Wave Mega City Center (WMCC) Private Limited, the company that was developing mega commercial – cum – residential project in Noida has filed an application in NCLT to initiate voluntary resolution process to protect the interest of hundreds of buyers in the project, who are left stranded after an unreasonable decision of Noida Authority.
Noida Authority’s abrupt decision to seal the residential-cum-commercial project in the prestigious Sectors 32 and 25 is being seen as an attempt to settle a commercial dispute through arbitrary means.
Wave Mega City Center (WMCC) has invested over Rs 3,800 crore in the project which includes investment of Rs 2,213 crores by its promoters and their associates. Besides this, a sum of Rs 200 crore has been raised as bank loan, and buyers have paid the balance amount of around Rs 1400 crore. Of this, more than Rs 2000 crore is paid to various Government agencies that include around Rs. 1600 crore to the Noida Authority.
According to Mr Rajiv Gupta- Managing Director of Wave Infratech,“Wave Mega City Centre (WMCPL) Private Limited has filed an application to initiate the corporate insolvency resolution process before the NCLT, Delhi due to the arbitrary and unreasonable decision of the authorities, causing immense loss to the company. The fact that the promoters and their associates have invested over Rs 2200 crore, reflect our commitment to the project. In the given situation, we were compelled to take this decision in the best interest of the buyers.”
The move is aimed at protecting the interest of buyers, as under IBC resolution plan, buyers’ interest fall in top priority even before financial creditor. WMCC is a special purpose vehicle (SPV) for this project and it does not have any investment into any other group company.
Wave Mega City Center Private Limited acquired 6.18 lakh sq. meters of land on a leasehold basis in 2011, spread between Sector 25 and 32 in Noida for around Rs 6,622 crore at the rate of Rs 1.07 lakh per sq. meter. As per the original scheme, the repayment schedule was spread over 16 half-yearly instalments after a moratorium of two years. Each instalment included principal and scheduled interest.
In December 2016, the authority came out with Project Settlement Policy (PSP) to deliver timely delivery of units to the allottees and recover the outstanding dues on account instalments.
Under the PSP, the developers were allowed to retain land equivalent to 85% of the money deposited with authority. And authority was entitled to forfeit the balance of 15%. This amount does not consider payment made toward stamp duty, penal interest, restoring charges, and other statutory charges.
Accordingly, WMCC was entitled to land equivalent to Rs 1,227 crore (after deducting Rs 226 crore, which is 15% of 1443 crore). Therefore, at the allotment rate of Rs 1.07 lakh sq. meter, WMCC was entitled to 1.14 Lakh sq. meters, as per the PSP.
The authority, accepting the proposal in principal, allocated only 56,400 sq meters to WMCC as newly allotted land. It stated that the allotment was done against the principal amount of Rs 709 crore after adjusting 15%. They treated this parcel of land as fully paid up, which was not sealed.
For the rest of land measuring approximately 58,000 sq. meters against the scheduled interest of Rs 733 crore out of Rs 1,443 crore, the authority forwarded the request to the state government. In order to fulfil the commitment to its customers, WMCC also requested the authority for little over 50,000 sq. meters of land, which was allotted at the prevailing market rate of Rs 1.60 lakh per sq. meter in 2017. And, the company deposited 20 % of the consideration for this.
Three years later in 2020, the authority itself decided not to restore land against balance Rs. 733 crore, saying this amount is paid as scheduled interest and therefore cannot be treated at par with the principal, while under the PSP only penal interest is excluded.
During these three years, it did not allow Sanction of drawings / revision of Master Plan etc. on the pretext that final decision is awaited. Now, the Authority raised demand of principal and interest on the entire land retrospectively, including lease rent on a pre PSP basis.
During this period, the authority didn’t allow WMCC to open escrow account, which was available under PSP scheme. It has also not given WMCC sub-lease facility, thereby not allowing registry of the fully completed unit to the buyers. In addition even the fully paid up land, as per the Noida Authority, was impacted causing serious delays at the project site including major escalation of the project cost.
On September, 2019, the authority issued occupancy certificates for completed project worth around Rs 700 crore, it may be noted that NOIDA Authority, as per its policy, never issues and Occupancy Certificate unless the dues for the land in question have been cleared.
However, four months later, it sends a fresh demand of more than 2,500 crore to WMCC. It asked WMCC to pay the said amount within 7 days. This demand included Rs 1800 crore toward land price and balance for lease rent and interest.
Unfortunately, on March 10, 2021 land parcel admeasuring 1.08 lac sq. mtrs was acquired by Noida Authority and two towers were also sealed.