Kiran Raj

The Supreme Court Division Bench of Justice Surya Kant and Justice Nongmeikapam Kotiswar Singh held that the cancellation of a 125-acre industrial land allotment by the Uttar Pradesh State Industrial Development Corporation (UPSIDC) was lawful and procedurally sound. The Court dismissed the appeals challenging the cancellation and stated that UPSIDC had complied with all necessary procedural mandates while revoking the allotment.

The Court declared that the subsequent allotment of the same land to a third party was illegal and contrary to public policy. It directed the concerned authorities to ensure all future land allotments are conducted transparently, in adherence to the Public Trust Doctrine. It also mandated that the cancelled land be re-allotted through a fair process prioritizing public interest and economic development.

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In a judgment that has far-reaching implications for the administration of public resources, the Court ordered that all allotments by UPSIDC henceforth must ensure maximum revenue generation and align with larger socio-economic objectives. It further directed that pending applications related to the matter stand disposed of accordingly.

The appellant, Kamla Nehru Memorial Trust (KNMT), a charitable trust established in 1975, applied for 125 acres of land in the Utelwa Industrial Area, Jagdishpur, Uttar Pradesh, intending to use it for floriculture. On 10.07.2003, KNMT submitted its application along with earnest money of INR 62,600.

On 18.09.2003, UPSIDC issued an allotment letter confirming the allocation of the subject land to KNMT. The letter stipulated that a reservation amount of INR 12,02,187.50, which included the adjusted earnest money, must be paid by 18.10.2003. It also outlined a payment schedule for the remaining 90% of the premium in eight equal half-yearly instalments beginning on 01.01.2006. Interest at 15% per annum was also applicable, with a possible rebate of 3% for timely payments.

KNMT did not meet the initial deadline and requested demarcation of the land, alleging encroachment by third parties. UPSIDC extended the deadline to 17.11.2003 and stated that failure to pay would lead to automatic cancellation. KNMT deposited the required amount through demand drafts dated 17.11.2003 but requested that interest not be levied until possession was granted. UPSIDC rejected this request, deeming it against policy.

KNMT eventually accepted the conditions of the Allotment Letter through communication dated 07.01.2004, including payment with interest. However, KNMT persistently wrote to UPSIDC seeking demarcation and possession, alleging encroachments. On 21.02.2004, UPSIDC informed KNMT of a policy change requiring the lease deed to be executed before possession.

KNMT failed to adhere to the payment schedule and requested rescheduling on 11.03.2005. UPSIDC agreed on 01.07.2005 to a revised plan of ten six-monthly instalments starting from that date, with the first instalment of INR 14,42,731.35 due immediately. KNMT again defaulted. UPSIDC issued a notice dated 14.12.2005 for an amount of INR 39,76,404.85, followed by another final notice on 13.11.2006 demanding INR 68,49,869.20 within ten days.

KNMT, without paying the dues, reiterated its request for demarcation and possession. UPSIDC responded on 13.12.2006, noting that only 10% of the amount had been paid and no further documents or lease deeds had been submitted. It concluded that KNMT was evading compliance through correspondence.

KNMT challenged this letter before the High Court through Writ Petition No. 349/2007 and later amended the petition to contest the cancellation order dated 15.01.2007. The High Court initially restrained UPSIDC from making fresh allotments and ultimately ordered restoration of the allotment on 27.05.2009, subject to payment compliance.

UPSIDC appealed, and the Supreme Court remanded the matter back to the High Court, noting that the cancellation order had not been adjudicated on merits. Meanwhile, UPSIDC had re-allotted the land to M/s Jagdishpur Paper Mills Ltd., which was separately challenged by KNMT.

The High Court eventually upheld the cancellation, citing KNMT's failure to meet payment obligations and confirmed that UPSIDC had followed the procedure under Clause 3.04 of the Manual for Marketing and Management of Industrial Areas.

The matter returned to the Supreme Court, where KNMT contended that UPSIDC frustrated the contract by failing to deliver possession or remove encroachments. UPSIDC countered that KNMT was a chronic defaulter despite multiple accommodations.

The Court observed, "Though KNMT addressed multiple communications to UPSIDC alleging non-demarcation of the Subject Land, such communications were, however, ex-facie an afterthought." It noted that the Allotment Letter included a site plan with measurements and that the allotment was made on an "as it is where it is basis."

