The Supreme Court on Thursday set aside the Noida Authority's penalty for delayed construction of two housing projects under insolvency proceedings, ruling that homebuyers and the successful resolution applicant cannot be made to pay for delays caused by the original developer. According to reports from LiveLaw, the top court was hearing a plea by homebuyers of Noida's Lotus Boulevard and Lotus Panache projects, developed by Granite Gate Properties Private Limited, who challenged a July 2025 NCLAT order directing them to pay "time extension" charges to the Noida Authority.
The developer had taken two plots on lease from the authority to build high-rise apartments, but after facing financial difficulties, it entered the Corporate Insolvency Resolution Process (CIRP), with the homebuyers constituting the Committee of Creditors (CoC). As reported by LiveLaw, a resolution plan by SMV Agencies Private Limited was later approved, making it the successful resolution applicant. The project was originally scheduled for completion in 2016, but despite another decade passing, homebuyers remain incomplete.
During the insolvency process, the homebuyers pooled their money under a CoC-approved 'Pool and Build' mechanism to continue construction. However, according to LiveLaw, the Noida Authority sealed three towers of Lotus Panache on October 16, 2024, over unpaid time extension charges. The court noted that imposing the charges on the homebuyers or the SRA would penalise parties that were not responsible for the project's delay.
A bench comprising Justices JB Pardiwala and K Vinod Chandran observed that the homebuyers and the SRA are sought to be penalised for past sins of the Corporate Debtor, which cannot be allowed. As reported by Hindustan Times, the bench stated that "the essential purpose of development would fail if Noida brings in a stipulation of payment of default charges." The court noted that the time extension charges, imposed as a percentage of the lease premium, are intended to penalise defaulting developers and deter delays, but in this case, the original developer was "out of the picture," while the stalled project could only be completed through the implementation of the resolution plan.
The Supreme Court held that the penalty as imposed by the Noida Authority on delay, now mulcted on the SRA and the homebuyers, cannot be validly imposed. According to LiveLaw, the court set aside the directions to consider the time extension charges as CIRP costs and modified the impugned order accordingly. The ruling establishes that homebuyers cannot be made to pay for the "past sins" of the Corporate Debtor, particularly in cases where the original developer is no longer involved in the project.
