TaxTMI 
TaxTMI 
TIME EXTENSION CHARGES – CIRP COST?
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....IME EXTENSION CHARGES – CIRP COST?<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Corporate Laws / IBC / SEBI<br>Dated:- 22-9-2026<br>Time Extension Charges The expression 'time extension charges, generally refers to an amount collected by a developer, contractor or allottee seeks additional time to perform an obligation or complete a project beyond the originally agreed contractual period. Issue The issue to be discussed in this article is as to whether the time extension charges will be the part of the cost of corporate insolvency resolution process with reference to a decided case law. Case law In The Authorised Representative for Granite Gate Properties Private Limited, Ms. Rakesh Verma Versus M/s New Okhla Industrial Developmen....
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....t Authority and Ors. - 2026 (9) TMI 357 - Supreme Court, the respondent New Okhla Industrial Development Limited ('NOIDA' for short) offered two plots of land to raise Highrise buildings, apartment, complexes etc. The project was commenced to provide housing, an essential part of development. Lured by the opportunity, many persons had invested their savings with the intention of obtaining a roof over their heads. The project is to be completed by the year 2016. The project itself ran into rough weather. Corporate Insolvency Resolution Process was initiated against the developer by the home buyers under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('Code' for short). Resolution Plans were sought by issuing advertisements by the Reso....
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....lution plan. One SRA submitted the resolution plan. The same was approved by the Committee of Creditors. Many IAs were filed before the National Company Law Tribunal ('NCLT' for short). The Resolution Professional also filed an IA before the NCLT for the approval of the resolution plan submitted by SMV Agencies Private Limited. An appeal was filed by the Resolution Professional before the National Company Law Appellate Tribunal ('NCLAT' for short) by the representative of the Developer. NOIDA also filed an appeal before the NCLAT. The NCLAT directed the time extension charges with regard to both the lease deeds to be treated as CIRP costs for the maximum period of three years provided in the lease deed, for completion of the project. NOI....
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....DA asserted that the time extension charges are sought, not for three years alone, but for the further period as introduced by office order dated 18.10.2019, which are also to be included as CIRP costs. Against this order, all the parties filed appeal before the Supreme Court. The Authorised representative submitted the following before the Supreme Court- • During the CIRP, the home buyers pooled their own resources as advance payment of the balance sale consideration and carried out the construction as a going concern under the Committee of Creditors ('CoC' for short) approved 'Pool and Build' mechanism. • NOIDA sealed three towers of the Lotus Panache on 16.10.2024 till a decision is arrived on the tim....
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....e extension charges. • As the time extension charges are concerned it does not come under Section 5(13)(c) of the Regulations since neither it is incurred by the Resolution Professional nor does it concern itself with the continuation of the project. • The time extension charges in any event are penal in nature and the developer who has caused the default having ended up in a CIRP, the inclusion as CIRP costs would be unjust and misconceived. • The default was of the developer for which the homebuyers cannot be mulcted with that liability. NOIDA, in their appeal, submitted the following before the Supreme Court- • Without payment of the time extension charges, there is no question of th....
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....e project being continued and hence it has to be included as CIRP costs. • The lease would be governed by UP Industrial Area Development Act, 1976 as also by the Rules/Regulations made or directions issued under this Act. • As per the prevailing policy which, read with earlier office order dated 18.06.2015 has stipulated time extension, even beyond three years up to the 10th year. • As per the new policy 7, 8, 9 and 10 percentage respectively for the first four years and thereafter at 1% of the total premium per year up to the 10^th year and cancellation after that, which too has to be included as CIRP costs. The SRA submitted the following before the Supreme Court- • In the resolution ....
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....plan contingent protection is capped at the overlap period balance alone. • the resolution plan itself records that unless specifically adjudicated to form part of CIRP costs by a binding judicial pronouncement any cost above Rs.3 crores estimate shall first be recovered from the allottees of towers 17/18/19 of Lotus Panache as super area charge. The Supreme Court considered the submissions of all the parties concerned. The Supreme court is to decide the issue as to whether the time extension charges are to be treated as CIRP costs. The Supreme Court observed that 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 ....
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....up an 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. The Supreme Court observed that the original lease deed existed, the stipulation for time extension charges were at 4%, 5% and 6% in the first, second and the third years of delay, respectively with only a stipulation for cancellation of the lease itself after the 3 year period is over. The Supreme Court further observed that even though the authority is involved in a commercial venture, it cannot be divorced from the essential purpose which every local authority pursues and advances, i.e., welfare....
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.... measures without a mere profit motive. The project was to be completed in the year 2016, and despite another decade having passed, the homebuyers are still left in the lurch. The essential purpose of development would fail if NOIDA brings in a stipulation of payment of default charges. The Supreme Court observed that 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. The Supreme Court was of the opinion that it is only proper that NOIDA waives the penalty charges since it is neither the default of the homebuyers nor the default of the SRA, which led to the delay. The Supreme Court did not allow the home buyers and SRA to be penalised....
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.... for the wrongdoing of the corporate debtor. The Supreme Court set aside the directions to consider the time extension charges as CIRP costs and modify the impugned order to that extent. The Supreme Court also rejected the request of NOIDA for time extension charges even beyond the three years up to the 10^th year. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....