On the issue of demarcation, the Court stated, "UPSIDC demarcated the Subject Land on 03.03.2005 to the satisfaction of KNMT, and the latter also acknowledged such factum vide letter dated 11.03.2005."

Regarding possession, the Court cited Clause 2.15 of the Manual: "The date of Possession of Plots shall be fixed by the Regional Manager after registration of Lease Deed itself." It added, "It becomes pellucid that the insistence of UPSIDC to furnish requisite documents for registration of the lease deed was both legitimate and in conformity with the prescribed procedure."

In rejecting the claim of contract frustration, the Court said, "None of the alleged acts—non-demarcation, removal of encroachment, or non-delivery of possession—constitute conduct that would frustrate the performance of the allotment terms."

On procedural validity, the Court quoted Clause 3.04(vii): "If an allottee has not paid the dues despite three consecutive legal notices, the Regional Manager shall be required either to cancel the allotment or send his recommendation for issue of Recovery Certificate."

It recorded, "Upon comparative analysis of the communications, particularly those dated 14.12.2004, 14.12.2005, and 13.11.2006, we find that these bear substantial similarity with the notice dated 13.11.2006."

The Court elaborated the meaning of a legal notice: "The expression 'legal notice' connotes an unambiguous communication along with legal consequences to a noticee who is alleged to be in default." It affirmed that UPSIDC had met these requirements.

The Court added, "The dues for the Subject Land, allotted in 2003, remained unpaid despite multiple communications spanning several years... UPSIDC’s action in treating KNMT as a defaulter was therefore both justified and necessary."

On broader issues, the Court invoked the Public Trust Doctrine: "The allocation of 125 acres of industrial land to KNMT without a competitive process fundamentally violated the Doctrine, which demands proper procedure and substantive accountability in public resource allocation."

It observed, "The hasty allotment followed by years of litigation exemplifies systemic deficiencies in the allocation process." The judgment also referenced prior constitutional interpretations to reinforce the need for transparency and public interest alignment.

The Court declared, "We uphold the cancellation of the allotment by UPSIDC." It also stated, "The actual allotment or any offer thereof made by UPSIDC in favour of M/s Jagdishpur Paper Mills Ltd (Respondent No.3) for the Subject Land is also declared to be illegal, contrary to public policy and is consequently annulled."

The Court added, "If any earnest money or any payment has been received from the said prospective allottee, the same is directed to be refunded along with interest at the rate granted by the Nationalized Banks."

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Further, the Court directed, "The State Government of Uttar Pradesh and UPSIDC are directed to ensure that any such allotment in the future be made in a transparent, non-discriminatory and fair manner by ensuring that such allotment process fetches maximum revenue and also achieves the larger public interest like industrial development priorities, environmental sustainability, and regional economic objectives."

It also mandated, "The Subject Land shall also be allotted strictly in accordance with the procedure as illustrated in direction (i) above."

The Court concluded, "Pending applications, if any, also stand disposed of in the above terms."

Advocates Representing the Parties:

For the Petitioners: Mr. Sunil Kumar Jain, AOR; Mr. Ramraj, Adv.; Mr. Shaantanu Jain, Adv.; Ms. Rashika Swarup, Adv.

For the Respondents: Mr. K.K. Venugopal, Sr. Adv.; Mr. A.N.S. Nadkarni, Sr. Adv.; Ms. Ruchira Gupta, Adv.; Mr. Salvador Santosh Rebello, AOR; Ms. Pooja Tripathi, Adv.; Ms. Kritika, Adv.; Mr. Amit Kumar, Adv.; Mr. Abhishek Verma, Adv.; Ms. Manisha Gupta, Adv.; Ms. Arzu Paul, Adv.; Ms. Deepti Arya, Adv.; Ms. Himanshi Nagpal, Adv.

Case Title: Kamla Nehru Memorial Trust & Anr. v. U.P. State Industrial Development Corporation Limited & Ors.

Neutral Citation: 2025 INSC 791

Case Number: Civil Appeal Nos. ________ / 2025 (arising out of SLP (C) Nos. 31887-88/2017)

Bench: Justice Surya Kant, Justice Nongmeikapam Kotiswar Singh

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