Contractual obligations are binding, and failure to comply with lease conditions justifies the cancellation of allotment, with courts limited to examining the decision-making process for reasonableness.

JUDGMENT :

S.M. SUBRAMANIAM, J.

1. Under assail is the Writ order dated 24.09.2021 passed in W.P.No.8771 of 2021.

2. The State Industries Promotion Corporation of Tamil Nadu Ltd. [hereinafter referred to as “SIPCOT”] preferred the present intra-Court appeal mainly on the ground that the terms and conditions stipulated in the contract entered into between SIPCOT and the respondent had been violated and therefore, the relief granted by the writ Court would cause prejudice to the appellants.

3. The facts in brief would show that the respondent was allotted an industrial plot No.A-16 at Pillaipakkam, Sriperumbadur on 30.09.2011. The relevant conditions stipulated in the allotment order are as under:-

6. If, in the opinion of SIPCOT, it is found that the land allotted to the allottee is not put to use for the purpose for which it was allotted or is in excess of the allottee’s actual requirements, SIPCOT shall, at any time, have the right to cancel the allotment in respect of such land or excess land, as the case may be, and resume the same under TNPPE Act. In that event, the plot cost paid by the allottee will be suitably adjusted and refund if any, will be made as per condition No.2(d). Interest, enhanced interest, if any already paid, will not be refunded. No compensation will be paid for improvement or for the buildings or other structures etc., erected on the plot.

4. In pursuance to the allotment order, a lease agreement was entered into on 21.12.2011 between SIPCOT and the respondent. Relevant clauses in the lease agreement are extracted hereunder:-

17. The allottee shall commence commercial production/trial production within 30 months from the date of allotment order. Failure will entail cancellation of the allotment and forfeiture of total amount paid towards the extent allotted.

18. The party of the second part shall have to commence construction of buildings within six months from the date of allotment order and be completed within 24 months from the date of allotment order. Before commencing such construction of works on the allotted plot, the allottee should strictly follow the following building regulations prescribed among others.

5. Pertinently, the respondent failed to complete the construction as per the timeline agreed in the lease agreement. No manufacturing activity commenced. Thus, action was taken by SIPCOT for cancellation of industrial plot, enabling them to re-allot the same to any other Industry. However, at the request of the respondent, time has been extended for completion of construction and to commence industrial activity. Despite the opportunity provided, respondent has not commenced the industrial activity. Therefore, the allotment came to be cancelled vide proceedings dated 23.03.2021, after a lapse of about 10 years from the date of allotment. The cancellation order reveals that the respondent violated condition No.6 of the allotment order and Clause 14(i) of the lease deed. Clause 14(i) of the lease deed reads as under:-

14.(i) If, in the opinion of the Party of the First Part, it is found that the land allotted to the Party of the Second Part is not put to use for the purpose for which it was allotted or is in excess of the actual requirements of the Party of the Second Part for the purpose for which it was