Agree. It seems contradictory as 'annual leave' is a contractual agreement. Therefore you must use it or lose it. I am sure that under employment law this though not illegal if challenged not upheld.
Was this fact made clear to you when you joined the company and did you sign your contract to this effect. If not then you have been misled.
I have to add that in our company we too have all sorts of strange rules that they can utilise but I don't recall them ever doing it. Enjoy your holiday.