Supreme Court of India· 03 September 2026

Whether the time extension charges are to be treated as CIRP costs?

The Authorised Representative for Granite Gate Properties Private Limited, Ms. Rakesh Verma v. M/s New Okhla Industrial Development Authority and Ors

2026 INSC 952 · Civil Appeal No. 3132 of 2026
Coram: Justice J. B. Pardiwala · Justice K. Vinod Chandran

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Answer

No. The default charges, as imposed in the lease deed and as introduced by the new policy, specify a percentage of the lease premium to penalise a defaulting developer, the intention being to motivate completion within time lines and to act as a deterrent against time lags. Here the defaulting developer is out of the picture and the half-baked project can be completed only if the Resolution Plan is put into operation. The directions to consider the time extension charges as CIRP costs were set aside.

Headnote

Corporate insolvency resolution process — CIRP costs — Perpetual lease granted by a development authority — Time extension charges — Penalty — Homebuyers as financial creditors — Successful Resolution Applicant — CIRP costs — Time extension charges are penal in nature — Not includible — Held: Time extension charges imposed as a percentage of the lease premium to penalise a defaulting developer are penal in nature, and the directions to treat them as CIRP costs cannot be sustained. (¶14, 16) Penalty — Default of the Corporate Debtor — Homebuyers and the Successful Resolution Applicant — Held further: The homebuyers and the Successful Resolution Applicant cannot be penalised for the past sins of the Corporate Debtor, neither of them having caused the delay; the authority imposing it is concerned essentially with development of the area under its control. (¶15) Development authority — Commercial venture — Welfare purpose — Held further: A development authority is involved in a commercial venture, but that cannot be divorced from the essential purpose every local authority pursues — welfare measures without a mere profit motive. The essential purpose of development would fail if default charges are insisted upon. (¶12, 13) Time extension charges — Beyond the three years stipulated — Disposal — On facts, held: The penalty now mulcted on the SRA and the homebuyers cannot validly be imposed. Directions to treat the time extension charges as CIRP costs set aside; the authority’s claim for charges beyond three years rejected. (¶16, 17)

In the Court's own words

Paragraph 11We are hence concerned with the issue as to whether the time extension charges are to be treated as CIRP costs. We have looked at the lease agreement produced as Annexure A1 in the appeal filed by NOIDA. The lease deed indicates that the plot demised on lease has 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.

Paragraph 14The default charges, as imposed in the lease deed as also now introduced as per the new policy, specifies a percentage of the lease premium to penalise a defaulting developer. The intention is also to motivate completion within time lines and to act as a deterrent to avoid time lags. In the present case, the defaulting developer is out of the picture and the half baked project can be completed only if the Resolution Plan is put into operation and completed.

Paragraph 16We hence, order that in the peculiar facts and circumstances of the case, the penalty as imposed by the NOIDA on delay, now mulcted on the SRA and the homebuyers, cannot be so validly imposed. We set aside the directions to consider the time extension charges as CIRP costs and modify 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.

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Also decided in this judgment

Can homebuyers and a Successful Resolution Applicant be made to bear penalty charges for the developer's delay?Is a development authority's lease of land to be treated as a purely commercial venture?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections