SUPREME COURT UPHOLDS CANCELLATION OF LAND ALLOTMENT TO CHARITABLE TRUST

The Judgment in the Case of “Kamla Nehru Memorial Trust &Anr. v. U.P. State Industrial Development Corporation Ltd. & Ors” Civil Appeal Nos. ________ / 2025 (Arising out of SLP (C) Nos. 31887-88/2017)was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice Surya Kant and Justice Nongmeikapam Kotiswar Singh on 30th May 2025. This case primarily addressesthe legality of the cancellation of land allotment made by the Uttar Pradesh State Industrial Development Corporation (UPSIDC) to the Kamla Nehru Memorial Trust (KNMT), a charitable organization. The dispute emerged from a series of events and communications between the parties, focusing on issues such as non-payment, non-demarcation, and the applicability of procedural safeguards under public law principles.

Factual Background

In March, 2003, KNMT sought to acquire land for a floriculture project and applied for 125 acres in the Utelwa Industrial Area, Sultanpur District in Uttar Pradesh. On July 10, 2003, it deposited earnest money of ₹62,600. UPSIDC, through a letter dated September18 2003, allotted the land, stipulating a reservation money payment of ₹12,02,187.50 by October 182003, failing which the allotment would be cancelled and the earnest money forfeited. KNMT defaulted, citing that the land was under encroachment and requested demarcation. UPSIDC extended the deadline to November 17, 2003, warning that non-compliance would result in cancellation. KNMT paid the reservation money on the last date but sought waiver of interest until possession was granted, which UPSIDC rejected. On December 15, 2003, KNMT confirmed the payment but protested the interest component. The issue was eventually resolved when KNMT accepted all conditions on January 7, 2004.

Despite KNMT’s repeated requests for demarcation and possession after the removal of encroachment, UPSIDC took no steps. On February 21, 2004, UPSIDC informed KNMT of a new policy requiring lease deed execution before possession and asked for requisite documents and payments within 15 days. KNMT did not comply and sought rescheduling on March 11, 2005. UPSIDC approved this on July 1, 2005, allowing ten instalments over five years at 15% interest. However, KNMT failed to pay even the first instalment. UPSIDC issued several notices, including  a final notice dated November 13,2006, demanding ₹68,49,869.20 and submission of lease deed documents within ten days, failing which allotment would be cancelled. KNMT replied on December 4, 2006, reiterating its request for demarcation but made no payment. UPSIDC responded on December 13, 2006, emphasizing that possession could only be granted post-payment and lease deed registration. KNMT challenged the cancellation in the High Court.

The High Court initially restored the allotment on May 27, 2009, but the Supreme Court remanded the matter back for adjudication on merits. Meanwhile, UPSIDC allotted the land to M/s Jagdishpur Paper Mills Ltd., which KNMT challenged in a separate writ petition. Ultimately, on May 29, 2017, the High Court upheld the cancellation Order.

Contentions of the Parties

Appellant’s Contentions (KNMT)

KNMT argued that the High Court wrongly concluded that it defaulted on payments. It asserted that UPSIDC frustrated the contract by not providing physical possession and ignoring its repeated requests for demarcation, even though the land remained encroached. KNMT contended that UPSIDC violated Clause 3.04(vii) of the Manual by issuing only one legal notice before cancellation, rendering the process procedurally defective. It emphasized that it had deposited the due amount following the High Court’s 2009 direction, which remained unutilized for over a decade.

Respondent’s Contentions (UPSIDC)

UPSIDC argued that it granted several opportunities to KNMT to comply, including payment rescheduling, but KNMT persistently defaulted and never honored its financial commitments. UPSIDC maintained that it issued multiple notices in line with Clause 3.04 and denied allegations of non-demarcation, citing that land demarcation was completed on March 3, 2005, and acknowledged by KNMT. It also highlighted KNMT’s request for repeated waivers of interest and its failure to execute the lease deed or make timely payments. UPSIDC characterized KNMT as a chronic defaulter and justified the cancellation given the increasing value of the land and public interest concerns.

Supreme Court

The Supreme Court upheld the cancellation of the land allotment. On the issue of contract frustration, the Court found no merit in KNMT’s claims. It emphasized that the allotment was made “as is where is” and included a detailed site plan. UPSIDC demarcated the land in March 2005, and KNMT acknowledged this. The Court held that under Clause 2.15 of the Manual, possession was to be handed over only after lease deed registration, a process that KNMT itself delayed by not submitting necessary documents.

On the question of procedural defect, the Court held that UPSIDC had substantially complied with Clause 3.04(vii). While the notices were not explicitly titled “legal notices,” communications dated December 14, 2004, December 14, 2005, and November 13, 2006, contained all essential elements of a legal notice. The Court explained that a legal notice must convey facts, upcoming legal obligations or breaches, and the intention to hold the recipient accountable. Thus, UPSIDC’s process met this standard. The Court described KNMT as a chronic defaulter that failed to meet financial obligations while demanding repeated concessions.

Significantly, the Court invoked the Public Trust Doctrine. It held that the initial allotment of 125 acres to KNMT, a private trust, was done hastily without competitive bidding, violating the principles of transparency and accountability. The Court stressed that public land must be allocated only for legitimate public purposes following fair procedures. The Supreme Court accordingly annulled any subsequent allotment or offer made to M/s Jagdishpur Paper Mills Ltd., reinforcing that public land must be distributed in a manner that ensures public benefit and adherence to the law.