Proportionality in allotment cancellation: composite lease arrangements and public law review can sustain action for repeated non-payment.

A writ challenge to cancellation of an allotment under a public authority involved a sufficient public law element, so contractual remedies did not bar judicial review of alleged arbitrariness. The allotment letters and lease deeds were treated as part of one composite transaction: the allotment terms survived only where not altered by the lease deeds, and the authority's independent statutory power of resumption remained available. Applying proportionality, the cancellation was examined against repeated defaults, prior lesser measures, unpaid dues and project non-compliance, and was found primarily rooted in non-payment. The court also addressed protection of homebuyers, sub-lessees and financial institutions through consequential directions.

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Issues: (i) whether the writ petition was maintainable; (ii) whether the allotment letters survived after execution of the lease deeds and whether cancellation of the allotment also cancelled the lease deeds; (iii) whether cancellation of the entire allotment was hit by the doctrine of proportionality and whether the cancellation was based only on non-payment or also on development defaults; (iv) whether the cancellation affected the rights of homebuyers, sub-lessees and financial institutions, and what consequential directions followed.

Issue (i): whether the writ petition was maintainable.

Analysis: The dispute arose out of a contractual and statutory arrangement with a public authority, but the challenge was to an alleged arbitrary and disproportionate cancellation by the State instrumentality. The existence of contractual remedies did not exclude judicial review where the impugned action was said to be unfair, unreasonable, or arbitrary. The matter therefore involved a sufficient public law element for the writ court to examine the legality of the cancellation.

Conclusion: The writ petition was maintainable.

Issue (ii): whether the allotment letters survived after execution of the lease deeds and whether cancellation of the allotment also cancelled the lease deeds.

Analysis: The allotment letters, reservation letter and lease deeds formed a composite transaction. Some allotment terms were repeated in the lease deeds, some were incorporated by reference, and some were modified or removed. The court held that the allotment letters did not disappear entirely on execution of the lease deeds, but continued for limited purposes where the lease deeds did not alter them. At the same time, the authority retained an independent statutory power to resume the site under the governing Act, and the lease deeds themselves preserved that wider statutory right. The cancellation order expressly referred to breach of allotment and lease conditions and to resumption of the site.

Conclusion: The allotment letters survived only to a limited extent, and the cancellation order had the effect of cancelling the lease deeds as well.

Issue (iii): whether cancellation of the entire allotment was hit by the doctrine of proportionality and whether the cancellation was based only on non-payment or also on development defaults.

Analysis: The court applied proportionality by examining the repeated defaults, notices, extensions, reschedulement, invocation of bank guarantee, escrow arrangement, and the petitioner's continued non-compliance. It also considered the scale of unpaid dues, the petitioner's financial distress, the impact on homebuyers, and the planned-development objective of the project. The authority had already adopted progressively less restrictive measures before resorting to cancellation. The court accepted that non-development was referred to, but held that the primary ground for cancellation was non-payment of dues, while development defaults and stakeholder interests were relevant supporting considerations. The cancellation was therefore not excessive or arbitrary.

Conclusion: The cancellation of the entire allotment was not violative of proportionality, and it was primarily based on non-payment of dues.

Issue (iv): whether the cancellation affected the rights of homebuyers, sub-lessees and financial institutions, and what consequential directions followed.

Analysis: The court distinguished between the main allotment and third-party interests. It held that the homebuyers' interests required protection and directed completion of their projects within fixed timelines, a committee mechanism, a zero-period treatment for the intervening period, and an exit policy. It held that sub-lessees were to be protected by direct lease arrangements with the authority on the same terms, and that financial institutions holding sub-lease interests were also to be protected by a similar mechanism. The money deposited by the petitioner pursuant to interim orders was not treated as automatically forfeited; instead, amounts paid to the authority were to be dealt with in accordance with insolvency proceedings and the directions issued.

Conclusion: The third-party interests were protected by consequential directions, and the petitioner was entitled to refund of amounts not validly forfeited, subject to the directions issued.

Final Conclusion: The impugned cancellation was sustained, but the court moulded relief to protect homebuyers, sub-lessees and financial institutions, and directed refund treatment of monies received by the authority in the manner specified.

Ratio Decidendi: Where allotment letters and lease deeds form one composite statutory transaction, the authority may still invoke an independent statutory power of resumption for breach of conditions and non-payment, and a cancellation supported by repeated defaults, prior lesser measures, and public-interest considerations will not be struck down as disproportionate merely because some lesser recovery route was available.

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