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Arbitration & Commercial LawSupreme Court of India

Unitech Limited & Ors. v. Telangana State Industrial Infrastructure Corporation (TSIIC) & Ors.

Civil Appeal · 2021 INSC 96Decided 17 Feb 2021
Civil Appeal No. 317 of 2021
Dr. Justice D.Y. Chandrachud · Justice M.R. Shah

Background

In 2007, Unitech won a bid from the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) to develop a large township/aerospace park near Hyderabad and paid Rs. 165 crore towards the land cost, despite pending litigation over the land's title that APIIC had flagged at the outset. That title litigation dragged on for years and was ultimately decided against the government, by which time the state had been split into Andhra Pradesh and Telangana, with TSIIC succeeding APIIC's obligations in the Telangana region. Unitech sought a refund of its payments with interest, since the project could never commence due to the unresolved and ultimately fatal title defect, while TSIIC and the State of Telangana disputed the extent of interest owed and sought to pass liability back to Andhra Pradesh.

Decision Breakdown

The Supreme Court held that Unitech was entitled to a refund of the full Rs. 165 crore with simple (non-compounded) interest running from the dates it originally paid each instalment, rejecting the High Court's view that interest should run only from a later date. It also held that the Development Agreement, which had not been stamped or registered, still supported Unitech's claim since stamp duty is a revenue measure and not a technical weapon to defeat a genuine claim, though it directed the agreement be impounded and the required duty paid from the refund amount. On the inter-state dispute, the Court declined to finally decide apportionment between TSIIC and APIIC/Andhra Pradesh, directing TSIIC to pay Unitech first and separately pursue its own remedies against Andhra Pradesh under the state reorganisation law.

Lesson Learnt

A party who pays money under a government contract that cannot be performed due to a defect the government itself disclosed (like disputed land title) is entitled to a full refund with interest, and unrelated technical defects such as a contract lacking registration or stamp duty cannot be used to defeat that right.

Unitech Limited & Ors. v. Telangana State Industrial Infrastructure Corporation (TSIIC) & Ors. – Legal Case Shots | LegalAware