The Supreme Court of India has upheld the cancellation of a 33-acre industrial lease in Gautam Budh Nagar, ruling that the failure of an allottee to raise construction and commence production within the mandated timeframe justifies the forfeiture of the plot. A three-judge bench comprising Justice Vikram Nath, Justice Sandeep Mehta, and Justice N.V. Anjaria dismissed the appeal filed by M/s. Piaggio Vehicles Pvt. Ltd. (the appellant-company), emphasizing that industrial land is allotted at subsidized rates to foster economic development, not to be held unutilized.
The core legal issue was whether the Uttar Pradesh State Industrial Development Authority (UPSIDA) acted arbitrarily in cancelling the lease of a significant industrial plot after the appellant failed to meet construction deadlines stipulated in the lease deed and subsequent notices. The Court concluded that the appellant’s conduct was “callous” and “laconic,” affirming the 2009 judgment of the Allahabad High Court that had dismissed the appellant’s writ petition.
Background of the Case
The industrial plot, located at Plot No. A-1, Site-B, Surajpur Industrial Area, was originally allotted in 1985. Through a series of transfers and an amalgamation, the lease was eventually held by the appellant-company. While a fresh lease deed was executed on July 10, 2007, to reflect the corporate name change, the Court noted that the substantive obligations from the original 2002 lease deed remained unaltered.
On August 25, 2008, UPSIDA cancelled the lease and forfeited the premium. This action was taken because the company had not completed the factory building or started production within the six-month period mandated by Clause 3(o) of the lease deed, nor within the extended time permitted.
Arguments of the Parties
Appellant’s Contentions: Senior Advocate Amar Dave, representing Piaggio, argued that the company was bona fide prevented from full-scale operations due to the “pressure to rapidly scale up manpower and facilities” at its alternate unit in Baramati, Maharashtra. He highlighted that the company had established a testing facility and invested approximately ₹27.89 crores. The appellant also contended that UPSIDA was estopped from cancellation because it had accepted an extension fee of ₹35,93,964 in 2008. Furthermore, the appellant sought restoration under the State’s Electric Vehicle Policy, offering to start e-vehicle manufacturing within six months.
Respondents’ Contentions: Senior Advocate Atmaram N.S. Nadkarni, appearing for UPSIDA, argued that the company had acted in “gross violation” of the lease terms since 2002. He pointed out that construction covering only 7.68% of the area existed on the plot—all of which was built by the original allottee in 1985—and the appellant had not “put up a single brick” since taking over. UPSIDA also stressed that the appellant failed to submit a mandatory affidavit in a prescribed format, which would have legally bound them to start production within nine months.
The Court’s Analysis
The Supreme Court examined the “salutary objectives” of industrial corridors, noting they are designed to generate revenue and employment.
On Violation of Lease Terms: The Court found that despite several years of possession, the appellant had not even obtained an approved layout plan. The bench observed:
“The appellant-company, being a well-established corporate entity, cannot be allowed to take refuge behind the veil of ignorance… 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.”
On the “Calculated” Omission of the Affidavit: A critical point in the Court’s analysis was the appellant’s failure to submit the affidavit in the prescribed format. The Court noted that the version submitted by the company conveniently omitted conditions requiring production to start within nine months.
“This omission was calculated and intentional, as furnishing the affidavit in the prescribed format would have legally bound the appellant-company to those specific terms… The appellant-company was undeniably aware that the production could not start within the stipulated period of nine months.”
On Equitable Relief: The Court rejected the plea for equitable relief under Article 136 of the Constitution, stating:
“Equities cannot work in favour of the litigants whose conduct is callous, laconic and in clear violation of the applicable rules and regulations.”
Regarding the Electric Vehicle Policy, the Court held that it would be “loath to substitute its own discretion for that of the State Government in such commercial decisions,” noting that UPSIDA reported similar plots could fetch nearly ₹300 crores in open auctions.
Decision of the Court
The Supreme Court dismissed the appeal and issued the following directions:
- The appellant-company must handover vacant and peaceful possession of the plot to UPSIDA within thirty days.
- UPSIDA is at liberty to deal with the plot as per law.
- The amount of ₹10,95,52,825 deposited by the appellant in the Court Registry during the pendency of the appeal shall be refunded with accrued interest.
Case Details:
- Case Title: M/s. Piaggio Vehicles Pvt. Ltd. v. State of U.P. & Ors.
- Case No: Civil Appeal No(s). 1944 of 2011
- Bench: Justice Vikram Nath, Justice Sandeep Mehta, and Justice N.V. Anjaria
- Date: April 06, 2026
