State Cannot Cancel Leasehold Allotments For Non-Operation Resulting From Forced Migration Or Civil Unrest

The Petitioner, a registered small-scale industrial (SSI) unit, was the allottee of Shed No. 5 at Bagh-i-Ali Mardan Khan Industrial Area, Srinagar, starting in 1978

Following the mass migration of Kashmiri Pandits in 1989, the sole proprietor fled to Jammu, leading to the abandonment of the unit

In 1991, the shed was damaged by fire

Subsequently, the State re-allotted Shed No. 5 to Respondent No. 6

In earlier litigation (OWP No. 488/1996), the Court directed the State to either provide a similar shed to the Petitioner or cancel the allotment to Respondent No. 6

The State purportedly complied by offering alternate sheds at Rangret but imposed new premium payments and significantly higher rent

While contempt proceedings were pending, the Respondents issued Order No. IDC/B/2004/73 on 06.04.2004, cancelling the Rangret allotment on the grounds that the Petitioner failed to complete formalities

The Petitioner challenged this cancellation and sought restoration of the original premises

1. Whether the State’s action in re-allotting the Petitioner's original industrial site to a third party during the period of forced migration was legally and ethically sustainable

2. Whether the cancellation of the alternate allotment at Rangret was arbitrary and in violation of the principles of natural justice

The Court emphasized the doctrine of the State as a protector of property rights, particularly for displaced persons or migrants under extraordinary circumstances

It applied the Principles of Natural Justice, asserting that administrative actions must account for the "turmoil time" and the inability of a displaced person to fulfill standard industrial formalities while their safety is at risk

The Court also utilized the principle of "adjusting the equities," balancing the passage of time with the need to restore the Petitioner’s original rights without imposing unfair financial burdens that treat a restored allottee as a new applicant

The Court observed that the State, instead of acting as a protector of a migrant's property, acted as a "predator" by exploiting the Petitioner's absence to re-allot the original premises to a third party

The Court found the purported compliance with the previous court order to be a "mirage" because the State demanded new premiums and higher rents, ignoring the Petitioner’s status as an original leaseholder

The Court reasoned that the Petitioner could not be expected to restore industrial activity in Kashmir during a period when the safety of the Kashmiri Pandit community was not secured

Consequently, the cancellation of the Rangret sheds for "failure to complete formalities" was deemed unfair and inequitable, as the Respondents failed to recognize the Petitioner's vested interests and the force of circumstances that caused the delay

If the previously identified sheds are unavailable, the State must provide new ones

The holding stipulated that: (i) no premium shall be charged for the allotment; (ii) the rent shall be at the prevalent rate but applied only prospectively from the date the Petitioner takes possession; and (iii) no arrears shall be insisted upon

The Court underscored that these directions were necessary to restore justice while adjusting the equities of the changed circumstances