The Supreme Court on Tuesday granted relief to over 4,200 home and office space buyers of the stalled Earth Infrastructures Limited projects which is currently under corporate insolvency resolution process (CIRP)[Alpha Corp Development Vs Greater Noida].
A Bench of Justices PV Sanjay Kumar and Alok Aradhe restored the resolution plans submitted by two firms, Roma Unicon Designex Consortium and Alpha Corp Development Private Limited, for the completion of the projects
The Court also criticised the Greater Noida Industrial Development Authority (GNIDA) for its persistent inaction and ineptitude.
"The inertia on the part of GNIDA and its failure to protect the interests of the home/office space buyers, apart from its own interests, clearly disentitles it from levying penal interest/penal charges/time-extension penalties at this stage," the Court said.
However, it permitted recovery of principal amount.
Earth Infrastructures Limited was developing several real estate projects through its subsidiaries and related entities.
GNIDA had leased land for three projects - Earth Towne, Earth TechOne and Earth Sapphire Court. Earth Copia was on freehold land in Gurugram.
Home and office space buyers booked units in these projects and paid substantial amounts.
However, construction later stalled.
In 2018, a financial creditor, Deepak Khanna, initiated insolvency proceedings against Earth Infrastructures Limited before the National Company Law Tribunal (NCLT).
During the CIRP, the resolution professional invited resolution plans project-wise. The Committee of Creditors eventually comprised HDFC Bank and 4,229 home and office space buyers.
Roma Unicon Designex Consortium submitted a plan for Earth Towne.
Alpha Corp Development Private Limited submitted a plan for Earth TechOne, Earth Sapphire Court and Earth Copia.
GNIDA claimed dues against the entities holding the leased land.
After the NCLT approved the resolution plans, GNIDA challenged the orders before the NCLAT.
The NCLAT set aside the NCLT orders approving the resolution plans of Roma Unicon Designex Consortium and Alpha Corp Development Private Limited.
It held that lands leased by GNIDA to subsidiaries of Earth Infrastructures Limited could not be dealt with in the CIRP of the parent company without GNIDA’s permission.
The NCLAT said GNIDA should have been made a party before any resolution plan involving its leased lands was approved.
It also faulted the resolution professional for not keeping GNIDA informed of the CIRP.
However, the NCLAT also criticised GNIDA. It said GNIDA had not been diligent in recovering its dues or monitoring the projects.Therefore, it directed GNIDA to waive penal interest and recalculate its dues.
This led to an appeal being filed before Supreme Court.
The Supreme Court partly disagreed with the consequences imposed by the NCLAT. It found that while GNIDA’s interests had to be protected, the solution could not be one that further delayed the projects and harmed home and office buyers.
The Court noted that the projects had remained stalled for years and that buyers had already suffered due to delayed construction. It said Alpha and Roma must pay GNIDA’s recalculated principal dues, but the burden should not be passed on to buyers.
"We would expect Alpha and Roma, the successful resolution applicants, to stand by their commitment that such dues would not be burdened upon the home/office space buyers who have already suffered sufficiently by the delay in the execution of the projects. The said dues shall be cleared by Alpha and Roma on their own," the Court said.
GNIDA was directed to recalculate its dues after excluding penal interest, penal charges and time-extension penalties. It must communicate the recalculated amount to Alpha and Roma within two weeks, the Court made it clear.
The dues must be cleared in equated monthly instalments over 24 months. The first instalment has to be paid on or before July 7, 2026.
The Court also directed that registration of homes and office spaces in favour of allottees can take place only after GNIDA’s dues are fully paid and with GNIDA’s active participation, so that buyers are conferred the status of sub-lessees.
The timeframes for completion of the projects under the resolution plans will begin from June 1.
Thus, the Court allowed the appeals filed by Alpha, Roma, Earth Towne Flat Buyers Welfare Association, Earth Copia Owners Society and Unific TechOne Patrons Independent Association. It dismissed GNIDA’s appeals against denial of penal interest.
The Court also rejected several intervention applications filed by individual home and office buyers after concluding that their interests were sufficiently represented by the associations before the Court.
Alpha Corp Development Private Limited was represented by Senior Advocates Abhishek Manu Singhvi and Dhruv Mehta along with advocates Sameer Abhyankar, Sandeep Bhuraria, Vatsala Pandey, Rahul Kumar and Aakash Thakur.
Roma Unicon Designex Consortium was represented by advocates Sumesh Dhawan, Nand Kishor Jha, Satyam Sinha, Vagisha Kashyap and Sumit Srivaastava.
Earth Copia Owners Society was represented by Senior Advocate Menaka Guruswamy.
Earth Infrastructures Limited was represented by Senior Advocate Nakul Dewan.
Earth Towne Flat Buyers Welfare Association was represented by Senior Advocate Meenakshi Arora.
GNIDA was represented by Advocate Binay Kumar Das.
[Read Judgment]