In a significant ruling, the Supreme Court of India has upheld the cancellation of a land allotment to Kamla Nehru Memorial Trust (KNMT) by the Uttar Pradesh State Industrial Development Corporation (UPSIDC), while simultaneously declaring as illegal a subsequent allotment offer to M/s Jagdishpur Paper Mills Ltd.. The Court's decision, rendered on May 30, 2025, by the Honourable Mr. Justice Surya Kant and the Honourable Mr. Justice Nongmeikapam Kotiswar Singh, emphasizes the critical need for transparency and accountability in the allocation of public resources.

The case, which originated from Civil Appeal Nos. of 2025 (Arising out of SLP (C) Nos. 31887-88/2017), dates back to an allotment made in 2003. KNMT, a charitable trust, was allotted 125 acres in the Utelwa Industrial Area for floriculture. However, the allotment was conditional upon compliance with specific terms, including timely payments.

Throughout the years, KNMT repeatedly defaulted on payments and sought concessions, including waivers of interest and rescheduling of dues. KNMT contended that UPSIDC failed to transfer physical possession of the land and continued to demand outstanding amounts without fulfilling its reciprocal contractual obligations, thus frustrating the contract. They also alleged non-demarcation and encroachment on the subject land.

UPSIDC, on the other hand, maintained that it provided ample opportunities for KNMT to make payments and even rescheduled the payment terms. It argued that the allegations of non-demarcation and encroachment were false, asserting that the site plan was provided with the allotment letter and the land was demarcated to KNMT's satisfaction on March 3, 2005. UPSIDC further clarified that possession could only be handed over after the registration of the lease deed, as per Clause 2.15 of its Manual for Marketing and Management of Industrial Areas.

The Supreme Court, in its analysis, found no merit in KNMT's claims of contract frustration. It determined that the communications from UPSIDC, despite not being explicitly captioned as "legal notices," substantially satisfied the requirements of Clause 3.04(vii) of the Manual, which stipulates that three consecutive legal notices must be issued to defaulters before cancellation. The Court deemed KNMT a "chronic defaulter" due to its persistent non-compliance and efforts to avoid payment obligations.

Beyond upholding the cancellation, the Supreme Court invoked the Public Trust Doctrine, expressing concerns about the original allocation process. The Court noted that UPSIDC allotted the land to KNMT within two months of the application, raising questions about the thoroughness of the evaluation. It also highlighted UPSIDC's "remarkable alacrity" in considering alternative allotments during the dispute's pendency.

The Court emphasized that the allocation of 125 acres of industrial land without a competitive process violated the Public Trust Doctrine, which mandates proper procedure and substantive accountability in public resource allocation. Such practices, the Court stated, deprive the public exchequer of potential revenue and create a system where privileged access supersedes equal opportunity, betraying the fiduciary relationship between the State and its citizens.

As a result, the Supreme Court not only dismissed KNMT's appeals but also issued significant directions for future land allotments:

• The State Government of Uttar Pradesh and UPSIDC are directed to ensure that any future allotments are made in a transparent, non-discriminatory, and fair manner to maximize revenue and achieve broader public interests like industrial development, environmental sustainability, and regional economic objectives.
• The Subject Land in question must also be allotted strictly in accordance with this new, transparent procedure.