Background
Granite Gate Properties Pvt. Ltd. took two plots on perpetual lease from NOIDA for high-rise residential projects — Lotus Boulevard (Sector 100) and Lotus Panache (Sector 110). The developer defaulted, entered Corporate Insolvency Resolution Process (CIRP), and was declared a Corporate Debtor. Homebuyers constituted the Committee of Creditors as a class of financial creditors. A Resolution Plan of M/s SMV Agencies Pvt. Ltd. (Successful Resolution Applicant) was approved.
NOIDA claimed time-extension charges (penal charges for delay in project completion) under the lease deeds and subsequent office orders, seeking their inclusion as CIRP costs. The NCLAT directed that such charges for the maximum three-year period under the original lease be treated as CIRP costs. Homebuyers (through their Authorised Representative) challenged this; NOIDA sought inclusion of charges even beyond three years (upto the 10th year under the 2019 policy).
Supreme Court’s Ruling
The Court allowed the homebuyers’ appeal and dismissed NOIDA’s appeal.
Key Findings:
- Nature of Time-Extension Charges
These are essentially penalty charges imposed on a defaulting developer to ensure timely completion and act as a deterrent. They are not ordinary dues incurred for continuing the project as a going concern. - CIRP Costs – Limited Scope
Under the Insolvency and Bankruptcy Code and CIRP Regulations, CIRP costs are those incurred by the Resolution Professional for the continuation of the corporate debtor as a going concern. Penal charges arising from the past default of the Corporate Debtor do not automatically qualify. - Equities and Public Purpose
The Court emphasised the plight of homebuyers who had invested their life savings. During CIRP they even pooled resources under a “Pool and Build” mechanism to keep construction going. Penalising the homebuyers and the Successful Resolution Applicant for the past sins of the defaulting developer would defeat the very purpose of the resolution process and the larger public purpose of urban development and housing. - NOIDA’s Dual Role
While NOIDA is entitled to commercial returns, it is primarily a development authority concerned with welfare and infrastructure. Insisting on penalty charges in these circumstances would undermine that role.
Directions
- Directions of the NCLAT treating time-extension charges as CIRP costs are set aside.
- NOIDA cannot impose the penalty charges (whether under the original three-year clause or the extended policy up to the 10th year) on the homebuyers or the Successful Resolution Applicant in the peculiar facts of this case.
- The Resolution Plan can proceed without these charges being treated as CIRP costs.
Significance
The judgment protects homebuyers in insolvency proceedings from being saddled with penal liabilities of the defaulting developer. It reinforces that CIRP costs must have a rational nexus with the resolution process and that development authorities must balance revenue considerations with the larger public interest in completing stalled housing projects.
CASE DETAILS:
- Case Title: Authorised Representative for Granite Gate Properties Pvt. Ltd. v. New Okhla Industrial Development Authority & Ors. (with connected appeal)
- Civil Appeal Nos. 3132 & 4207 of 2026
- Citation: 2026 INSC 952
- Bench: Justices J.B. Pardiwala & K. Vinod Chandran
- Date: 03 September 2026
Click HERE for full Judgment.
Lawcutor 