Federal Constitutional Court Restricts Conversion of Industrial Land to Residential Projects

The judgement asserts that land secured for a public purpose must preserve its designated original use and upholds the Peshawar High Court’s rejection of a housing scheme on mill property.

ISLAMABAD: In a ruling poised to set a nationwide precedent for land-use policy, the Federal Constitutional Court (FCC) declared on Wednesday that property obtained for a defined public purpose—such as industrial development—may not later be transformed into residential housing estates.

“We hold that because the land was acquired expressly for the establishment of Paper and Board Mills, the petitioner company cannot claim an absolute or indefeasible right to its conversion into a housing scheme,” Chief Justice Aminuddin Khan observed in the opinion he authored.

A two-judge FCC bench, headed by Justice Aminuddin and comprising Justice Ali Baqar Najafi, reviewed an appeal by M/s Adil International (Pvt) Ltd against the Sept 11, 2024 decision of the Peshawar High Court, which had dismissed the company’s plea.

A senior lawyer, speaking on condition of anonymity, remarked that the ruling carries significant implications because multiple tracts initially acquired for industry have been converted into housing schemes in Punjab, Khyber Pakhtunkhwa and Sindh.

In 1954, some 1,020 kanals and 19 marlas situated in Mohal Amangarh, Nowshera Khurd, tehsil Nowshera, Khyber Pakhtunkhwa, were acquired under the Land Acquisition Act, 1894, for the construction of Board/Paper Mills.

The dispute originated when Adil International purchased the assets of Adamjee Papers and Board Mills through a court-supervised auction in 2000 for Rs220 million, free from encumbrances.

After the factory became unusable, the company dismantled it with requisite approvals and sought to convert the land into a housing scheme. When authorities withheld the no-objection certificate (NOC), the firm obtained orders from both the PHC and Supreme Court directing consideration of the NOC. The certificate was ultimately granted, enabling the company to develop the scheme, sell plots and start construction.

Subsequent government directives restricted land use and transfers, leading to refusal of deed registration. The petitioner then sought orders for sale registration, but the PHC rejected the request on Sept 11, 2024, prompting the appeal.

In its 17-page judgement, the FCC held that the KP government remains free to exercise powers under the law and the terms of the Oct 16, 1954 agreement executed via Section 41 of the Land Acquisition Act, 1894, should it find the land surplus to original needs or misapplied.

Justice Aminuddin emphasized that land acquired for a specified public purpose remains subservient to that purpose despite any transfer, assignment or judicial sale, retaining its public character.

Consequently, the verdict stated, neither the company nor any later transferee acquires an unfettered right to alter the land’s use except with prior provincial sanction and strict adherence to the 1894 Act’s Section 41 agreement.

The FCC concluded that the PHC judgement suffered no illegality or jurisdictional defect, and upheld the order while dismissing the petition as meritless.

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