Listen to this articleUNITECH LIMITED
VERSUS
TELANGANA STATE INDUSTRIAL INFRASTRUCTURE
CORPORATION (TSIIC) & ORS.
Civil
Appeal No. 317 of 2021 Arising out of SLP (C) No. 9019 of 2019, Decided on
February 17, 2021
JUDGES: D. Y. Chandrachud & M. R. Shah, JJ.
FACTS: The Appellant No. 1 entered into a Development
Agreement dated 19-08-2008 (hereinafter referred as “Agreement”) with the Andhra Pradesh Industrial Infrastructure
Corporation Ltd. (hereinafter referred as “APIIC”) to develop, design and construct an Integrated Township
Project / Multi Services Aerospace Park (hereinafter referred as “Project”) in a certain land. For this
Project, Appellant No. 1 paid around Rs 165 Crores, which comprises of Rs 140
Crores towards the Cost of Land, Rs 20 Crores towards Earnest Money Deposit (hereinafter
referred as “EMD”) and Rs 5
Crores towards Project Development Expenses.
However,
allotment of Land was subject to the outcome of a litigation pending before the
then High Court of Andhra Pradesh in the matter of Pratap Karan v Govt.
of Andhra Pradesh. Hence, Appellant No. 1 deferred commencement of work on
the Land, until APIIC handed over possession of the Land encumbrance-free.
Thereafter, the High Court of Andhra Pradesh passed a Judgment dated 19-12-2011
in the said matter and held that the Government of Andhra Pradesh did not have
title to the Land.
Meanwhile,
the State of Andhra Pradesh was re-organized into the successor States of
Andhra Pradesh and Telangana with effect from 02-06-2014 under the provisions
of the Andhra Pradesh Reorganization Act, 2014 (hereinafter referred as “Reorganization Act”). As a result, Appellant
No. 1 requested both APIIC and the newly-formed Telangana State Industrial
Infrastructure Corporation Ltd (hereinafter referred as “TSIIC”), a successor of APIIC, for
refund of all amounts received in relation to the Land together with interest
and damages for the loss suffered by them, including the cost of borrowing
capital from banks, expenses for planning and designing, opportunity costs and
other costs for development.
But as
APIIC and TSIIC did not refund the amounts, Appellant No. 1 filed a Writ
Petition before the Supreme Court, which directed Appellant No. 1 to approach
the High Court. Hence, Appellant No. 1 filed a Writ Petition before the High
Court of Telangana seeking a refund of Rs 165 Crores along with interest at the
SBI Prime Lending Rate (hereinafter referred as “SBI- PLR”) from September 2007, i.e. the date from when Appellant
No. 1 started making payments. The said Petition was allowed by the Hon’ble
High Court, vide Judgment dated 23-10-2018.
Aggrieved,
TSIIC and State of Telangana filed an Appeal before the Division Bench of the
High Court. The Division Bench passed a Judgment dated 01-04-2019 and upheld
the Order of the Single Bench regarding liability of TSIIC to refund Rs. 165
Crores to Appellant No. 1. However, the Division Bench modified the Order to
the extent that interest would be paid at SBI-PLR rate from 14-10-2015, i.e.
the date on which Appellant No. 1 had first sought for refund of all amounts,
instead of September 2007, when Appellant No. 1 had started making payments, as
Appellant No. 1 was then aware of the pending litigation.
Aggrieved
by the Order of the Division Bench of the High Court, Appellant No. 1 filed
Special Leave Petitions before the Supreme Court.
ISSUE
Whether
the writ under Article 226 is maintainable or is excluded altogether in a
contractual matter?
HELD
The
Supreme Court allowing the appeal held that the jurisdiction under Article 226
was rightly invoked by the Single Judge and the Division Bench of the Andhra
Pradesh High Court when the foundational representation of the contract has
failed. The Court said that the TSIIC, a state instrumentality, has not just
breached its contractual obligation, but hoarded the refund of the principal
and interest on the consideration that was paid by Appellant No. 1 over a
decade ago. The Court held that the State and its instrumentalities are not
exempted from the duty to act fairly merely because in their business dealings
they have entered into the realm of contract and similarly, the presence of an
arbitration clause does oust the jurisdiction under Article 226 in all cases.
ISSUE
Whether
the State authority was under contractual obligation to pay compensatory payment?
[Fact: the basic postulate underlying the contract between
the parties was the availability of the land which comprised the project site
which was subject to the outcome of the pending appeal
HELD
The
Supreme Court answering in affirmative held that the State Authority was under
contractual obligation to pay the compensatory payment to the Appellant No. 1.
ISSUE
Whether the APIIC
or TSIIC is liable to pay compensatory payment to the Appellant No. 1?
HELD
The
Court held that TSIIC shall refund the amounts due and payable to Appellant no.
1 in terms of the present judgment with liberty to pursue its rights and
remedies in accordance with law over its claim for apportionment on which the
Court expressed no final opinion.
ISSUE
Whether
non-registration or payment of stamp duty of Development Agreement would bar the
Appellant from claiming contractual remedy under the said Agreement?
HELD
The
Supreme Court answering the above question in negative held that 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 Appellant No. 1. Furthermore, the Court observed that the Stamp Act
is a fiscal measure enacted to secure the revenue for the State, and not to arm
the opponent with a weapon of technicality and hence, Appellant No. 1’s claim
to compensatory payment cannot be defeated on the sole ground of the payment of
stamp duty.