A builder defaults. The project is stalled. Homebuyers — who have already paid substantial amounts — are now being asked to pool additional money to complete the project through the insolvency resolution process. And NOIDA — the authority that gave the builder permission — is now demanding time extension charges for the delayed project from the homebuyers. The Supreme Court has said: this is not permissible. Homebuyers cannot be made to pay for the builder's sins.

What Happened

In a Corporate Insolvency Resolution Process (CIRP) involving two delayed high-rise projects by Granite Gate Properties, NOIDA demanded that its time extension charges be treated as insolvency process costs — meaning the homebuyers' pooled funds and the resolution applicant would have to pay these charges. NCLAT upheld NOIDA's demand. The Supreme Court reversed it.

What the Court Held

Homebuyers who constitute a class of financial creditors in the CIRP of a defaulting developer cannot be saddled with the liability to pay time extension charges — especially when the project is being completed with the pooled financial contributions of the homebuyers themselves.

The Court stated: "The homebuyers and the SRA (Successful Resolution Applicant) are sought to be penalised for past sins of the Corporate Debtor, which cannot be allowed."

The Principle

It is a well settled principle that homebuyers who are financial creditors in an insolvency proceeding cannot be held liable for penalties arising from the developer's own defaults. They are victims of the developer's non-performance — not successors to the developer's obligations toward NOIDA or other development authorities.

Practical Guidance for Homebuyers in Stalled Projects

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If your builder's project is in CIRP and you are being asked to contribute to NOIDA/development authority charges or penalties — challenge this demand. The Supreme Court has confirmed that such charges cannot be passed on to homebuyers.

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Register your claim as a financial creditor in the CIRP through the Resolution Professional. Homebuyers who have paid instalments are financial creditors and have voting rights in the Committee of Creditors.

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RERA remedies remain available even during CIRP in many states — check whether the Rajasthan REAT can be approached for interest and compensation for delayed possession alongside the CIRP process.

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If a resolution plan is being approved that imposes development authority charges on homebuyers — object to the plan before the NCLT. Cite this Supreme Court ruling in your objection.

Case Reference
Authorised Representative For Granite Gate Properties Private Limited Rakesh Verma v. M/S New Okhla Industrial Development Authority and Ors. | 2026 LiveLaw (SC) 893 | Hon'ble Justice J.B. Pardiwala & Hon'ble Justice K. Vinod Chandran | September 3, 2026 | Hon'ble Supreme Court of India

Frequently Asked Questions

Questions people commonly search on this topic

Can NOIDA charge time extension fees from homebuyers if the builder defaulted? +
No. The Supreme Court has held that homebuyers who are financial creditors in a CIRP cannot be made to pay time extension charges imposed on the developer for delayed construction. Homebuyers are victims of the builder's default, not successors to the builder's obligations.
Are homebuyers financial creditors under the IBC? +
Yes. The Insolvency and Bankruptcy Code (Amendment) Act, 2018 recognized homebuyers who have entered into agreements to purchase units in real estate projects as financial creditors. They can register their claims in the CIRP, participate in the Committee of Creditors, and have voting rights in the insolvency process.
What should homebuyers do if their builder's project is in insolvency? +
Register your claim immediately with the Resolution Professional as a financial creditor. Keep all payment receipts and the allotment letter. Attend the Committee of Creditors meetings through your Authorised Representative. Challenge any resolution plan that imposes additional liabilities on homebuyers for the builder's defaults.
Can homebuyers claim RERA relief even if the builder is in CIRP? +
This is a complex question with ongoing litigation. In many states, RERA proceedings can continue alongside CIRP, as the Supreme Court has held in various cases. Approach a lawyer for advice on the specific situation, as Rajasthan RERA and the NCLT may need to be approached separately.