Cancellation of lease for non-construction is valid where the original public purpose is frustrated by liquidation.

The Petitioner, a Cooperative Society established by the Government of India, was granted a perpetual lease by the Delhi Development Authority (DDA) for Plot No. 20, Rajendra Place, on 13.10.1998

Although allotted in 1975, possession was handed over in 1998

The lease required construction of a commercial building within three years

Construction was delayed due to CBI and CVC investigations into the petitioner’s contracts and the Society’s subsequent financial distress/liquidation proceedings

On 06.08.2002, the DDA cancelled the lease for non-construction and alleged non-payment of ground rent

During pendency, the DDA offered to restore the lease subject to payment of ~Rs. 82.96 Crores, which the Petitioner challenged as arbitrary and erroneous in calculation

1. Whether the cancellation of the lease deed by the Respondent on grounds of non-construction and non-payment of dues was legally valid despite the Petitioner's internal difficulties

2. Whether the Court should interfere with the Respondent’s calculation of outstanding dues for restoration of the lease under Article 226

3. Whether the restoration of the lease is feasible or serves a public purpose given the Petitioner is under liquidation

The Court applied the principle that public land is a scarce resource held in public trust, requiring utilization in strict conformity with allotment terms

It relied on Dalip Singh v. State of Haryana, affirming that executive resumption of land is valid if an allottee fails to satisfy necessary conditions like timely construction

The Court also noted that while administrative disputes between government bodies should ideally be referred to high-powered committees [ONGC v. CCE, p. 6], contractual violations provide a valid legal basis for cancellation

The Court reasoned that the Petitioner admittedly failed to construct the building within the stipulated three-year period

While the Petitioner cited CBI/CVC probes as causes for delay, the Court held these were internal management issues and did not absolve the Petitioner of contractual obligations

The Court found that the primary objective of the lease—to provide affordable consumer goods to the public—was frustrated because the Petitioner is in liquidation and can no longer fulfill its socio-economic purpose

Regarding the disputed dues (e.g., Unearned Increase), the Court declined to conduct a "roving inquiry" into arithmetic calculations under writ jurisdiction, noting that the Petitioner was granted two prior opportunities to pay which it bypassed by seeking waivers

Ultimately, the Court emphasized that permitting the property to remain an "asset" for liquidation debts would ignore the "larger public interest" of utilizing scarce land for its intended amenity

It held that non-construction was a sufficient ground for cancellation and that restoration would be an "empty formality" as the Petitioner’s liquidation prevents it from achieving the lease's original public objective

The Court ordered that interim protections stay in place for three weeks post-judgment to allow for further legal recourse