The Authorised Representative for Granite Gate Properties Private Limited, Ms. Rakesh Verma v. M/s New Okhla Industrial Development Authority and Ors.
Time extension charges levied by a development authority on a defaulting developer are penal; where the delay was the corporate debtor's default and the project can only be completed under the resolution plan, they cannot be loaded on the homebuyers and the successful resolution applicant as CIRP costs.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-14
The developer Granite Gate Properties, which held two NOIDA plots for the Lotus Boulevard and Lotus Panache projects, went into insolvency, and the homebuyers formed the committee of creditors. The NCLAT had directed that NOIDA's time extension charges for three years be CIRP costs. The Supreme Court held that the charges were a penalty for the developer's default and should not be imposed on the homebuyers or the resolution applicant.
What happened
NOIDA granted the developer perpetual leases of two plots in Sectors 100 and 110 on which it advertised the projects Lotus Boulevard and Lotus Panache. The developer was declared a corporate debtor, the committee of creditors consisted of homebuyers as a class of financial creditors, and a resolution plan of SMV Agencies Private Limited was approved. The NCLAT directed that time extension charges under both leases be treated as CIRP costs for the maximum period of three years in the lease deed; the Authorised Representative of the homebuyers appealed and NOIDA appealed, seeking the charges also for the further period under its office order of 18 October 2019 (read with that of 18 June 2015), under which extension can run up to the tenth year at stated percentages of the premium. The charges were claimed for December 2016 to December 2017, December 2017 to December 2018 and from December 2018 until insolvency commenced on 10 January 2019. The project was to be completed in 2016.
Questions before the court
- Are NOIDA's time extension charges for the developer's delay to be treated as CIRP costs payable by the homebuyers and the resolution applicant?
Why the court ruled this way
The Court examined the lease, which showed that the plot was acquired for the development of an urban and industrial township, so that housing is an essential part of the development NOIDA is meant to promote (paragraphs 11 and 13). The homebuyers pooled money to carry on the project during the CIRP and the resolution plan was approved by a committee of homebuyers alone; the project, due in 2016, was still incomplete, and the purpose of development would fail if NOIDA imposed default charges (paragraph 13). The default charges, a percentage of the premium, penalise a defaulting developer and deter delay, but the defaulting developer was out of the picture and the project could only be completed through the resolution plan (paragraph 14). It was proper that NOIDA waive the penalty charges, since neither the homebuyers nor the resolution applicant caused the delay and they cannot be penalised for the past sins of the corporate debtor (paragraph 15).
Controlling point
Penal time extension charges for the developer's delay cannot be validly imposed on the homebuyers and the resolution applicant or treated as CIRP costs.
Order and next steps
The directions to treat the time extension charges as CIRP costs were set aside and the impugned order modified to that extent. NOIDA's appeal for charges beyond three years up to the tenth year was rejected. Civil Appeal No. 3132 of 2026 was allowed, Civil Appeal No. 4207 of 2026 dismissed, and pending applications disposed of.
Practical implications
A resolution applicant or homebuyer group taking over a stalled project should challenge penal extension charges levied by a development authority for the developer's default, citing this ruling's reasoning about the purpose of development and the lack of fault.
Limits of this ruling
- The Court said the order was made in the peculiar facts of the case; it does not decide that all dues of an authority are excluded from CIRP costs, or that non-penal lease dues need not be paid.
Law and judgment source
- Insolvency and Bankruptcy Code, 2016 (CIRP costs)
- Uttar Pradesh Industrial Area Development Act, 1976
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Source checked: 2026-10-14 · Judgment paragraphs: paragraphs 1–18 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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