Allahabad HC Upholds YEIDA's Cancellation Of Jaypee's 1000 Hectare Lease, Directs Return Of Deposit

Recently, the Allahabad High Court has upheld the cancellation of 1000 hectare land allotted to M/s Jai Prakash Associates Ltd by Yamuna Expressway Industrial Development Authority. However, the Court directed YEIDA to return the amounts deposited by JAL in pursuance of the orders of the Court as well as the amount received by YEIDA from JAL in furtherance of the lease deeds and allotment letters whether prior to cancellation or thereafter in proportion of the area of land resumed.The bench of Justice Manoj Kumar Gupta and Justice Kshitij Shailendra issued several directions for protection of interest of homebuyers, sub-lessees and financial institutions. Case BackgroundM/s Jai Prakash Associates (JAL) challenged the cancellation of allotment of 1000 Hectares of land under the Special Development Zone Project by Yamuna Expressway Industrial Development Authority (YEIDA). Since the Petitioner defaulted in payments of leased rent, premium and interest thereof, lease deeds for the entire 1000 Hectare were cancelled by YEIDA. At the initial stage of hearing, the Counsel for Petitioner had submitted that amount of Rs.2,379.74 crores had already been paid to YEIDA. Only Rs. 359.81 crores was outstanding on 31.07.2017. Further, since substantial development had been done over the land, cancellation of the entire lease deed was arbitrary and disproportionate, argued the petitioner. JAL deposited more than Rs. 200 crores pursuant to various interim orders passed by the Court from time to time and a status quo order was passed by the High Court. YEIDA further asked for restoration charges of around Rs. 425.10 crores, which was also challenged by the petitioner. JAL applied for further interim relief, which was rejected by the bench of then Chief Justice Pritinker Diwaker and Justice Saumitra Dayal Singh. Subsequently, JAL was admitted in insolvency which was upheld by the NCLAT and the Supreme Court, where an Interim Resolution Professional was also appointed who stepped into the shoes of the company for the purpose of this litigation. Final VerdictRegarding the maintainability of the writ petition, the Court held that the same was maintainable as a right granted under the agreement was being infringed and affected large number of homebuyers and sub-lessees. The Court further held that the execution of lease deeds did not result in complete annihilation of the allotment letters as the petitioner time and again took recourse to the allotment letter regarding time-extensions for payment of dues, for which no provision was mentioned in the lease deeds. It was held that since this was not a case where absolute transfer of property had been made vide sale deed, the powers of YEIDA under Section 14 of the U.P. Industrial Area Development Act, 1976 to cancel the lease and resume the land was not superseded by the provisions of the Transfer of Property Act. The Court observed that YEIDA had cancelled the lease after various defaults, including delays in constructions and defaults in payment of dues as per the allotment letters and lease deeds, committed by the petitioner. Therefore, the doctrine of proportionality was not applicable in this case. It was noted that Section 14 of the 1976 Act empowers the authority to forfeit the property and to forfeit the amount (whole or in part) deposited by the defaulting party. The Court held that the forfeiture of deposit is not a necessary consequence as the word “may” is used in Section 14. “In case of forfeiture for breach of conditions of transfer, the Authority is vested with power to resume the site or building and “may further forfeit the whole or any part of the money, if any, paid in respect thereof”. Thus, every case of forfeiture of the site does not automatically entail forfeiture of the money paid to the Authority. The Authority is given discretion to forfeit in whole or any part of the money paid to it. Undoubtedly, if such power is exercised, it has to be based on consideration of all relevant facts and circumstances.”The Court held that the order of lease cancellation was only limited to that purpose and does not mention forfeiture of the deposits made by the petitioner. Therefore, while the site had been resumed by YEIDA, there was no express or implied forfeiture of the sums deposited by JAL. While directing YEIDA to refund the amount deposited by JAL during the pendency of the writ petition, the Court directed that the amount be at the disposal of NCLT as JAL was already in liquidation. “The cancellation order specifically mentions that it does not take in its fold the sub-leases. The sub-leases were between JAL and third parties. YEA was not privy to the contract. Sub-leases would not survive, unless appropriate directions are issued to make the same binding upon YEA. The interests of various stakeholders are diverse and sometimes conflicting, while at other times they align. We recognize that achieving a perfect balance is not possible, but we have made every...

Allahabad HC Upholds YEIDA's Cancellation Of Jaypee's 1000 Hectare Lease, Directs Return Of Deposit

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