Section 34-B Notice Not Required Before Cancellation

The Karnataka High Court dismissed IDBI Bank’s writ appeal and upheld KIADB’s cancellation of the land allotment made in its favour.

The dispute arose from an allotment letter dated 15.02.2013 for 4.5 acres in Bengaluru Hardware Park on a lease-cum-sale basis. The allottee paid the tentative cost, received a confirmatory allotment letter on 12.08.2014, and was put in possession on 27.12.2014. The allotment terms required execution of the lease-cum-sale agreement within 30 days of the possession certificate and commencement of production within 24 months of taking possession.

The record showed that KIADB sent a draft lease-cum-sale agreement on 23.03.2016. The appellant sought changes to several clauses, and correspondence continued, but the agreement was never finalized. KIADB informed the appellant on 27.01.2018 that the requested modifications could not be accepted. Even thereafter, the appellant only sought a further extension of three years in May 2022. KIADB then cancelled the allotment by communication dated 20.12.2022 for non-adherence to the time schedule and failure to implement the project.

Before the court, the appellant argued that KIADB could not cancel the allotment without issuing notice under Section 34-B of the Karnataka Industrial Areas Development Act, 1966. The court rejected that submission. It agreed with the Single Judge that the procedure under Section 34-B was to be followed after execution of the lease-cum-sale agreement, and not before. The court also noted that the appellant had not executed the agreement for more than 10 years from the date of allotment.

The Division Bench found that the appellant had not taken tangible steps to secure execution of the agreement or to commence business operations. It also noted that KIADB had, in 2018, asked the appellant to approach the SLSWCC for extension of time, but there was no material to show that such a request was made. On that basis, the court held that the appellant had been lax in implementing the project.

The court further held that this was not a case of sudden cancellation without notice or opportunity. KIADB had communicated its position in 2018, and the cancellation came nearly five years later. Finding no infirmity in the Single Judge’s order, the court dismissed the appeal.

Practical takeaway: An allottee that delays execution of the lease-cum-sale agreement and project implementation for years cannot insist on Section 34-B notice to defeat cancellation.