SC: Homebuyers & SRA Cannot Be Burdened With Developer’s Past Delay Penalties

On September 03, 2026, the Hon’ble Supreme Court, in The Authorised Representative for Granite Gate Properties Pvt. Ltd. v. M/s New Okhla Industrial Development Authority & Ors., (2026 INSC 952; Civil Appeal Nos. 3132 and 4207 of 2026), held that time-extension charges arising from the erstwhile developer’s default could not be imposed upon the homebuyers and the Successful Resolution Applicant (SRA) as Corporate Insolvency Resolution Process (CIRP) costs.

The case concerned two residential projects, Lotus Boulevard and Lotus Panache, developed by Granite Gate Properties Pvt. Ltd. on land leased by the New Okhla Industrial Development Authority (NOIDA). The developer was subsequently declared a Corporate Debtor, following which a Committee of Creditors (CoC), comprising the homebuyers as a class of financial creditors, was constituted. A Resolution Plan was approved, with SMV Agencies Pvt. Ltd. emerging as the SRA.

During the CIRP, the homebuyers pooled their resources towards the balance sale consideration and continued construction under a CoC-approved “Pool and Build” mechanism.

The original lease deeds prescribed time-extension charges of 4%, 5% and 6% of the lease premium for the first, second and third years of delay, respectively. NOIDA subsequently relied upon its office orders dated June 18, 2015 and October 18, 2019 to seek charges beyond three years and up to the tenth year.

The authorised representative for the homebuyers contended that the charges were penal in nature and arose from the Corporate Debtor’s default. It was argued that such charges did not fall within Section 5(13)(c) of the IBC, as they were neither incurred by the Resolution Professional nor concerned with the continuation of the project, and that liabilities arising before the insolvency commencement date of January 10, 2019, could not be shifted to the CIRP.

NOIDA, on the other hand, contended that payment of the charges was necessary for continuation of the project.

The Court examined the purpose of the NOIDA lease and noted that the land had been acquired for development of an urban and industrial township, including housing. While NOIDA was engaged in a commercial venture, its role could not be divorced from its broader developmental and welfare objectives.

The Court observed that the time-extension charges were intended to penalise the defaulting developer and deter delay. However, the developer responsible for the delay had entered insolvency, while the homebuyers and the SRA were left to complete the project. The project, originally scheduled for completion in 2016, remained incomplete nearly a decade later.

The Court held that it was only proper that NOIDA waives the penalty charges since it was neither the default of the homebuyers nor the default of the SRA, which led to the delay. The homebuyers and the SRA were sought to be penalised for past sins of the Corporate Debtor, which could not be allowed, especially in the context of the authority imposing penalty, ie: the local authority being concerned essentially with the development of the area under its control.

Thus, the Court set aside the directions treating the time-extension charges as CIRP costs and rejected NOIDA’s claim for charges beyond three years and up to the tenth year. Civil Appeal No. 3132 of 2026 was allowed, while Civil Appeal No. 4207 of 2026 filed by NOIDA was dismissed.