The Madras High Court has dismissed a writ appeal filed by Kems Forging Ltd. challenging the cancellation and resumption of a portion of industrial land by the State Industries Promotion Corporation of Tamil Nadu Limited (SIPCOT). The Court held that the land remained unused for the industrial purpose for which it had been allotted.
A Division Bench of Justice S.M. Subramaniam and Justice K. Surender delivered the judgment on March 2, 2026, in Kems Forging Ltd. (formerly Sri Lakshmi Industrial Forge and Engineers Ltd.) v. State Industries Promotion Corporation of Tamil Nadu Ltd. (SIPCOT), W.A. No. 2295 of 2022.
The Bench confirmed the earlier order of the Single Judge in W.P. No. 13565 of 2012 dated July 22, 2022.
Mr. Anand Gopalan, appearing for M/s Agam Legal, represented the appellant company. Ms. R. Revathi, Standing Counsel, appeared for SIPCOT.
Background Of The Dispute
SIPCOT allotted Plot No. E-12 to the appellant company on December 5, 2005 for establishing an industrial unit to manufacture forged or machined automobile components. The parties executed a Lease Deed dated March 2, 2006, which imposed conditions regarding the use of the allotted land.
Later, SIPCOT found that 3.70 acres of the allotted land remained unused. The authority therefore requested the company to surrender the unused portion and execute a surrender deed before May 15, 2012.
When the company failed to comply, SIPCOT invoked Clause 14(i) of the lease deed and issued proceedings dated March 25, 2012, cancelling the allotment of the unused land and resuming possession.
Lease Conditions And SIPCOT’s Power Of Resumption
Clause 14(i) of the lease deed states that SIPCOT may cancel the allotment if the allottee fails to use the land for the purpose for which it was granted. The clause also permits resumption of land if the authority finds the allotted extent excessive or unnecessary for the project.
The clause further provides that after resumption the allottee will receive only a refund of the plot deposit. SIPCOT will not refund development charges, lease rent, or other payments.
SIPCOT relied on this clause to resume the unused portion of land measuring 3.70 acres.
Appellant’s Arguments Before The Court
Before the Division Bench, counsel for the appellant argued that the land was not lying idle. He submitted that the company had installed a solar panel on the disputed portion of the property.
To support this claim, the appellant also produced a photograph before the Court. According to the appellant, the installation demonstrated that the land was being used and therefore SIPCOT should not have resumed it.
Court’s Observations
The High Court rejected this argument.
The Bench observed that the installation of a solar panel did not satisfy the lease conditions. The land had been allotted specifically for establishing an industrial unit for manufacturing forged or machined automobile components.
The Court held that a solar panel cannot be treated as an industrial structure or manufacturing activity within the meaning of the lease deed or the project proposal submitted by the appellant.
The Bench also noted that the Single Judge had carefully examined the lease conditions and the admitted facts of the case. Clause 14(i) clearly authorised SIPCOT to cancel the allotment of unused land.
The Court further observed that the appellant had accepted the lease conditions at the time of allotment. Therefore, the company remained bound by those contractual obligations.
Final Decision Of The Court
After examining the record, the Division Bench found no infirmity in the order of the Single Judge.
The Court held that SIPCOT acted within its contractual powers when it resumed 3.70 acres of land that remained unused for the intended industrial purpose.
Accordingly, the High Court dismissed the writ appeal and confirmed the earlier order. The Court also directed SIPCOT to refund the deposit amount to the appellant in accordance with Clause 14(i) of the lease deed.
The Bench further ordered that there would be no order as to costs, and the connected miscellaneous petition stood closed.
