IHC rules buyers of luxury apartments at One Constitution Avenue have no ownership rights

ISLAMABAD: The Islamabad High Court (IHC) on Monday issued a detailed judgment in the One Constitution Avenue case, upholding the cancellation of the lease of the multi-billion-rupee project.

It ruled that buyers of luxury apartments in the development do not have ownership rights and may instead pursue legal remedies against the builder for recovery of their investment.

In a detailed judgment, IHC Chief Justice Sardar Muhammad Sarfraz Dogar dismissed a set of petitions filed by M/s BNP (Pvt) Limited — the developer of the project — along with investors and other stakeholders, challenging the Capital Development Authority’s (CDA) decision to terminate the lease.

The court held that the impugned action was in accordance with law and consistent with the framework laid down earlier by the Supreme Court (SC).

In the case, leading lawyers, including former SC judge Ijazul Ahsan, represented the BNP, while advocate Kashif Ali Malik represented the CDA.

The dispute concerns a 2005 lease agreement between the CDA and BNP for the development of a five-star hotel. The BNP converted it to a residential project — namely, One Constitution Avenue, a high-end residential and commercial project located in a prime area of the federal capital.

The lease was initially terminated in 2016 but later restored by the SC in January 2019, subject to stringent financial conditions. These included payments of Rs17.5 billion within eight years through structured instalments backed by bank guarantees, and a stipulation that termination could only take place in case of default after issuance of a 30-day notice.

The IHC observed that the SC’s judgment was binding and created a complete framework governing the rights and obligations of the parties. It held that strict compliance with those directions was mandatory and that any deviation would have legal consequences.

Examining the conduct of the petitioner, the court found that BNP failed to honour its financial commitments under the revised terms.

The judgment noted that the developer did not make timely payments of instalments and also failed to furnish bank guarantees in the form acceptable to the CDA. The court rejected BNP’s stance that the delays were caused by the CDA, observing that the petitioner could not justify prolonged non-compliance on that basis.

The IHC further observed that the petitioner had undertaken a substantial financial obligation under SC’s order and was expected to demonstrate both capacity and readiness to fulfil those obligations. Instead, the record showed a pattern of delays and failure to adhere to agreed timelines, which, according to the court, constituted a material default.

Addressing BNP’s contention that the CDA had frustrated performance by delaying the handing over of possession and approval of bank guarantees, the court held that even if certain administrative delays occurred, they did not absolve the petitioner of its primary responsibility to comply with the payment schedule.

It emphasised that the doctrine of reciprocal obligations could not be invoked to excuse non-performance where the defaulting party itself failed to take concrete steps to fulfil its commitments.

On the issue of due process, the IHC held that the CDA had complied with the requirement of issuing notices prior to termination. It observed that the developer was given sufficient opportunity to cure the default but failed to do so within the stipulated time. Therefore, the termination of the lease could not be termed arbitrary or unlawful.

The IHC also rejected the argument that the impugned action was mala fide, noting that the CDA exercised its statutory powers within the limits prescribed by law and SC’s judgment. It reiterated that administrative discretion, when exercised in accordance with binding judicial directions, could not be interfered with lightly.

In relation to the claims of apartment buyers and investors, the court held that their rights were contingent upon the validity of the lease held by the developer.

Since the lease itself stood lawfully terminated, no independent ownership rights could accrue in their favour. The court observed that such purchasers were essentially dealing with the developer at their own risk and could not claim protection against the CDA in the absence of a valid title.

Justice Dogar, however, noted that the affected buyers were not without remedy and could seek recovery of their amounts by initiating legal proceedings against M/s BNP.

The judgment further highlighted that although the case involved contractual elements, it also had significant public law implications, as it concerned the exercise of statutory authority by the CDA over public land. In such circumstances, the court held, the actions of the authority must be assessed on the touchstone of legality, fairness and compliance with judicial directives.

Concluding that the petitioner had failed to establish any illegality in the CDA’s decision, the IHC dismissed all petitions and upheld the termination of the lease.