Lucknow Development Authority Can't Levy Interest On Auction Sale Consideration Before Issuing Allotment Letter: Allahabad High Court

The Allahabad High Court has held that the Lucknow Development Authority (LDA) could not levy interest on the auction sale consideration for the period prior to issuance of the allotment letter to the successful bidder of a plot.It held that under the terms and conditions of the auction, installments became payable only after issuance of the allotment letter, and interest and penal interest could arise only upon delay in payment of those installments. Consequently, no interest could be charged from the date of the auction till the date of allotment.Referring to the terms and conditions of the auction, the bench of Justice Alok Mathur and Justice Amitabh Kumar Rai held, “…. it is abundantly clear that without issuance of the allotment letter, no interest could have been levied upon the successful bidder and therefore we do not find any reason or any provision by which Lucknow Development Authority could have imposed interest upon the petitioner for the delayed payment.”The petitioner, a company engaged in real estate and hospitality, was the highest bidder in an auction of plots for hotel purposes advertised by the Lucknow Development Authority in 2007, having offered Rs. 12,050 per square metre against the reserve price of Rs. 8,800 per square metre. Eleven bids had been received. The Authority cancelled the auction in 2007 on the ground that the bid was low, as an adjoining commercial plot fetched Rs. 35,500.The High Court stayed the cancellation, after which the parties settled the dispute. In 2015 the Authority agreed to withdraw the cancellation and allot the plot to the petitioner, but subject to payment of interest running from the date of the auction. The petitioner contested the levy, on grounds that interest could be levied only after the allotment letter was issued and possession handed over, and not from any date prior.In a revision preferred by the petitioner, the State Government held that no interest could be levied for the period 2007 to 2015 and remanded the matter to the Authority to determine the levy of interest strictly as per the terms and conditions of the auction. On remand, the Authority again levied interest from the date of the auction till the date of allotment. This was challenged by the petitioner before the High Court.The Court noted that the order restoring the petitioner's bid contained no mention of any rule or provision of law enabling the Authority to levy interest from the date of the auction till the date of payment. It observed that Clause 10 of the terms and conditions of the auction required the highest bidder to deposit 35% of the bid amount within seven days of acceptance of his bid, whereupon the allotment letter would be issued. A further 15% was payable within one month of allotment, and the remaining 50% in four quarterly installments carrying interest at 15%. The installments were to commence only after issuance of the allotment letter, and penal interest at 18% was leviable only upon delay in depositing the installments.The Court held that interest could be levied only from the date of allotment, that installments were payable only after issuance of the allotment letter, and that penal interest could be levied only upon delay in depositing the installments. Since the bid had initially been cancelled and no allotment letter had been issued at that stage, no interest could be levied upon the petitioner.Relying on the Supreme Court's decision in Golden Food Products India Vs. State of Uttar Pradesh & Others, the Court observed that the highest bid could be discarded only on valid and reasonable grounds, and that the mere expectation of a higher bid in a subsequent auction was no ground to cancel an auction that had otherwise been validly conducted. The Court further observed that under the Government Order dated 6 February 1997, where the highest bid offered was higher than the base price, the bid was to be accepted and not cancelled unless there was concealment or fraud in offering it. As eleven bidders had participated and no fraud or concealment was alleged, the cancellation was held to be arbitrary and illegal, and contrary to the Government Order.Allowing the writ petition, the Court set aside the order levying interest from the date of the auction till the date of allotment as illegal and arbitrary, and quashed the impugned orders dated 24 December 2024 and 11 April 2025. It directed the Authority to pass a fresh order requiring the petitioner to pay the amount for which he had bid strictly in accordance with Clause 10 of the terms and conditions of the auction, and to hand over possession accordingly.Case Title: M/s Drosia India Limited Thru. Director Mr. Waheedul Hasan Siddiqui v. State of U.P. Thru. Prin. Secy. Deptt. of Housing and Urban Planning Lko. and 3 others 2026 LiveLaw (AB) 469Case Citation: 2026 LiveLaw (AB) 469Click Here To Read/Download Order

Lucknow Development Authority Can't Levy Interest On Auction Sale Consideration Before Issuing Allotment Letter: Allahabad High Court

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Lucknow Development Authority Can't Levy Interest On Auction Sale Consideration Before Issuing Allotment Letter: Allahabad High Court

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