Verdict
Responsibility Government body for Public Welfare in a Commercial Venture
In Supreme Court, Civil Appellate
Appeal No. 3132 of 2026
(along with No. 4207 of 2026)
Authorised Representative [AR] of
Granite Gate Properties Pvt. Ltd. . . . . . . . . . . . . . . . . . . Appellant(s)
Vs
New Okhla Industrial Development Authority Ltd [NOIDA]
& Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Respondent(s)
Recently, the Supreme Court delivered a nuanced order on disputes between home buyers and property developers.
Facts
- NOIDA, a U.P. government body established to develop industry and infrastructure in Gautham Buddha Nagar district near Delhi, gave two plots of land on perpetual lease to Granite Gate Properties Pvt Ltd [Developer] for building residential flats as part of the overall development of the area.
- The Developer began two residential projects – “Lotus Boulevard” and “Lotus Panache” – with money collected from buyers, in 2013, to be completed in 3 years i.e. by 2016.
- Terms of the lease included levy by NOIDA on the Developer of penal (‘time extension’) charges of 4%, 5% and 6% of lease value for delays of 1 year, 2 years and 3 years beyond the 3-year completion period; delay beyond 3 years after original completion period entailed cancellation of the lease itself.
- Developer defaulted and became a ‘corporate debtor’, thus coming under purview of National Company Law Tribunal [NLCT] for resolving situation arising out of Developer’s insolvency.
- Buyers who had invested in these two projects formed a Committee of Creditors [CoC] to continue with construction under a ‘Pool and Build’ mechanism. A Corporate Insolvency Resolution Process [CIRP] was initiated by NCLT and a Resolution Plan was approved. A Successful Resolution Applicant [SRA] was nominated for executing the CIRP.
- By this time, original completion date of 3 years expired and NOIDA blocked the lease until all its penal dues as per lease deed and subsequent office orders were settled by Developer.
- NLCT issued several orders as part of CIRP, among them (i) time extension charges to be levied on the lease deeds for the delayed period of 3 years (ii) these charges to be treated as CIRP Cost, meaning this Cost gets priority for settlement in insolvency situations.
- NOIDA had issued office orders in 2015 and 2019 (i) altering maximum delay period from 3 to 10 years (ii) proportionately enhancing time extension charges up to 10% (iii) 1% charge for each year of delay beyond 10 years, without cancelling the lease (iv) these charges to be treated as CIRP Cost.
- NOIDA filed appeal in Supreme Court for implementation of its orders. The CoC filed a counter appeal through Authorised Representative [AR] of Developer in whose name the leases still existed.
Issues involved
- Whether the Buyers can be penalised by way of time extension charges by NOIDA in a lease agreement it had entered into with the Developer who has defaulted and became insolvent?
- Whether the time extension charges can be treated by NCLT and NOIDA as CIRP Costs that are under Insolvency and Banking Code [IBC] of 2016?
Analysis & Judgement
The considered opinion of honourable Supreme Court in these appeals is as follows:
- The land covering the disputed projects has been acquired by NOIDA under Land Acquisition Act of 1894 for the stated developmental purpose of setting up an urban and industrial township. NOIDA’s subsequent agreement of lease with Developer is also for the same purpose of development of industrial infrastructure which includes housing in the area of development.
- While giving due importance to commercial terms of the lease agreement, NOIDA cannot lose sight of the underlying objective of the lease agreement and cannot be divorced from the essential functions of welfare and development that every government authority is expected to perform in their endeavours.
- The dispute has arisen only because Developer had delayed the projects and became a corporate defaulter; the Buyers were in no way responsible either for the project delay or Developer’s insolvency situation.
- Instead of passively becoming claimants for possession or litigants, the Buyers pooled their hard-earned resources and undertook to complete the projects. They proactively formed themselves into a CoC and entered the CIRP with the objective of completing the projects even under unfavourable circumstances.
- Penalising the Buyers with time extension charges for delay caused by Developer would be improper and a travesty of justice, especially when they have ventured to complete the projects with their own resources. In essence, they could not be punished for ‘past sins’ of a corporate debtor, in this case the Developer.
- IBC of 2016 stipulates several costs as being part of CIRP Costs. In the present case, time extension charges for delay caused by Developer cannot be applied as a CIRP Cost on the CoC.
Supreme Court accepted CoC’s Appeal filed through AR, while rejecting the appeals and orders of NOIDA and NCLAT. Supreme Court also directed that:
- Time extension charges shall not be levied on the Buyers.
- Time extension charges shall not be treated as CIRP Cost.
For full text of the judgement:
https://api.sci.gov.in/supremecourt/2025/49175/49175_2025_6_1501_73956_Judgement_03-Sep-2026.pdf