income Tax Act when determining dues during liquidation.
  •  In Alchemist Asset Reconstruction Company Limited v Hotel Gaudavan Private Limited and Others, the Supreme Court ruled that the IBC prevails over state enactments.

BUT SLUM LAW AND IBC VIEW OF COURT IS AS UNDER:

The provisions of the IBC are not meant to defeat slum redevelopment and similar or allied statutes. To hold otherwise would simply be unthinkable. It would mean that a Writ Court would put a premium on corporate wrongdoing and that even a defaulting corporate debtor who had not complied with the terms of a LoI could now use the golden parachute of the IBC to secure through the RP a restraint against the welfare of slum dwellers. In  Nagesh Madhava Suvarna and Ors v State of Maharashtra & Ors and in interim order of 21st March 2024 in Writ Petition No 1349 of 2024 in Tagore Nagar Shree Ganesh Krupa Co-operative Housing Society Ltd v State of Maharashtra & Ors

STARE DECISIS :

Anudan Proprties Private Ltd vs Mumbai Metropolitan Region SRA

The material placed on record clearly shows that the Slum Rehabilitation Scheme which forms the subject matter of this litigation has unfortunately remained stalled or delayed for a significant period, despite repeated attempts at revival and the initial objective of speedy implementation.

ISSUES RAISED IN THE MATTER:

(i) Does the approval of the petitioner’s resolution plan by the NCLT under Section 31 of the IBC override or nullify the petitioner’s obligations and liabilities arising under the Slum Act and the Slum Rehabilitation Scheme? In particular, is the SRA barred or restricted by the IBC from taking action under Section 13(2) of the Slum Act due to the resolution plan’s binding 901-wp-2065-2025-F.doc effect?

(ii) Is the obligation to pay transit rent to slum dwellers a statutory obligation imposed by the Slum Act/regulations (and thus part of the public law framework), or merely a contractual term of the development agreement between the petitioner and the slum society?

(iii) Was the SRA justified in law in invoking Section 13(2) and issuing the impugned order terminating the petitioner’s appointment as developer?

(iv) Was the decision-making process of Respondent No.6 (CEO, SRA) in issuing the impugned order fair and in accordance with law?

HELD :

The mere approval of a resolution plan under the IBC does not automatically prevent the SRA from invoking its powers under Section 13(2) of the Slum Act. So long as the SRA’s action is not a disguised attempt to recover money but is instead a genuine exercise of its duty to safeguard public interest and ensure project completion, such action is valid in law. It is true that the claims for arrears of transit rent – being pre-CIRP liabilities – stand extinguished to the extent they exceed ₹2.50 crores, as recognised under the approved resolution plan. Therefore, neither the slum dwellers nor the SRA can now initiate any independent suit or coercive action to recover such amounts from the petitioner. But the broader statutory obligation of the petitioner – to rehabilitate the slum dwellers – continues. This obligation is not merely a financial one, but a performance-based duty that remains attached to the project. If the petitioner is no longer in a position to fulfill that duty — whether due to loss of financial capacity or credibility — then the SRA has the legal authority and duty to take corrective steps, including changing the developer. This is not a case of one law overriding another. Rather, this is a case where the Slum Act continues to operate in an area that the IBC resolution plan did not and could not fully address. Public interest requires that such powers remain available to the SRA, especially in situations where the welfare of hundreds of families is at stake.

CONCLUSION:

 The Bombay High Court ruled that developers cannot use the IBC to avoid their obligations under the SRS.  The court ruled that the SRA can terminate a developer’s appointment, even if a resolution plan has been approved under the IBC. The court ruled that the IBC provisions cannot prevail over the welfare statute aimed at protecting slum dwellers 

 Shruti Desai

4th April 2025