Can't Allow Deliberate & Repeated Defaults By Allottee, Harmful Precedent Detrimental To Public Interest: Allahabad High Court Refuses To Restore Lease

The Allahabad High Court while refusing to restore lease of an allotee who consistently defaulted on dues over a long-term period observed that it would create a negative precedent for future allottees to disregard payment schedules and statutory obligations, anticipating eventual concessions.

The Court was considering a Writ Petition seeking quashing of an order whereby the Petitioner’s lease was cancelled.

The division bench of Justice Mahesh Chandra Tripathi and Justice Vinod Diwakar observed, "Restoration of leases after repeated defaults may be viewed as arbitrary or ultra vires, particularly when it contravenes the express terms of the allotment letter or lease deed.......A policy of restoring leases after long-term default would create a negative precedent for future allottees to disregard payment schedules and statutory obligations, anticipating eventual concessions. This undermines the deterrent effect of enforcement measures like cancellation and eauction, weakening the overall governance framework of industrial land allocation."

The Petitioner was represented by Advocate Om Prakash Shukla while the Respondent was represented by C.S.C. Anuj Pratap Singh.

Facts of the Case

The Petitioner was duly allotted the plot in question for the purpose of establishing industrial activities, in accordance with the policies and procedures prescribed by the concerned authorities.

Pursuant to the allotment, the petitioner deposited the earnest money, completed all requisite formalities, and executed a 90-year lease deed on September 25, 2020. Despite taking possession of the Plot, the Petitioner failed to deposit the balance premium amount of ₹19,82,912.03/-. She sought multiple extensions, citing financial constraints and health-related issues within her family, and even approached the Court which granted her liberty to clear the dues within a period of three months. However, upon her failure to comply with the said order, the Respondent authority cancelled the allotment vide the impugned order.

Counsel for the Petitioner contended that the Petitioner, despite facing severe financial hardships and family health emergencies, has never acted with any mala- fide intent and she is ready and willing to clear the outstanding dues along with applicable interest and penalties. It was submitted that the impugned orders are vitiated by procedural irregularities, as the Petitioner’s application for restoration of the plot was filed within one month from the date of actual service of the cancellation order. It was further argued that UPSIDA failed to consider the Petitioner’s bona fide conduct and her genuine attempts to comply with the conditions of allotment. It was also submitted that the principles of natural justice were not adhered to, and the rejection of the restoration application was mechanical and devoid of proper consideration.

On the other hand, Counsel for UPSIDA asserted that the cancellation of the Petitioner’s allotment is legal, justified, and strictly in accordance with the conditions stipulated in the allotment letter. It was submitted that UPSIDA, being a statutory authority, has an obligation to ensure the optimal utilization of industrial plots, and the prolonged non-compliance by an allottee, despite repeated indulgence and extensions, inevitably warrants cancellation. It was further contended that the fresh e-auction process initiated by the authority is a transparent and lawful mechanism to re-allocate unused industrial land to deserving applicants, thereby promoting industrial growth and public interest.

Reasoning By Court

The Court at the outset noted that the decision of the Supreme Court in Skyline Contractors Pvt. Ltd. v. State of U.P squarely applies to the facts of the present case.

"In that matter, despite partial and delayed payments by the allottee, the Hon’ble Supreme Court upheld the cancellation of allotment by NOIDA, holding that unilateral deposits made without prior approval or consent could not bind the authority. Similarly, in the present case, the petitioner neither sought nor obtained any formal extension of time from UPSIDA within the contractual framework. Her delayed restoration applications—though sought to be justified by referring to the alleged date of service—cannot cure or condone years of non-performance and breach of essential terms of allotment", the Court observed.

It also cited recent Supreme Court judgement in Kamla Nehru Memorial Trust and Others v. U.P. State Industrial Development Corporation Limited and Others,(2025 INSC 791) wherein it was held that in order to preserve the integrity of the allotment process, allowing deliberate and repeated defaults by an allottee to persist unchecked would undermine the entire framework of land allocation and set a harmful precedent detrimental to public interest.

The Court was not persuaded to accept the Petitioner’s explanation of financial hardship and medical exigencies as a valid justification for years of non-compliance with the essential terms of the allotment and lease.

"While the Court is mindful of and sympathetic to the petitioner’s personal circumstances, a mere expression of willingness to pay outstanding dues after the initiation of e-auction proceedings or subsequent to the cancellation of the allotment cannot obliterate a prolonged and wilful failure to adhere to contractual obligations. Equity, though an integral facet of the writ jurisdiction, cannot be invoked in favour of a party who has consistently failed to perform its obligations under the allotment and lease conditions," the Court observed.

It emphasized that the cancellation of the allotment was not predicated merely upon any delay in filing the restoration application but was fundamentally based on the Petitioner’s sustained failure to adhere to the core obligations under the lease and held that this is not a case where a minor procedural lapse alone resulted in the cancellation; rather, it is one of repeated and substantial non-compliance with essential conditions.

Noting that there are far reaching consequences of restoring a lease after repeated defaults, the Court observed, "A policy of restoring leases after long-term default would create a negative precedent for future allottees to disregard payment schedules and statutory obligations, anticipating eventual concessions. This undermines the deterrent effect of enforcement measures like cancellation and eauction, weakening the overall governance framework of industrial land allocation", the Court observed.

The Petition was accordingly dismissed.

Cause Title: Savita Sharma vs. State Of U.P. And 2 Others (2025:AHC:111809-DB)

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