Supreme Court Orders Refund in Unitech vs. Telangana State Industrial Infrastructure Dispute
The Supreme Court of India, in a significant ruling in Unitech Limited & Ors. vs. Telangana State Industrial Infrastructure Corporation (TSIIC) & Ors., addressed a long-standing contractual dispute over an infrastructure development project in Hyderabad. The court ordered the refund of Rs. 165 crores to Unitech Limited along with interest due to failure of title and non-fulfillment of contractual obligations by the government authorities.
Background of the Case
The case revolves around the 2007 bid invitation by Andhra Pradesh Industrial Infrastructure Corporation (APIIC) to develop a multi-services aerospace park over 350 acres in Nadergul Village, Hyderabad. Unitech Limited won the bid and was required to pay:
- Rs. 140 crores as project land cost
- Rs. 5 crores as project development expenses
- An earnest money deposit of Rs. 20 crores
Unitech made the full payment but faced multiple hurdles due to ongoing litigation over the land’s ownership.
Legal Proceedings and Issues
The dispute began when APIIC failed to provide an encumbrance-free title to the land. Several cases, including Appeal Suit No. 274/2007 and multiple writ petitions, questioned the ownership of the land. The key issues were:
- Whether APIIC had a clear title to transfer the land to Unitech
- Whether Unitech was entitled to a refund due to failure of title
- The apportionment of liabilities between Andhra Pradesh and Telangana after the bifurcation
Petitioner’s (Unitech Limited) Arguments
Unitech contended that:
- The entire agreement was based on the representation that APIIC had the authority to transfer the land.
- The company made full payments in good faith, but the land was never legally transferred.
- APIIC had a contractual obligation under Article 14.3.1 of the Development Agreement to refund payments in case of failure to execute a sale deed.
- They were entitled to compensatory payment at the SBI Prime Lending Rate (SBI-PLR).
- Unitech had suffered losses due to prolonged legal battles and was entitled to a refund with interest from the date of payment.
Respondent’s (TSIIC & State of Telangana) Arguments
The Telangana authorities defended their position by stating:
- Unitech was aware that the land was under litigation.
- The company voluntarily continued to engage in the project despite legal uncertainties.
- Unitech could not claim a refund with compounded interest since it had been aware of the risks involved.
- The liability of refund should be shared between TSIIC and APIIC based on the Andhra Pradesh Reorganization Act, 2014.
Supreme Court’s Observations
The Supreme Court, comprising Justices Dhananjaya Y Chandrachud and M.R. Shah, analyzed the case and ruled in favor of Unitech. Key observations included:
- APIIC’s failure to provide a clear title to the land amounted to a “political force majeure event” under the contract.
- Unitech had made full payments in reliance on the government’s representation.
- The contractual provision for compensatory payment at the SBI-PLR was enforceable.
- The interest should be awarded from the date of payment rather than from the date of Unitech’s refund request in 2015.
“The State and its instrumentalities are duty-bound to act fairly under Article 14 of the Constitution. Investors who respond to government tenders are entitled to demand that contractual representations be honored.”
Read also: https://judgmentlibrary.com/supreme-court-clarifies-contempt-of-court-in-family-business-dispute/
Final Judgment
The Supreme Court ruled:
- TSIIC must refund Rs. 165 crores to Unitech, with interest calculated from the respective dates of payment.
- Interest will be at the SBI Prime Lending Rate but without compounding, considering that Unitech had knowingly entered into an agreement with an existing land dispute.
- TSIIC is allowed to seek apportionment of liability from APIIC, but it must make the refund to Unitech without delay.
- The Development Agreement must be registered and stamped, with costs deducted from the refund amount.
Impact of the Judgment
The ruling sets an important precedent:
- Accountability in Public-Private Partnerships: The decision reinforces that government authorities must honor contractual obligations.
- Fairness in Business Transactions: Ensures that private investors are not unfairly burdened by administrative failures.
- Legal Certainty in Land Transactions: Reinforces that state bodies must ensure clear land titles before entering into agreements.
- Financial Implications for States: The case emphasizes the necessity of proper financial planning in state infrastructure projects.
Conclusion
The Supreme Court’s ruling in Unitech Limited vs. Telangana State Industrial Infrastructure Corporation is a landmark decision that upholds fairness in government contracts. By directing a refund of Rs. 165 crores with interest, the Court reaffirmed that the state must act responsibly in contractual matters. This judgment serves as a crucial reference for future cases involving failed land acquisitions and government agreements.
Petitioner Name: Unitech Limited & Ors..Respondent Name: Telangana State Industrial Infrastructure Corporation & Ors..Judgment By: Justice Dhananjaya Y Chandrachud, Justice M.R. Shah.Place Of Incident: Hyderabad, Telangana.Judgment Date: 17-02-2021.
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