Hotel Allottee Applied For Building Approval Nearly 5 Years Late; Madras HC Upholds SIPCOT’s Cancellation After Years Without Operations

SIPCOT allotted the appellant a two-acre plot in 2007 on a 99-year lease for a hotel project.

The allotment and lease required construction to be completed within 24 months and commercial production to commence within 30 months; they also placed responsibility for obtaining statutory approvals, including building-plan approval, on the allottee.

After the appellant failed to complete the project despite extensions and notices, SIPCOT cancelled the allotment in February 2020 and directed the appellant to execute a surrender deed.

The appellant challenged the cancellation by writ petition, which was dismissed by a Single Judge; it then filed this writ appeal.

The Allotment Order and Lease Deed, read together, governed the parties’ rights and obligations.

Their relevant terms required timely construction and commencement of commercial production, placed responsibility for statutory approvals on the allottee, restricted use of the plot to the allotted purpose, and authorised cancellation and resumption for non-compliance.

The Lease Deed also provided for action under the Tamil Nadu Public Premises (Eviction of Unauthorised Occupants) Act, 1975.

The Court applied the principle that a party cannot accept the benefits of a commercial bargain while disowning its burdens, and held that legitimate expectation cannot arise contrary to express contractual terms.

It further stated that discretionary jurisdiction under Article 226 cannot be invoked to excuse a prolonged, clear breach of a commercial lease of public industrial land.

The Court found that the plot was a stand-alone site and that neither the Allotment Order nor the Lease Deed required SIPCOT to procure layout or building-plan approval; the appellant had accepted the obligation to obtain approvals itself.

The appellant applied to the DTCP only in 2012, did not furnish the particulars it requested, and did not challenge the return of the application or seek directions against either respondent.

Its earlier explanations for delay did not refer to the approval issue, which arose only after the contractual deadlines had passed.

Despite extensions and prolonged forbearance, the project remained incomplete and commercial operations never began; the appellant’s later request to change the land use did not confer a right to retain the plot.

It found no illegality, infirmity, or perversity in the Single Judge’s order, dismissed the writ appeal, confirmed that order, made no order as to costs, and closed the connected miscellaneous petition.