Justice J. B. Pardiwala, Justice K. Vinod Chandran, Supreme Court
NOIDA Though Involved In Commercial Venture Can’t Be Divorced From Essential Purpose Of Welfare Measures Without Mere Profit Motive: Supreme Court
|The Supreme Court was considering a case involving the plight of home buyers who were left in the lurch.
While observing that the New Okhla Industrial Development Authority (NOIDA) involved in a commercial venture, cannot be divorced from the essential purpose of welfare measures without a mere profit motive, the Supreme Court has set aside the directions to consider NOIDA’s time extension charges as CIRP costs.
The Apex Court was considering a case involving the plight of home buyers, who invested their hard-earned life savings in grandiose high-rise buildings promised by the developer but were left in a lurch.
The Division Bench of Justice J. B. Pardiwala and Justice K. Vinod Chandran held, “When the development fructifies, by virtue of the taxes and duties imposed on the various activities as also housing there is considerable generation of money, which is pumped into development activities again. The authority surely is involved in a commercial venture, but it cannot be divorced from the essential purpose which every local authority pursues and advances, i.e.: welfare measures without a mere profit motive. Development brings within its wake infrastructure challenges and these are to be met from the taxes, cesses and duties levied and collected, necessitating prudent financial and economic measures too.”
Factual Background
The developer took on perpetual lease, at a high premium, two plots of land to put up high-rise buildings and apartment complexes thereon. On a 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. The developer M/s Granite Gate Properties Private Limited 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 was to be put in motion through the Successful Resolution Applicant (SRA).
Various directions passed by NCLT and an appeal was filed by the Authorized Representative for M/s Granite Gate Properties Private Limited, essentially the home buyers (AR), NOIDA too filed an appeal. In the appeal before the Apex Court, the AR was 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. NOIDA claimed that the time extension charges are sought, not for three years alone, but for the further period as introduced by office order dated October 18, 2019, which were also to be included as CIRP costs.
Reasoning
Taking note of the lease deed, the Bench noted that the same indicated that the plot demised on lease had been acquired under the Land Acquisition Act, 1894 for development by NOIDA for the purpose of setting up an urban and industrial township. “Hence, the intention of NOIDA in entering into such lease agreements is for development of urban and industrial township. An overall development of the area under its control to promote industrial and commercial enterprises as also build homesteads in multi-storeyed buildings is the purpose behind the acquisition and lease”, it added.
The Bench took note of the fact that the project was to be completed in the year 2016, and despite another decade having passed, the homebuyers were left in the lurch. “The essential purpose of development would fail if NOIDA brings in a stipulation of payment of default charge”, it mentioned.
The Bench was of the view that NOIDA should waive the penalty charges since it was neither the default of the homebuyers nor the default of the SRA, which led to the delay. The Bench thus stated, “The homebuyers and the SRA are sought to be penalised for past sins of the Corporate Debtor, which cannot 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, allowing the civil appeal, the Bench set aside the directions to consider the time extension charges as CIRP costs and modified the impugned order to that extent. “NOIDA’s appeal praying for time extension charges even beyond the three years upto the 10th year also stands rejected”, it ordered.
Cause Title: The Authorised Representative for Granite Gate Properties Private Limited v. M/s New Okhla Industrial Development Authority and Ors. (Neutral Citation: 2026 INSC 952)