UNITECH LIMITED & ORS. versus TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION (TSIIC) & ORS.

Citation: [2021] 1 S.C.R. 1064 · Decided: 17-02-2021 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 1 S.C.R.
   [2021] 1 S.C.R. 1064
1064
UNITECH LIMITED & ORS.
v.
TELANGANA STATE INDUSTRIAL INFRASTRUCTURE
CORPORATION (TSIIC) & ORS.
(Civil Appeal No. 317 of 2021)
FEBRUARY 17, 2021
[DR. DHANANJAYA Y CHANDRACHUD
AND M. R. SHAH, JJ.]
Contract: Tender – APIIC invited bids to develop, design and
construct an integrated township/aerospace park in area of 350
acres of land – Unitech was successful bidder – In LOA, it was
stipulated that the allotment of land was subject to outcome of a
pending litigation – Pursuant to acceptance of LOA, Unitech by
various instalments paid Rs. 165 crores: Rs. 140 towards cost of
land, Rs. 20 crores towards earnest money deposit and Rs. 5 crores
toward project development expenses – On 19.12.2011, decision
was given by High Court in pending litigation in State of Andhra
Pradesh through Principal Secretary v. Pratap Karan that the
Government of Andhra Pradesh did not have title to the project
land – During the years 2012 and 2013, Unitech called upon APIIC
to execute the sale deed, handover the project site and ensure that
the encumbrances on the project land are cleared in terms of
Development Agreement so as to comply with its obligations – The
State of Andhra Pradesh was reorganised w.e.f. 02.06.2014 –
Request was made to newly formed TSIIC (successor of APIIC) to
clarify the status – On 02.04.2015, Unitech sought release of earnest
money deposit of Rs.20 crores in light of full payment of
consideration – On 09.10.2015, Supreme Court in Pratap Karan
case upheld the judgment of the High Court – Thereafter, on
14.10.2015, Unitech requested APIIC and TSIIC, to refund all the
amounts which were received in relation to the land together with
interest and damages for the loss suffered by them – Writ petition
under Art.226 was instituted before the High Court seeking a refund
of Rs 165 crores together with interest at the SBI Prime Lending
Rate (“SBI- PLR”) from the date of payments – A Single Judge of
the High Court allowed Unitech’s Writ Petition – Writ Appeal by
TSIIC and the State of Telangana – The Division Bench of the High
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Court while upholding order of Single Judge on liability of TSIIC
directed refund of the principal sum of Rs 165 crores with interest
from 14.10.2015 at the SBI-PLR, as opposed to the dates of payment
of installments, beginning from September 2007 – Appeal by Unitech
– Held: Under the Development Agreement which was executed
between APIIC and Unitech, APIIC was to transfer the land
absolutely free from all encumbrances by executing a sale agreement
– The terms of the agreement were to prevail in the event of any
conflict with any other document which formed a part of the bidding
process – Thus, the terms of the agreement were placed on the
pedestal of the highest priority for interpretation, as compared to
other documents, including the LoA – Under the terms of the
Development Agreement, APIIC was obligated to sell and transfer
the land together with its right, title and interest free from all
encumbrances “forthwith upon payment of the last installment of
the total purchase price by the developer” – The fulfillment of the
terms of the agreement was postulated on the availability of the
land – The failure of title in the erstwhile APIIC and the Government
of Andhra Pradesh attained finality upon the decision of Supreme
Court – The basic postulate on which the entire contract was
founded stood nullified as a consequence of the failure of title –
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 entitled Unitech to
claim a full refund together with compensatory payment, as
contractually defined – Further, the Development Agreement provides
that compensatory payment will be “from the date on which the first
payment of project price” is made – 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 –
Unitech cannot be penalized for wanting to continue with the
agreement, as APIIC navigated disputes over its claim to the land –
While Unitech was put to notice of the existence of a litigation, the
Development Agreement which stipulated an encumbrance-free
handover also specified that its covenants would supersede all other
understandings and that its terms would rank as the firs

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