ISLAMABAD: The Islamabad High Court (IHC) on Monday issued a detailed ruling in the One Covenant Avenue case, upholding the cancellation of the lease contract for the multi-billion rupee project.
It ruled that buyers of luxury apartments in the project had no ownership rights and could instead pursue legal remedies against the construction company to recover their investments.
In a detailed ruling, IHC Chief Justice Sardar Muhammad Sarfraz Dogar dismissed a batch of petitions filed by 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 procedure was consistent with the law and consistent with the framework previously set by the Supreme Court.
In this case, prominent lawyers, including former Supreme Court Justice Ijazul Ahsan, represented the BNP, while lawyer Kashif Ali Malik represented the Constitution Drafting Body.
The dispute relates to the 2005 lease agreement between CDA and BNP for the development of a five-star hotel. The BNP converted it into a residential project – specifically, One Constitution Street, an upscale residential and commercial project located in a prime area of the federal capital.
The lease was initially terminated in 2016, but the SC later restored it in January 2019, subject to strict financial conditions. These included payments worth Rs 17.5 billion within eight years through structured installments backed by bank guarantees, and the stipulation that termination could only take place in the event of default after issuing a 30-day notice.
The IHC noted that the Supreme Court ruling was binding and created a complete framework governing the rights and obligations of the parties. It considered that strict compliance with those directives was mandatory and that any deviation would have legal consequences.
After examining the petitioner’s conduct, the court found that BNB failed to fulfill its financial obligations under the revised terms.
The ruling indicated that the developer did not pay the installments in a timely manner, and also failed to provide bank guarantees in a form accepted by the Community Development Authority. The court rejected BNP’s position that the delay was due to the CDA, observing that the petitioner could not justify prolonged non-compliance on this basis.
The IHC also noted that the petitioner had undertaken a significant financial commitment under the Supreme Court order and was expected to demonstrate the ability and willingness to meet such commitments. Instead, the record showed a pattern of delays and failure to adhere to agreed-upon timelines, which, according to the court, constituted a material default.
Addressing BNP’s claim that the CDA had frustrated performance by delaying the delivery of possession and approval of bank guarantees, the court held that even if certain administrative delays occurred, they did not relieve the petitioner of its primary responsibility to comply with the payment schedule.
He stressed that the principle of mutual obligations cannot be relied upon to justify non-performance when the defaulting party itself fails to take concrete steps to fulfill its obligations.
On the issue of due process, the IHC held that the CDA had complied with the requirement to issue notices prior to termination. It was noted that the developer was given enough opportunity to fix the bug but failed to do so within the stipulated time. Therefore, the termination of the lease cannot be described as arbitrary or illegal.
The IHC also rejected the argument that the impugned action was in bad faith, stating that the CDA exercised its statutory powers within the limits set by law and the Supreme Court ruling. It reaffirmed that administrative discretion, when exercised in accordance with binding judicial directives, cannot be interfered with lightly.
Regarding the claims of apartment buyers and investors, the court held that their rights were conditional on the validity of the lease contract concluded by the developer.
Since the lease itself has been legally terminated, no separate property rights can arise in their favour. The court noted that these buyers 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 deed.
However, Justice Duggar noted that the affected buyers were not without compensation and could seek a refund by commencing legal proceedings against BNP.
The ruling further stressed that although the case involved contractual elements, it also had important common law implications, as it concerned the exercise of legal authority by the CDA over public land. The court held that in such circumstances, the actions of the authority must be evaluated on the basis of legality, justice and compliance with judicial directives.
The IHC concluded that the petitioner had failed to prove any illegality in the CDA’s decision, denied all petitions and upheld the termination of the lease.
Recent CDA actions
Last week, reports emerged on social media that residents of the building had been served eviction notices by officials.
Social media was filled with video clips showing a large number of police personnel at the site, while reports circulating on social media stated that the police stormed the building after midnight and asked residents to evacuate. Some also claimed that the police broke the doors and locks in the building.
The apartments in the building are said to be owned by prominent figures, including PTI founder Imran Khan, Chaudhry Aitzaz Ehsan, Chandana Gulzar Aurangzeb, former minister Burjis Tahir, and former caretaker Prime Minister Nasirul Mulk.
On Friday, IHC upheld the CDA’s decision to cancel the lease of the building due to the company behind the project defaulting on payments worth billions of rupees.
On the same day, Prime Minister Shehbaz Sharif formed a high-level committee to review the case and prevent the authorities from taking any action.
