Authorised Representative for Granite Gate Properties Private Limited, Ms. Rakesh Verma vs New Okhla Industrial Development Authority

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 5(13)(c) - CIRP costs - Time extension charges - Lease deed - UP Industrial Area Development Act, 1976 - Penalty for delay - Whether time extension charges payable by corporate debtor to lessor can be treated as CIRP costs - Held: In peculiar facts, where default is of corporate debtor and homebuyers and SRA are not at fault, penalty cannot be imposed as CIRP costs - Authority directed to waive penalty charges. (Paras 13-16)

Facts of the case:
The developer took perpetual lease from the local development authority for two plots to build apartment complexes. The developer became a corporate debtor and CIRP was initiated. Home buyers formed the Committee of Creditors and approved a resolution plan of the Successful Resolution Applicant (SRA). The authority claimed time extension charges for delay in completion as CIRP costs. The NCLT and NCLAT directed that time extension charges for three years be treated as CIRP costs. Appeals were filed by the home buyers and the authority.

Findings of Court:
The Court held that the penalty charges for delay cannot be imposed on the home buyers or the SRA as the default was of the corporate debtor. The essential purpose of development would fail if the authority insists on penalty. The authority's appeal seeking inclusion of further time extension charges beyond three years was also rejected.

Issues: The main issues were whether time extension charges (penalties) under the lease deed and subsequent policy should be included as CIRP costs and whether the authority can enforce such penalties against innocent home buyers and the SRA.

Ratio Decidendi: In the context of a local authority's welfare and development purpose, penalty for delay cannot be mulcted on innocent home buyers and the SRA; it is not proper to treat such charges as CIRP costs when the delay is attributable solely to the corporate debtor.

Result: Civil Appeal No.3132 of 2026 allowed (home buyers' appeal), Civil Appeal No.4207 of 2026 dismissed (authority's appeal). The directions to treat time extension charges as CIRP costs were set aside.

Legal Category Hierarchy

1. Home buyers invested in apartments; developer corporate debtor; dispute over lease extension charges as CIRP costs. (Para 1 , 2 , 3 , 4 , 5 )

2. Home buyers' representative argued time extension charges not CIRP costs; NOIDA argued they are necessary for project continuation. (Para 7 , 8 , 9 , 10 )

3. Court waived penalty, set aside inclusion as CIRP costs, dismissed NOIDA's appeal. (Para 16 , 17 )

4. Are time extension charges under a lease validly treated as CIRP costs when the delay is caused solely by the corporate debtor?

No; the court held that such penalty charges cannot be imposed on home buyers or the resolution applicant as they are not responsible for the delay. (Para 11 , 12 , 13 , 14 , 15 , 16 )

5. Are time extension charges for periods beyond the original lease term under a new policy also recoverable as CIRP costs?

No; the court rejected NOIDA's appeal seeking such charges, affirming they are not recoverable in these circumstances. (Para 16 , 17 )

JUDGMENT :

K.VINOD CHANDRAN, J.

Yet another case highlighting the plight of home buyers, who invest their hard-earned life savings for a roof over their heads, on promises of living in style and luxury, in grandiose high-rise buildings promised by the developer, with exotic names, end up with the realization that it was all a pipe dream.

2. Here, we are faced with a developer who took on perpetual lease, at a high premium, two plots of land to put up highrise buildings; apartment complexes thereon. On lease granted by the New Okhla Industrial Development Authority (NOIDA), two projects were advertised; one in Sector 100 and the other in Sector 110, called project ‘Lotus Boulevard’ and project ‘Lotus Panache’ respectively.

3. The developer M/s Granite Gate Properties Private Limited, ran into rough weather and was declared a Corporate Debtor (CD). The Committee of Creditors (CoC) was constituted of the home buyers who formed a Class of Financial Creditors. A Resolution Plan was approved and is to be put in motion through the Successful Resolution Applicant (SRA).

4. Numerous IAs were filed before the adjudicating authority, the NCLT, which was disposed of together with an IA filed by the Resolution Professional (RP) to approve the Resolution Plan of M/s SMV Agencies Private Limited, who has now turned the SRA.

5. From amongst the various directions passed by NCLT, an appeal was filed by the Authorized Representative for M/s Granite Gate Properties Private Limited, essentially the home buyers (herein after referred to as AR), NOIDA too filed an appeal.

6. In the appeal before us, the AR is concerned with the order of the NCLAT which directed the time extension charges with regard to both the lease deeds to be treated as CIRP costs for the maximum period of three years provided in the lease deed, for completion of the project. Insofar as NOIDA is concerned, they assert that the time extension charges are sought, not for three years alone, but for the further period as introduced by office order dated 18.10.2019, which are also to be included as CIRP costs.

7. Mr. Dhruv Mehta, learned Senior Counsel appearing for the AR submitted that during the CIRP, the home buyers pooled their own resources as advance payment of the balance sale consideration and carried out the construction as a going concern under the CoC approved 'Pool and Build' mechanism. However, NOIDA sealed three towers of the Lotus Panache on 16.10.2024 till a decision is arrived on the time extension charges. As far as time extension charges are concerned it does not come under Section 5(13)(c) of the Regulations since neither is it incurred by the Resolution Professional nor does it concern itself with the continuation of the project.

8. The time extension charges were claimed by NOIDA as dues payable by the Corporate Debtor for the first year from December 2016 to December 2017, the second year from December 2017 to December 2018 and in the third year from December 2018 up to the insolvency commencement date on 10.01.2019. If at all, the time extension charges are to be paid as CIRP costs only the remaining period from 10.01.2019 would stand included. The time extension charges in any event are penal in nature and the developer who has caused the default having ended up in a CIRP, the inclusion as CIRP costs would be unjust and misconceived. The default was of the developer and homebuyers cannot be mulcted with that liability.

9. Mr. Rachit Mittal, learned counsel appearing for the appellant-NOIDA in Civil Appeal No.4207 of 2026, on the other hand asserted that without payment of the time extension charges, there is no question of the project being continued and hence it has to be included as CIRP costs. It is also pointed out from the lease deed that the lease would be governed by the provisions of the UP Industrial Area Development Act, 1976 as also by the Rules/Regulations made or directions issued under this Act. NOIDA has come out with an office order dated 18.10.2019, a

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2026 Supreme(SC) 1071

Time extension charges (penalties) for project delay cannot be treated as CIRP costs when the delay is attributable to the corporate debtor and not to home buyers or the resolution applicant.

Legal Category Hierarchy

Table of Contents

4. Are time extension charges under a lease validly treated as CIRP costs when the delay is caused solely by the corporate debtor?

5. Are time extension charges for periods beyond the original lease term under a new policy also recoverable as CIRP costs?

Judicial Analysis