The Supreme Court docket on Thursday put aside instructions treating NOIDA’s time-extension prices as insolvency course of prices in two delayed high-rise tasks, holding that homebuyers and the brand new decision applicant can’t be made to pay penalties for the unique developer’s default.
The Court docket held that homebuyers, who represent a category of economic collectors within the Company Insolvency Decision Strategy of a defaulting developer, can’t be saddled with the legal responsibility to pay time extension prices for the underdeveloped undertaking, particularly when the undertaking is being accomplished with the pooled monetary contributions of the homebuyers themselves.
“The homebuyers and the SRA (Profitable Decision Applicant) are sought to be penalised for previous sins of the Company Debtor, which can’t be allowed, particularly within the context of the authority imposing penalty, ie: the native authority worrying basically with the event of the realm underneath its management.”, noticed a bench of Justice J.B. Pardiwala and Justice Okay. Vinod Chandran, whereas permitting the attraction filed by the homebuyers, setting apart the Nationwide Firm Regulation Appellate Tribunal’s (NCLAT) instructions upholding the NOIDA’s demand to deal with time extension prices as CIRP prices.
The Court docket held that though the penalty on a developer is meant to behave as a deterrent towards undertaking delays, the legal responsibility to pay time extension prices can’t be imposed on the homebuyers or the Profitable Decision Applicant, significantly when the developer is in insolvency and the undertaking is being sustained by the pooled contributions of the homebuyers.
The case arose from two housing tasks developed by Granite Gate Properties Personal Restricted in Noida Sectors 100 and 110, ‘Lotus Boulevard’ and ‘Lotus Panache.’ The developer had taken perpetual lease of two plots from NOIDA to assemble high-rise condo complexes.
The developer bumped into monetary difficulties and was subjected to CIRP. The Committee of Collectors (CoC) was constituted of homebuyers, who fashioned a category of economic collectors. A Decision Plan was accepted by M/s SMV Businesses Personal Restricted because the Profitable Decision Applicant (SRA).
Through the CIRP, homebuyers pooled their very own sources underneath a CoC-approved ‘Pool and Construct’ mechanism to proceed building. Nonetheless, NOIDA sealed three towers of Lotus Panache on October 16, 2024, demanding fee of time extension prices.
The undertaking was to be accomplished in 2016, however greater than a decade later, homebuyers have been nonetheless ready for possession.
Whereas the NCLT accepted the decision plan, the NCLAT handled the time extension prices as a CIRP price, prompting the homebuyers to maneuver to the Supreme Court docket.
Setting apart the impugned order, the judgment authored by Justice Chandran held that point extension prices are penal in nature and can’t be handled as CIRP prices.
“The default prices, as imposed within the lease deed as additionally now launched as per the brand new coverage, specifies a share of the lease premium to penalise a defaulting developer. The intention can also be to inspire completion inside time strains and to behave as a deterrent to keep away from time lags. Within the current case, the defaulting developer is out of the image and the half baked undertaking will be accomplished provided that the Decision Plan is put into operation and accomplished.”, the Court docket noticed.
“…within the peculiar information and circumstances of the case, the penalty as imposed by the NOIDA on delay, now mulcted on the SRA and the homebuyers, can’t be so validly imposed. We put aside the instructions to contemplate the time extension prices as CIRP prices and modify the impugned order to that extent.”, the Court docket held.
Because of this, the homebuyers attraction was allowed, directing NOIDA to waive the penalty prices.
Trigger Title: The Authorised Consultant for Granite Gate Properties Personal Restricted Rakesh Verma Versus M/s New Okhla Industrial Improvement Authority and Ors.
Quotation : 2026 LiveLaw (SC) 893
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Look:
Mr. Dhruv Mehta, Sr. Adv. argued for the homebuyers
Mr. Rachit Mittal, Adv. argued for the NOIDA
Mr. Krishnendu Datta, Sr. Adv. argued for the Profitable decision applicant
