Supreme Court rules homebuyers cannot pay penalties for developer delays

The Supreme Court of India has ruled that homebuyers and new developers cannot be held liable for time-extension charges imposed by the Noida Authority due to delays caused by an insolvent developer. The ruling sets aside a previous order from the National Company Law Appellate Tribunal (NCLAT) that had required a Committee of Creditors, composed of homebuyers, to pay these penalties.

The case involved the Lotus Boulevard and Lotus Panache housing projects in Noida, which were originally scheduled for completion in 2016 before the developer, Granite Gate Properties Private Limited, entered insolvency. Under a ‘Pool and Build’ mechanism, homebuyers had collectively funded construction to resume work.

A bench comprising Justice J B Pardiwala and Justice K Vinod Chandran stated that the local authority should not be driven solely by profit and must consider the welfare of homebuyers. The court noted that the homebuyers and the successful resolution applicant should not be penalized for the ‘past sins’ of the original corporate debtor.