Once Land Is Acquired for a Specific Purpose, State Cannot Allot It to Someone Else Without Notice: Karnataka High Court

“No Notice Issued, No Cancellation Communicated—Yet Land Allotted to Another”, In a significant judgment protecting the sanctity of government land allotments and the rights of investors under State-promoted industrial schemes, the Karnataka High Court delivered its verdict. The Court held that once land has been acquired by the State for the benefit of a specific applicant under an approved industrial scheme, it cannot be reassigned to others without informing or cancelling the original allotment.

Observing a clear procedural failure by State agencies, Justice R. Devdas held:

“No material is placed to show that prior notice was issued to the petitioner, informing the petitioner that on failure to pay the balance consideration, the allotment and the agreement will be cancelled.”

The Court, however, balanced equities by directing the State to allot alternative land at 2003-04 rates, recognising the irreversible nature of third-party rights and compensation already disbursed.

The petitioner, M/s Royal Fragrances Private Limited, had in 2001 applied to the Karnataka Udyoga Mitra (KUM) for allotment of land to set up an IT/Software Park. The State Level Single Window Agency (SLSWA) approved acquisition of approximately 22 acres in Devarabisanahalli and Kariyammana Agrahara.

KIADB agreed to acquire the land, entered into an agreement, and the petitioner deposited over ₹1.34 crore. Acquisition notifications under Sections 28(1) and 28(4) of the KIAD Act followed, and possession of 19 acres 38.5 guntas was taken under Section 28(8).

However, multiple writ petitions by landowners delayed the process. While the petitions were dismissed in 2013, the petitioner alleged that no further intimation was ever made by KIADB to deposit the balance or proceed. Instead, by 2017, parts of the land were allotted to private respondents (M/s Sai Srushti Infra Tech Pvt. Ltd. and others), and the petitioner came to know of this only much later.

Core Legal Issue: Can Government Divert Acquired Land Without Cancelling Original Allotment or Notifying the Allottee?

The High Court framed its decision around this central violation.

“It is broadly agreed... that no formal communication or notice is issued to the petitioner before considering the proposal given by respondents no.4 and 5.”

“To that extent, the petitioner has made out a prima facie case.”

The Court also noted an official communication dated 18.08.2020 from KIADB’s CEO which confirmed that no cancellation of the original allotment had ever taken place.

State's Justification: Silence of the Petitioner Implies Abandonment

The State and KIADB argued that the petitioner remained silent for over a decade and failed to pay balance dues or pursue possession. It contended that the State had no option but to allot land to other investors, who not only secured landowners’ consent but also paid ₹42.9 crore in compensation—compared to the petitioner's ₹1.34 crore.

The Court noted the factual distinction but held:

“No material is placed at the hands of the respondent authorities to show that the petitioner was called upon to pay the balance consideration… or that the allotment and the agreement will be cancelled.”

Equity and Irreversibility: “The Situation Has Become Irreversible”

Weighing the competing interests, the Court observed that quashing the allotments to third parties would:

• Undo compensation already paid to landowners

• Compel the State to refund nearly ₹43 crore

• Require the petitioner to pay an equivalent amount, which it may not afford

Thus, the Court concluded: “The amount deposited by respondents No.4 and 5 herein to the satisfaction of the land owners and the payment made to the land owners is an irreversible situation.”

Alternative Relief: Land Allotment at Old Rates

Finding the petitioner faultless for the procedural omission by the State, and acknowledging that “the remaining extent of land is not contiguous or suitable”, the Court directed:

“Respondents No.1, 2, 3 and 9 are hereby directed to identify and allot minimum of 20 acres of land, alternatively, in a nearby industrial area, to the satisfaction of the petitioner-company, at the rates prevailing in the year 2003-2004.”

The allotment must be completed within six months.

This case highlights a major lapse in transparency and procedural compliance by industrial promotion agencies, where an investor with valid approval and payments was ignored and displaced, without formal notice or cancellation. Yet, balancing legal rights and ground realities, the Court crafted a just and proportionate remedy.

“The right of an investor cannot be extinguished merely due to administrative oversight, especially when land was acquired specifically for their benefit and no cancellation ever occurred.”

Date of Decision: 20 August 2025