The Hon’ble Supreme Court vide its judgment¹ dated November 07, 2022, has recalled its previous orders² granting relief on an interim application by a real estate developer in case concerning Amrapali Group whereby the interest was capped at 8% simple interest per annum on the outstanding premium and dues to be realised by Noida and Greater Noida on the land leased to private developer. Further the Hon’ble Court in clarification stated that the intention was to cap the rate of interest to the rate charged by the Bank and the cut of date for calculation of the rate of interest was from 01.01.2010. The arrears before the abovementioned dates were to be paid as per the terms of the agreement.

It is relevant to consider the context in the which the order of the Hon’ble Supreme Court was passed. The Court was hearing the plea of the aggrieved homebuyers in the projects of Amrapali Group of Companies, wherein, an interim application was filed by the builder in the name of Ace Group claiming relief on similar lines as requested by the flat buyer of Amrapali Group. Ace group requested the Court for general reduction in rate of interest charged by Noida and Greater Noida authorities. The plea of the Ace group was that the authorities are levying excessive and penal interest in contrast to the prevailing financial market scenario. It was submitted that the rate charged ranges from 15-23% per annum with half yearly compounding. It is also the case that land allotted is sometimes encumbered and disputed and this distress has further resulted into crisis with the Covid outbreak and post covid situations. It has become almost impossible for the developers to bear the brunt and resultantly most of the projects are incomplete, leaving homebuyer empty handed.

It was argued by the authorities before the Court in the recall application that the order passed by the Hon’ble Court is without any jurisprudential basis for overriding the contractual terms between the parties. If the premium for the land is paid upfront there is no question of interest, however, if the advantage of the long lead time for payment of the premium for the land is availed, it must be on the basis of the agreed terms. The rate of interest was disclosed in the brochure, in the allotment letter and in the consequential lease deed. Consequently, amount of interest act as input and forms a part of the price payable by the consumers. The authorities also stated that it is set jurisprudence that the term of the contract cannot be altered without it being “arbitrary per say” citing the case of “Central Inland Water Transportation Corporation limited and anr. Vs Brojo Nath Ganguly and anr.”³.

It was also submitted that financial loss to Greater Noida Authority in relation to all the group housing projects would exceed Rs.4,279/- crores, while that to the Noida Authority would be more than Rs.3,000 crores.

The Hon’ble Court finally concluded in the recall application that the Court was considering the peculiar facts only in the case of Amrapali Group and since there was no general petition on behalf of any or all the builder of the Noida or Greater Noida nor the scope of the matter is wide enough, thus the relief granted was not appropriate. Further as a result of the previous order capping rate of interest, builders are now asking for adjustments of whatever they have paid earlier and also demanding refund in certain cases, where amount paid is in excess. The Court concluded that it has erred in granting relief as the impact leading to a loss of more than INR 7000 crore to the authorities was not exactly presented before, thus the orders in relation to capping the interest rate was recalled.

That the since the various orders passed by the Hon’ble Supreme Court in the present Writ Petition in respect to developers except Amrapali Group has been recalled. The State government had earlier passed an order dated 09.06.2020 considering the widespread impact on liquidity and cash flow due to Covid 19 pandemic. This order passed by UP Government reducing the rate of interest is the only solace. However, the except the limited relief provided by this order of UP Government, the terms of the contract/allotment letter/lease deed between the developer and authorities will be the governing document for deciding the interest to be charged and the arrears already due to the authorities.

By - Devesh Bhatia