February 08, 2023
Builders in Noida plead with SC to recall order on the rate of interest
The Supreme Court was petitioned on Tuesday by the Confederation of Real Estate Developers of Noida and Greater Noida to review its decision from November 2017 that nullified the 2020 order capping the rate of interest on late payments by builders at 8% and allowed the authority to charge interest according to the agreement, which is in the range of 15%–23%.
For the past three years, the rate of interest debate has been interminably divisive. First, the Supreme Court capped the interest rate at 8% in June 2020, after reducing it from somewhere between 15% and 23%, depending on the terms of the contract. The court determined that the majority of the projects in Noida and Greater Noida were stalled because of the companies' financial difficulties and provided the builders with much-needed relief.
The authorities in Noida and Greater Noida then requested the recall of that ruling, claiming that the interest rate cap would cause them to lose Rs 7,500 crore. The Supreme Court accepted their request, recalled the ruling, and abolished the interest rate cap in November of last year, nearly two and a half years after it issued the order. The builders have since moved SC, asking for the restoration of the 2020 order and the recall of the recalled order.
Before a bench of justices, Ajay Rastogi and Bela Trivedi, and senior attorneys Abhishek Manu Singhvi, Ranjit Kumar, and Shekhar Naphade for the builders, argued that the 2020 order was a well-reasoned order that was given after careful thought and that there was no need to recall that order. Builders had a difficult time during the pandemic, according to Singhvi, who also informed the court that any benefits the company received from the reduced interest rate would be passed on to the customers and that the court could keep an eye on it.
In its 2020 order, the Supreme Court stated that the Amrapali Group of Companies-related bench had handled the case. The facts outlined also demonstrate how an unrelated issue ended up being handled by the bench that was primarily in charge of Amrapali Group of Companies' problems. When these orders were passed, no appropriate notice was given to the relevant authorities, and the court was also not informed of the precise effects of the rulings. We must conclude that this court erred in awarding relief to initiatives other than those of the Amrapali Group of Companies.
The court had capped lending rates in 2020, stating that the real estate industry needed to be "given momentum" and that relief should be given to builders since many of them were struggling to survive due to the slowing in the economy and the COVID-19 outbreak.