The Madras High Court has upheld the power of the State Industries Promotion Corporation of Tamil Nadu (SIPCOT) to take back unused portions of industrial land allotted to companies. The court dismissed an appeal filed by Kems Forging Ltd., confirming that authorities can resume excess or unutilized land if it is not used for the purpose for which it was allotted.
A division bench of Justice S.M. Subramaniam and Justice K. Surender delivered the judgment on March 2, 2026.
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Background of the Case
The dispute arose from an industrial plot allotted to Kems Forging Ltd. in December 2005. The company later entered into a lease deed with SIPCOT on March 2, 2006, for the land meant to establish a manufacturing unit for forged and machined auto components.
During a review, SIPCOT found that about 3.70 acres of the allotted land remained unused. The authority issued a notice asking the company to surrender the unused portion and execute a surrender deed before May 15, 2012.
When the company did not comply with this request, SIPCOT invoked Clause 14(i) of the lease deed, cancelled the allotment relating to the unused portion, and initiated steps to resume the land.
The company challenged this action before the High Court through a writ petition. However, the Single Judge upheld SIPCOT’s decision, prompting the company to file a writ appeal.
Clause in the Lease Deed
A central issue in the case was Clause 14(i) of the lease deed, which allows SIPCOT to cancel the allotment of land if it is not used for the purpose for which it was granted or if the land exceeds the allottee’s actual requirements.
The clause also provides that in such cases the authority may resume the land while refunding the plot deposit, though development charges and other fees are not refundable.
Argument by the Company
During the appeal hearing, the company argued that the land was not entirely unused. Its counsel submitted that a solar panel had been installed on the disputed portion and even produced a photograph to support the claim.
The company contended that this showed the land had been put to use.
Court’s Observations
The division bench was not convinced by the company’s argument.
“The solar panel is not an industrial structure,” the court observed, adding that the land had not been utilized for establishing the manufacturing unit that formed the basis of the original allotment.
The bench emphasized that the lease conditions clearly required the allottee to use the land for the specific industrial purpose mentioned in the project report.
Since the authorities found that the land had not been used for such industrial activity, SIPCOT was justified in invoking Clause 14(i) and resuming the unused portion.
Court’s Decision
The court noted that the Single Judge had already examined the facts and the lease conditions in detail and had correctly upheld SIPCOT’s action.
The bench stated that there was no legal infirmity in the earlier order and affirmed that the terms of the lease deed were binding on the company.
While confirming SIPCOT’s right to resume the land, the court also reiterated that the authority must refund the plot deposit as provided under Clause 14(i) of the lease agreement.
Accordingly, the writ appeal was dismissed, and the order of the Single Judge was confirmed. The connected miscellaneous petition was also closed, with no order as to costs.
Case Title: Kems Forging Ltd. vs State Industries Promotion Corporation of Tamil Nadu Ltd. (SIPCOT)
Case No.: W.A. No. 2295 of 2022
Decision Date: 02 March 2026
