The Supreme Court has directed the Telangana State Industrial Infrastructure Corporation (TSIIC) to refund Rs 165 crore with interest to real-estate firm Unitech Limited as it could not hand over 350-acre land in Ranga Reddy District to develop an integrated township project.
In September 2007, the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) Ltd invited bids to “develop, design and construct” an integrated township project/multi-services aerospace park in the area of about 350 acres in Nadergul Village, Saroornagar Mandal, Ranga Reddy District. In pursuance of its press release, APIIC floated a bid document and Unitech was chosen. After that Unitech entered into agreement with the APIIC, and deposited Rs 165 crore with the government body.
However, the project did not proceed further as the TSIIC, which took over issues related to the project from APIIC after the bifurcation of Telangana and Andhra Pradesh, could not ensure encumbrance-free hand over of land to the real estate firm which took legal recourse for refund.
A two-judge bench of Justices D.Y. Chandrachud and M.R. Shah has noted, “The agreement clearly provides that the ability of the Government of Andhra Pradesh/TSIIC to convey full title to the developer forms the basis of the contract. The failure of title entitles Unitech to claim a full refund together with compensatory payment, as contractually defined. The claim does not raise a disputed question of fact requiring an evidentiary determination. Both the learned Single Judge and the Division Bench of the High Court have elaborately considered the precedents of this Court and correctly concluded that Unitech is entitled to a refund.
“The State and its instrumentalities are duty-bound to act fairly under Article 14 of the Constitution. They cannot, even in the domain of contract, claim an exemption from the public law duty to act fairly,” said the Court.
The Court also held that the Division Bench was in error in curtailing the right of Unitech to claim a refund with effect from the dates on which the respective payments were made. “Obviously, Unitech had entered into the project since it wished to pursue it. Unitech cannot be penalized for wanting to continue with the agreement, as APIIC navigated disputes over its claim to the land,” the Court said.
The Court said, “The entitlement of Unitech to a refund of the amounts paid is embodied in the terms of the contract which envisage that a default on the part of APIIC in conveying the land or the existence of political force majeure events would furnish a valid basis for the “compensatory payment”. Moreover, the date from which compensatory payment has to be made is specifically provided : the Development Agreement provides that it will be “from the date on which the first payment of project price” is made.”
While taking note of the contention of the TSIIC and the State of Telangana that the Development Agreement, on the basis of which Unitech has sought to avail its contractual remedy has not been registered or assessed to stamp duty, the Apex Court said Unitech’s claim to compensatory payment cannot be defeated on the sole ground of the payment of stamp duty.
“The Development Agreement shall have to be impounded and be presented to the Chief Controlling Revenue Authority in the State of Telangana for assessment of stamp duty and to the competent authority for registration. The assessment shall be completed within thirty days. The appropriate stamp duty and registration charges liable to be paid in terms of the determination shall be paid by TSIIC and be deducted from the refund due and payable to Unitech under the terms of this order,”
-the Court said.
The Court has disposed of the plea with the following directions;
(i) The Development Agreement stands impounded and shall be forwarded by TSIIC within two weeks to the competent authority for registration and for assessment of stamp duty. The assessment to stamp duty and formalities for registration shall be completed within one month. The amount payable towards stamp duty, penalty (if any) and registration charges shall be paid initially by TSIIC into the account of the competent authority within two weeks of the determination and shall be adjusted against the refund payable by TSIIC to Unitech;
(ii) The appeal filed by Unitech, arising out of SLP(C) No 9019 of 2019 is allowed in part by setting aside the direction of the Division Bench of the High Court which confined the liability to pay interest only with effect from 14 October 2015;
(iii) Unitech shall be entitled to a refund of an amount of Rs.165 crores together with interest at the SBI-PLR commencing from the respective dates of payment, computed in accordance with the provisions of the Development Agreement (except for compounding);
(iv) The amount which has been deposited in the Registry of this Court in pursuance of the interim order shall be disbursed to Unitech together with accrued interest. The balance due and payable under the terms of this judgment shall be refunded by TSIIC to Unitech within two months from the receipt of a certified copy of this judgment; and
(v) In terms of the directions of the Single Judge of the High Court, TSIIC will be at liberty to pursue its remedies for apportionment in relation to APIIC in accordance with law. No opinion is expressed on the merits or tenability of the claim for apportionment asserted by TSIIC.