UPSIDC Cannot Charge Interest for Eight Years of Its Own Inaction, Rules Allahabad High Court
The Allahabad High Court waived interest on time extension fees accrued before UPSIDC's decision, holding the authority cannot profit from its own eight-year delay in deciding a pending application.
A Division Bench of the Allahabad High Court, comprising Justice Mahesh Chandra Tripathi and Justice Prashant Kumar, has disposed of two connected writ petitions filed by M/S Uttam Lifestyle Hotels Private Limited against the Uttar Pradesh State Industrial Development Corporation Limited (UPSIDC) and the State of Uttar Pradesh. The petitioner had challenged, first, a demand of Rs.86,41,002/- in time extension charges and, second, the refusal to issue a functional certificate for its industrial unit at Plot No.B-3, Industrial Area Site-IV, Sahibabad, Ghaziabad. The bench found that while the petitioner bore some responsibility for the delay, UPSIDC's eight-year inaction on a time extension application made it impermissible to charge interest on time extension fees for that entire period. The court directed UPSIDC to recalculate dues after waiving interest up to 29 October 2020 and ordered the petitioner to deposit the revised amount within a fixed timeline.
The Industrial Plot and the Transfer
Plot No.B-3, Industrial Area Site-IV, Sahibabad, Ghaziabad was originally allotted to M/s Parvan Exports Private Limited under a registered lease deed dated 24 September 1982 executed by UPSIDC. The original allottee applied on 19 June 2008 and 18 September 2008 for transfer of the plot to the petitioner's company. UPSIDC permitted the transfer on 13 January 2009 on payment of transfer charges of Rs.32,49,180/-.
The permission letter set out the conditions of transfer. The transferee was required to submit a time-bound programme for completion of construction and implementation of the project, not exceeding two years. Time Extension Fee (TEF) was stipulated at 5% of the premium rate for extension up to one year and 10% for extension up to two years. The lease period was to run for the remaining period from the original allotment date.
After transfer charges were paid, a registered lease deed was executed between UPSIDC and the petitioner on 13 January 2010. Clause 3(e) of that deed required the petitioner to commence construction within three months of execution and to complete at least 30% of the allotted area fit for use and start manufacturing and production within 13 months, failing which time extension could be sought subject to time extension fees as per prevailing rules. Possession of the plot was handed over on 20 February 2010.
The Application for Building Plan and Eight Years of Silence
Almost 11 months after taking possession, on 29 December 2010, the petitioner applied for sanction of the building plan. UPSIDC replied on 27 January 2011 that since more than two years had passed from the allotment date of 13 January 2009, the building plan could not be approved without a time extension being granted first.
On 14 February 2011, the petitioner formally applied for a one-year extension of time. UPSIDC asked for payment of lease rent of Rs.27,008/- and time extension fees of Rs.1,85,609/- to process the application. The petitioner deposited Rs.2,12,617/- on 28 February 2011 and followed up by letter on 3 March 2011.
What followed was a prolonged silence. Reminders sent in July and September 2012 were met with replies stating that the application had been forwarded to Headquarters and no further action could be taken until Headquarters decided. On 16 September 2015 — more than four years after the application was filed — UPSIDC issued a notice threatening to re-enter the plot and forfeit all amounts paid because the petitioner had failed to construct and start production within the stipulated time. The petitioner replied the same day, pointing out that the time extension application had been pending at Headquarters for five years and that without its approval, the building plan could not be sanctioned.
Further reminders in January 2016, February 2018, March 2020, and September 2020 went unheeded. It was only on 29 October 2020 — eight years after the application was filed — that UPSIDC allowed the time extension, subject to payment of Rs.86,41,002/- comprising lease rent, service tax, and time extension charges, within 30 days.
The Litigation Trail
The petitioner challenged the demand of Rs.86,41,002/- and the accompanying letter dated 25 November 2020 by filing Writ-C No.5960 of 2021. On 28 October 2021, the court passed an interim order directing the petitioner to deposit Rs.25 lakhs out of the claimed amount, to be kept in a fixed deposit in a nationalised bank, and restraining UPSIDC from taking coercive action. The court also directed UPSIDC to decide the pending building plan application on merits.
