Allahabad High Court Upholds YEIDA’s Power to Cancel Land Allotment Despite Executed Lease Deeds
- REEDLAW
- Aug 23
- 4 min read
REEDLAW Legal News Network reports: In a significant ruling, the Allahabad High Court upheld the Yamuna Expressway Industrial Development Authority’s (YEIDA) statutory power to cancel land allotment even after the execution of lease deeds and partial payments. The Court held that the allotment and lease terms constituted a composite transaction, and YEIDA’s authority under Section 14 of the U.P. Industrial Area Development Act, 1976, to resume land prevailed over any contractual claims arising from lease execution.
The Allahabad High Court Division Bench, comprising Justice Manoj Kumar Gupta and Justice Kshitij Shailendra, while adjudicating a batch of multiple Writ Petitions, affirmed YEIDA’s cancellation of land allotment as lawful and proportionate. The Court ruled that the allotment and lease terms were inseparable, forming a composite transaction, and that the statutory power conferred under Section 14 of the U.P. Industrial Area Development Act, 1976, to resume land overrides any rights claimed under executed lease deeds and partial payment arrangements.
The Appellant challenged the order cancelling land allotment for a Special Development Zone project and sought to restrain coercive actions and direct provision of amenities. The dispute arose from large-scale allotments made for sports-based development, where lease deeds were executed following allotment letters, granting the lessee exclusive development rights, sub-leasing powers, and mortgage rights for financing. The Authority cancelled the allotment on 12.02.2020, citing persistent defaults in payment of dues, failure to develop the core area as per the policy, and non-compliance with statutory obligations under the U.P. Industrial Area Development Act, 1976. It claimed that the lessee had completed only 5.46% of the required development against the stipulated 40% in the core area and failed to deliver mandatory facilities, including stadiums, housing for sportspersons, and related infrastructure. Complaints from homebuyers and defaults in multiple housing projects further justified the cancellation.
The Appellant argued that the cancellation was arbitrary, disproportionate, and contrary to contractual terms, asserting that lease deeds were the definitive agreements superseding allotment letters. It claimed that 91% of dues were already paid, only 9% remained outstanding, and substantial investments exceeding ₹2,500 crores had been made. The Appellant emphasised that no cancellation clause existed in the lease deeds and contended that the Authority could recover dues as arrears of land revenue under Clause 38 without resorting to termination. It relied on the doctrine of proportionality and precedents supporting judicial review of contractual disputes. Conversely, the Authority maintained that both allotment letters and lease deeds formed a composite transaction, that Clause 4.2 permitting cancellation survived, and that the cancellation was a last resort after repeated extensions and restructuring opportunities. It invoked its statutory power under Section 14 of the 1976 Act to resume land for persistent defaults, emphasising public interest and protection of homebuyers.
The High Court found that the Appellant had repeatedly defaulted despite 21 notices, reschedulement of dues, invocation of bank guarantees, and execution of an escrow agreement. Even as per the Appellant’s affidavit, dues exceeded ₹1,067 crores, while the Authority claimed over ₹3,621 crores, including additional compensation. The High Court held that the allotment and lease terms coexisted as part of a single composite transaction and must be read harmoniously. It concluded that the cancellation was lawful, proportionate, and within statutory powers, noting that continuation of the project was detrimental to public interest given the Appellant’s insolvency and inability to complete development.
The High Court Division Bench further recorded that the Corporate Debtor was admitted to insolvency on 03.06.2024 under Section 7 of the IBC, and the NCLAT upheld the NCLT order on 06.12.2024, with the Supreme Court dismissing appeals on 10.01.2025. It directed that all refunds payable to the Appellant be placed at the disposal of the NCLT for distribution under the supervision of the Resolution Professional. YEIDA was ordered to refund all amounts deposited by the Corporate Debtor pursuant to litigation, including payments under allotment and lease agreements, with interest at SBI PLR within six weeks, retaining proportionate amounts for land under sub-leases.
To safeguard third-party interests, the High Court directed that sub-lessees’ rights would continue so long as dues were paid regularly, and YEIDA was to execute direct leases with them on the same terms as their agreements with the Corporate Debtor. Financial institutions holding security interests through mortgages or sub-leases were permitted to obtain leases from YEIDA or assign them to third parties within 12 weeks. For homebuyers, the High Court mandated the timely completion of pending housing projects within 12 to 36 months, formed a high-level monitoring committee, declared a zero period for interest and penalties from 11.02.2020, and provided an exit policy with refunds at 9% interest. Finally, the High Court upheld the cancellation order dated 12.02.2020, subject to these directions, and disposed of all pending petitions without costs.
Mr. Navin Sinha, Senior Advocate, with Mr. Rahul Agarwal and Mr. Rohan Gupta, Advocates, represented the Petitioner.
Mr. Ami Tandon, Mr. Arvind Srivastava, Mr. Ashish Kumar Singh, C.S.C., Mr. Gaurav Tripathi, Mr. Kartikeya Saran, Mr. Rahul Agarwal, Mr. Rohit Nandan Pandey, Mr. Sandeep Arora, Mr. Shreesh Srivastava, Mr. Sujan Singh and Mr. Syed Imran Ibrahim, Aditya Bhushan Singhal, C.S.C., Mr. Praveen Kumar, Mr. Rohan Gupta, Mr. Kamaljeet Singh, Advocates, Mr. Pramod Jain, Senior Advocate, appeared for the Respondent.
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