New Delhi: The Supreme Court has held that homebuyers and a Successful Resolution Applicant (SRA) cannot be saddled with penalty charges imposed by NOIDA for a defaulting developer’s delay in completing a housing project, setting aside a NCLAT direction that had treated such time extension charges as part of the Corporate Insolvency Resolution Process (CIRP) costs.
A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran, allowing the appeal filed by the Authorised Representative of homebuyers of M/s Granite Gate Properties Private Limited, observed that the case was “yet another” instance of homebuyers who invested their life savings for a home, only to be left in the lurch when the developer’s grandiose promises turned into a corporate insolvency.
The dispute arose out of two housing projects, ‘Lotus Boulevard’ in Sector 100 and ‘Lotus Panache’ in Sector 110, developed on land leased by the New Okhla Industrial Development Authority (NOIDA). After the developer was declared a Corporate Debtor, the homebuyers, constituting the Committee of Creditors, pooled their own funds under a CoC-approved ‘Pool and Build’ mechanism to continue construction during the CIRP, and a Resolution Plan proposed by M/s SMV Agencies Private Limited, the SRA, was eventually approved. NOIDA, however, sealed three towers of Lotus Panache in October 2024 pending a decision on time extension charges payable under the lease deeds, and the NCLAT had directed that such charges, for a maximum period of three years as stipulated in the lease, be treated as CIRP costs. NOIDA separately sought inclusion of extension charges for a much longer period, up to ten years, based on a 2019 office order.
Appearing for the homebuyers, senior counsel argued that the time extension charges were penal in nature, had accrued largely for periods before the CIRP even commenced, and could not be foisted upon homebuyers or the SRA for a default committed solely by the developer. NOIDA, on the other hand, contended that the project could not proceed at all without payment of these charges, and that its revised policy of 2019 permitted levy of extension charges on an escalating scale up to the tenth year before cancellation of the lease.
Examining the lease deed, the Court noted that the land had been acquired for developing an urban and industrial township, and that NOIDA’s purpose, though commercial, could not be divorced from its essential character as a welfare-oriented local authority tasked with providing housing and infrastructure.
The Court observed that the project, originally slated for completion in 2016, remained unfinished even a decade later, leaving homebuyers who had already pooled their savings to keep it alive further exposed to charges arising from the original developer’s default.
Holding that the default charges were designed to penalise a defaulting developer and deter delay, the Court found it improper for that burden to fall on homebuyers and the SRA, who were not responsible for the delay and were, in the Court’s words, being made to answer for “past sins of the Corporate Debtor.”
The Court accordingly directed that NOIDA waive the penalty charges in the peculiar facts of the case, setting aside the NCLAT’s direction treating the extension charges as CIRP costs, and rejected NOIDA’s claim for extension charges beyond three years up to the tenth year.
Case Title: The Authorised Representative for Granite Gate Properties Private Limited, Ms. Rakesh Verma vs. M/s New Okhla Industrial Development Authority and Ors., Civil Appeal No. 3132 of 2026 (with Civil Appeal No. 4207 of 2026)