UPSIDC, however, rejected the building plan application on 31 October 2022, citing the opinion of its General Manager (Law) that approval could not be granted while time extension charges remained unpaid. A representation by the petitioner in February 2023 was also turned down on 22 February 2023. The petitioner challenged both rejections in Writ-C No.9598 of 2023. On 22 May 2023, a co-ordinate bench quashed the orders dated 31 October 2022 and 22 February 2023, noting that the petitioner had complied with the earlier court direction to deposit Rs.25 lakhs, and remanded the matter for fresh consideration of the building plan. That order expressly provided that any decision on the building plan would be subject to the final outcome of Writ-C No.5960 of 2021.
Following the remand, UPSIDC approved the building plan on 13 July 2023. The petitioner completed construction and applied for a functional certificate on 8 January 2024. UPSIDC rejected that application on 23 January 2025, citing outstanding dues of Rs.1,47,48,619/- and stating that the matter of the functional certificate would be decided only after the final outcome of Writ-C No.5960 of 2021. The petitioner filed Writ-C No.4588 of 2025 challenging this rejection, which became the leading petition before the Division Bench.
The Competing Arguments
Counsel for the petitioner argued that the entire delay in construction was attributable to UPSIDC's failure to decide the time extension application for eight years. Since the building plan could not be approved without a time extension, and the time extension application was kept pending at Headquarters, the petitioner was effectively prevented from constructing. UPSIDC could not now charge interest on time extension fees for a period of delay it had itself caused. The petitioner had already invested approximately Rs.8.35 crores in completing the building and was being deprived of its use.
Counsel for UPSIDC countered that the petitioner had breached Clause 3(e) of the lease deed from the outset by applying for building plan approval only after 11 months, well past the three-month deadline for commencing construction. The petitioner was aware that time extension required payment of fees as per prevailing rules. The time extension fee was calculated at 10% up to 1 October 2013 and at 15% thereafter, in accordance with the decision of the Board of Directors at its 274th meeting held on 30 June 2011. The break-up of dues, as placed before the court on 18 December 2025, totalled Rs.1,59,41,445/-, comprising lease rent balance, GST on lease rent, maintenance charges, time extension fees of Rs.70,53,116/-, and interest on time extension fees of Rs.82,76,405/-.
How the Bench Reasoned
The bench found that both parties bore responsibility for the delay, but in different measures. On the petitioner's side, the court noted that the obligation under Clause 3(e) was clear: construction was to commence within three months and at least 30% of the area was to be completed within 13 months. The petitioner did not even apply for building plan approval within that window, filing the application only after 11 months. The court also observed that a prudent businessman serious about establishing a factory would have approached the court much earlier to compel UPSIDC to decide the time extension application, rather than remaining inactive for years while the value of the land increased. The bench noted that the petitioner appeared to have chosen to convert the building into a commercial complex rather than develop a factory, and that this conduct did not appear to be bona fide.
On UPSIDC's side, the court was unequivocal. The authority had sat on the time extension application for eight years without assigning any reason for the delay. The bench applied the maxim nullus commodum capere potest de injuria sua propria — no man can take advantage of his own wrong — drawing on its articulation in Broom's Legal Maxims and the Supreme Court's decisions in Kusheshwar Prasad Singh v. State of Bihar and Eureka Forbes Limited v. Allahabad Bank. The court held that UPSIDC could not be permitted to charge interest on time extension fees for the period during which the delay was entirely of its own making.
The bench drew a clear line at 29 October 2020, the date on which UPSIDC finally decided the time extension application. Interest on time extension fees up to that date was to be waived because the delay up to that point was attributable to UPSIDC. From 30 October 2020 onwards, the petitioner was liable to pay interest as per the terms of the lease deed, since the decision had by then been taken and the petitioner had the means to act.
As for the remaining heads of dues — lease rent balance, GST on lease rent, and maintenance charges — the court held that these were legitimately outstanding and the petitioner was bound to pay them. The time extension fee itself, calculated as per the Board's 274th meeting resolution and the lease deed, was also held payable. Only the interest component accrued before 29 October 2020 was waived.
Order
The Division Bench directed UPSIDC to furnish a recalculated statement of dues to the petitioner within two weeks, reflecting the waiver of interest on time extension fees up to 29 October 2020. The petitioner was directed to deposit the outstanding amount as recalculated within four weeks of receiving that statement. Simultaneously, within two weeks of depositing the amount, the petitioner was required to tender a categorical undertaking to UPSIDC, in terms of the lease deed, to complete construction and make the unit functional. The court made clear that if the petitioner failed to comply with these directions, UPSIDC would be at liberty to proceed with cancellation of the lease in accordance with law. Both writ petitions — Writ-C No.4588 of 2025 and Writ-C No.5960 of 2021 — were disposed of on these terms on 4 May 2026.