The Supreme Court has ruled that time extension penalties imposed on a bankrupt real estate developer cannot be recovered as Corporate Insolvency Resolution Process (CIRP) costs from distressed homebuyers. A bench comprising Justices JB Pardiwala and K Vinod Chandran set aside a National Company Law Appellate Tribunal ruling that had previously directed a committee of creditors composed of homebuyers to settle penalty charges levied by the New Okhla Industrial Development Authority.
The litigation centered on the stalled Lotus Boulevard and Lotus Panache housing projects located in Noida's Sectors 100 and 110, which have remained incomplete for a decade. The original developer, Granite Gate Properties Private Limited, defaulted and slipped into insolvency proceedings, prompting homebuyers to pool personal funds under a specialized 'Pool and Build' mechanism before SMV Agencies Private Limited stepped in as the successful resolution applicant.
The apex court strongly criticized the appellate tribunal's decision, emphasizing that both the homebuyers and the incoming resolution applicant were unfairly burdened with financial obligations stemming from the original developer's defaults. The bench expressed deep sympathy for buyers who had committed their lifetime savings to residential projects that ultimately stalled.
_“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,
