Builder Can’t Be Penalised for Authority’s Delay in Approving Plans: Allahabad High Court

The Allahabad High Court has held that a developer cannot be faulted for construction delays when the development authority itself fails to act on the building plan or hand over lawful possession of the land.

The bench of Justice Prakash Padia, allowing a writ petition filed by M/s Kinetic Buildtech Pvt. Ltd., quashed Greater Noida Industrial Development Authority's (GNIDA) decision to cancel a plot allotted to the builder and forfeit Rs. 10.64 crore, the initial premium deposit, over alleged default in payment and construction.

Kinetic Buildtech was allotted a 22,000 square metre plot in Sector-10 of Greater Noida in 2014. A lease deed was executed in 2015, following which the company paid the mandatory 20% premium. However, the developer contended that it was never given actual physical possession of the plot as per the site plan annexed with the lease deed.

Later on, there was a unilateral change in the site layout by GNIDA. A modified layout was introduced on July 9, 2015, but was never communicated to the builder until years later, during a revision hearing. Even then, the possession letter bore no signature of the person handing over or receiving possession, which the court noted made it merely “paperwork" and "no actual physical possession".

Court also found that while the developer had submitted a building plan and even deposited a processing fee of Rs. 38 lakh, GNIDA never decided on the application. A letter raising objections to the plan was allegedly sent in May 2016, but court observed that there was no proof that this letter was ever served to the petitioner.

In light of these findings, the high court concluded that GNIDA’s actions, failing to hand over possession, not executing a corrected lease deed, and leaving the construction application pending, could not be used as grounds to punish the petitioner.

"The development authority kept the application for grant of permission for construction pending with him, as such, it cannot be blamed that petitioner has not carried on the construction within the stipulated period...Thus, the petitioner cannot be blamed and charged for the same," court held.

Court cited Supreme Court judgment in the case of Municipal Committee Katra & others Vs. Ashwani Kumar (2024), and said no party should be allowed to profit from its own wrongdoing. “The development authority itself had faulted in not delivering possession and not taking a decision on the application for construction. For this, the petitioner cannot be penalised,” it held.

Accordingly, court set aside the cancellation orders and directed GNIDA to execute the required correction deed and extend the construction deadline accordingly.

Case Title: M/S Kinetic Buildtech Pvt. Ltd. vs State of UP and Another

Download judgment here