SC Upholds Lease Cancellation of Piaggio's UP Industrial Plot for Non Use

A bench of Justices Vikram Nath, Sandeep Mehta and N.V. Anjaria heard an appeal by M/s. Piaggio Vehicles Pvt. Ltd. challenging the Allahabad High Court’s dismissal of its writ petition under Article 226, which had upheld UPSIDA’s cancellation and forfeiture of a 33‑acre industrial lease at Surajpur Industrial Area for failure to complete construction and commence production within the stipulated time.

The Court rejected the appeal and refused to exercise its extraordinary jurisdiction under Article 136 to restore the allotment. The bench held that the lease deed’s time‑bound obligations were material and had not been complied with, that the appellant had failed to furnish the affidavit in the prescribed format or pay the extension fee in time, and that “equities cannot work in favour of the litigants whose conduct is callous, laconic and in clear violation of the applicable rules and regulations.” The Court emphasised the governing contractual covenants and the limited scope for judicial interference in State commercial decisions, observed that Clauses 3(e) and 3(o) of the lease imposed an obligation to put the premises to industrial use within the prescribed period, and directed surrender of possession. 

The Court, in its reasoning, observed: “Otherwise also, the lackadaisical conduct of the appellant‑company in failing to adhere to the terms and conditions of the lease deed, and thereby delaying development of the industrial plot by almost six to seven years, as against the mandatory period of six months prescribed under the lease deed, would equally disentitle it to discretionary relief. Equities cannot work in favour of the litigants whose conduct is callous, laconic and in clear violation of the applicable rules and regulations.”

Background

The dispute arose from the allotment of Plot No. A‑1, Site‑B, Surajpur (33 acres), originally allotted in 1985 and subsequently transferred to the appellant’s predecessor. A lease deed dated 19 March 2002 (and a formal deed in the appellant’s name dated 10 July 2007) required the lessee to raise construction and put the land to industrial use within stipulated periods. UPSIDA alleged breach of sub‑clauses (e) and (o) of Clause 3 and Clause 5 for failing to commence construction and production; the Corporation issued notices in 2007–2008 and conditioned any extension on deposit of an extension fee and execution of an affidavit in a prescribed format that bound the lessee to start construction within three months and production within nine months of extension.

The appellant admitted delay and sought extensions, deposited forms of payment but failed to file the affidavit in the prescribed form or to submit it in time; some affidavits furnished omitted the mandatory declarations. UPSIDA cancelled the lease and forfeited the premium by order dated 25 August 2008 and notified its intention to re‑enter the plot. The Allahabad High Court dismissed the writ petition on 15 October 2009. This Court granted special leave, extended interim protection several times, and entertained settlement attempts, including a 2024 proposal by the appellant to manufacture e‑vehicles, which the State later declined. The appellant deposited Rs.10,95,52,825/‑ in this Court; the Supreme Court ordered a refund of that amount with interest and directed the appellant to hand over vacant possession within 30 days.

In rejecting the appeal, the Court analysed the lease terms and recorded that “Clauses 3(e) and 3(o) of the lease deed make it abundantly clear that the lessee, upon execution of the lease deed and handing over of possession, would be under an obligation to raise construction of the industrial unit within the stipulated period of six months, or within such extended period as may be allowed.” The bench noted the absence of an approved site plan, the limited pre‑existing construction (7.68% of area) left by the original allottee, and the appellant’s failure to demonstrate bona fide steps to implement the project over six years. The Court further declined to substitute its judgment for the State’s commercial discretion and found no ground to interfere with the High Court’s order. The appeal was dismissed as devoid of merit; UPSIDA was permitted to deal with the plot as per law, and pending applications stood disposed.

Case Details:
Case No.: CIVIL APPEAL NO(S).1944 OF 2011
NeutralCitation: 2026 INSC 321
Case Title: M/S. PIAGGIO VEHICLES PVT. LTD. VERSUS STATE OF U.P. & ORS.
Appearances:
For the Petitioner(s): Shri Amar Dave, Senior Counsel
For the Respondent(s): Shri Atmaram N.S. Nadkarni, Senior Counsel

Source: 2026 CaseBase(SC) 281