'Failure To Develop Allotted Land Bars Equitable Relief', Supreme Court Upholds Cancellation Of Lease In Piaggio's Favor

The Supreme Court of India on Monday (April 6) upheld the forfeiture of a lease granted to Piaggio Vehicles Pvt. Ltd., observing that the company failed to undertake construction or develop the industrial plot within the stipulated time, and was therefore not entitled to any equitable relief. “…there is no escape from the conclusion that, right from the date of the grant of lease…the appellant company failed to demonstrate any convincing effort or bona fide intent to establish a full-scale industrial manufacturing unit on the plot in question.”, observed a bench of Justices Vikram Nath, Sandeep Mehta and NV Anjaria, stressing that non-adherence to the terms of the lease deed do not warrants equitable relief to the company. “…delaying development of the industrial plot by almost six to seven years, as against the mandatory period of six months prescribed under the lease deed, would equally disentitle it to discretionary relief.”, the court observed. The land measuring 33 acres in the Surajpur Industrial Area of Gautam Budh Nagar was originally allotted in 1985 and later transferred to Piaggio's predecessor. A formal lease deed was executed in March 2002, requiring the company to begin utilising the land within six months. However, despite taking possession in April 2002, Piaggio did not undertake any substantial development. The Court noted that only about 7.68% of the land had existing structures, which predated the company's acquisition. No new construction or approved layout plan was submitted by the company for several years. The Uttar Pradesh State Industrial Development Authority (UPSIDA) issued a notice in 2007 pointing out violations of the lease conditions. In response, the company cited internal constraints and sought an extension, admitting it had shifted focus to another facility in Maharashtra. Against the cancellation of the lease deed, the company moved to the High Court, which refused to interfere with the cancellation, prompting the company to appeal to the Supreme Court. Dismissing the Appeal, the judgment authored by Justice Mehta faulted the company's lethargic attitude for failing to indicate any meaningful activity taken by it to show that the subject land was put to use for an industrial development. “…the appellant company did not indicate that any meaningful industrial activity, including the so called testing activities, had ever been undertaken on the subject plot during the preceding six years.”, the court said. “…the lackadaisical conduct of the appellant-company in failing to adhere to the terms and conditions of the lease deed, and thereby delaying development of the industrial plot by almost six to seven years, as against the mandatory period of six months prescribed under the lease deed, would equally disentitle it to discretionary relief. Equities cannot work in favour of the litigants whose conduct is callous, laconic and in clear violation of the applicable rules and regulations.”, the court added. Resultantly, the appeal was dismissed. “The appellant-company shall forthwith and not later than a period of thirty days from today handover the vacant and peaceful possession of the subject plot to UPSIDA, which would be at liberty to deal with the plot as per law. The amount of Rs.10,95,52,825/- (Rupees Ten Crore Ninety Five Lakh Fifty Two Thousand Eight Hundred Twenty Five Only), deposited by the appellant–company in this Court, shall be refunded to the appellant–company, along with the accrued interest thereon.”, the court ordered.HeadnoteLease Forfeiture – Industrial Plot – Failure to utilize land – Breach of Covenants – The Supreme Court upheld the forfeiture of a 33-acre industrial plot by the Uttar Pradesh State Industrial Development Authority (UPSIDA) due to the appellant's failure to complete construction and commence production within the stipulated timeframe - noted that the primary purpose of industrial areas is to generate revenue, create employment, and foster economic development, requiring allottees to strictly adhere to time-bound project implementation – Held that The appellant was in clear breach of sub-clauses (e) and (o) of Clause 3 of the lease deed dated 19th March 2002 for failing to raise construction or commence industrial activity. [Para 57, 58, 59-69]Conditional Extension – Compliance with Prescribed Format – UPSIDA had offered an extension of time subject to the deposit of an extension fee and the submission of an affidavit in a specific format - The appellant failed to submit the affidavit in the required format and language within the fixed period and deposited the fee only after the cancellation order was issued. [Para 64, 67, 72]Equitable Relief – Article 136 – Supreme Court declined to exercise its extraordinary jurisdiction under Article 136 of the Constitution, observing that the appellant's conduct was "callous, laconic, and in clear violation of applicable rules -" Supreme Court emphasized that it would be loath to substitute...

'Failure To Develop Allotted Land Bars Equitable Relief', Supreme Court Upholds Cancellation Of Lease In Piaggio's Favor

Yash Mittal

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Yash Mittal

'Failure To Develop Allotted Land Bars Equitable Relief', Supreme Court Upholds Cancellation Of Lease In Piaggio's Favor

Yash Mittal

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Yash Mittal

This is a premium content
Available exclusively to
Our subscribers