GNIDA, NOIDA Not Secured Creditors In Shubhkamna Buildtech Insolvency: NCLAT

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has dismissed appeals by the Greater Noida Industrial Development Authority (GNIDA) and New Okhla Industrial Development Authority (NOIDA), holding that their lease deeds did not create a security interest that would make them secured creditors in the insolvency proceedings of Shubhkamna Buildtech Pvt. Ltd.

A bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha held that the “first charge” under the lease deeds was limited to the authorities' share of any unearned increase in the value of the land.

It was also conditional on the property being sold or a mortgage being foreclosed. No such mortgage, sale or foreclosure involving the corporate debtor's plots was shown to have occurred.

The dispute concerned the treatment of GNIDA and NOIDA's dues under the revised resolution plan dated October 12, 2019. The plan provided ₹18.5 crore towards GNIDA's dues and ₹25 crore towards NOIDA's dues. NOIDA had originally filed a claim of ₹99.32 crore, while its admitted claim was recorded at ₹41.53 crore.

Both authorities argued that their dues were secured by statutory charges under the Uttar Pradesh Industrial Area Development Act, 1976 (UPIDA). They relied on Sections 3(30) and 3(31) of the Insolvency and Bankruptcy Code (IBC) to claim the status of secured creditors. Section 3(30) deals with creditors holding a security interest, while Section 3(31) defines the nature of such a security interest.

The authorities also argued that their claims should rank alongside secured financial creditors under Section 53(1)(b)(ii) of the IBC.

The court rejected the argument after examining the relevant clauses in the two lease deeds. Clause F allowed the lessee to mortgage the land to a bank or financial institution with prior permission.

However, the lessor's first charge covered only its share of the unearned increase in land value and arose only upon sale or foreclosure of the mortgaged property.

Clause 11, which allowed arrears to be recovered as land revenue, also did not create a contractual security interest. The court held that it was a statutory recovery mechanism under the UPIDA.

The court further relied on the 2026 amendment to Section 3(31), which excludes security interests created purely by operation of law. It held that the amendment has retrospective effect.

The bench also held that the statutory-charge route recognised in the Supreme Court's decision in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni was no longer available after the amendment, insofar as the claimed security arose merely by operation of law.

The NCLAT also distinguished its earlier ruling in Assets Care & Reconstruction Enterprise Ltd., where NOIDA was treated as a secured creditor because the relevant sub-lease expressly created a general first charge securing all dues. No such clause existed in the present lease deeds.

It therefore held that the classification of GNIDA and NOIDA's claims as unsecured statutory/operational dues under the resolution plan could not be faulted on the ground that the lease deeds created a security interest. The appeals were dismissed, with no order as to costs.