[Breaking] Arbitration Tribunal Of Three Retired Supreme Court Judges Awards Rs 155 Crores In Favour Of Bengal Unitech

Arbitration Tribunal of three retired Supreme Court Judges awards Rs. 155 Crores in favour of Bengal Unitech. The matter pertains to a dispute that arose in relation to a tender floated by SJDA in the year 2006 for the development of 232.4 acres of land under the “New Township Project”. (NTP).

Precursor to dispute between Bengal Unitech And SJDA

In the year 2017 an Arbitration was invoked between the Bengal Unitech Universal Siliguri Projects Ltd., a subsidiary of Unitech Ltd. (Bengal Unitech) and the Siliguri Jalpaiguri Development Authority (SJDA).

The high stakes residential project across Mahanada River was envisaged as a public private partnership wherein Bengal Unitech emerged as the highest bidder. Manifestly, the bid was awarded to Bengal Unitech for Rs. 84.24 crores which was deposited on 27.12.2006.  SJDA’s move to initiate the bid process was based on the anticipated increase in population resulting in increased demand for residential property.

After securing the bid, the claimant went on to deposit 40% of the bid amount of Rs. 210.60 crores within 15 days from this date adjusting deposits made earlier towards this project. The said first installment was in addition to the earnest money deposited at the initial stage of the tender process.

Thus, according to the Claimant 40% of the bid amount was paid to the Respondent Authority amounting to Rs.84.24 crores, which happened to be proportionate to 92.96 acres of the subject land.

Crux of the dispute between Bengal Unitech and SJDA

In due course of the project development cycle, the execution of the lease deed of the allocated land and the marketability of the title became a matter of deliberation and led to dispute between the parties.

Bengal Unitech alleged that the possession was merely on paper. The respondent affirmed that delivery of possession of 90.19 acres of land was evidenced by issuance of a Possession Certificate dated 10.08.2007 which has been produced by the Claimant itself. The respondent also contended that Bengal Unitech delayed the initiation of the project work. 

While SJDA blamed Bengal Unitech over the prolonged delay in the execution of the project, the latter pointed out SJDA’s failure to provide the conversion certificate which is mandatorily required to use the agricultural land for residential construction.

Swift execution of  lease deed was required: Arbitration Tribunal

The matter was adjudicated upon by a bench of three retired justices of the Supreme Court consisting of Mr. Justice B.P. Singh (Retd.), Mr. Justice A.K. Patnaik (Retd.) and Mrs. Justice Gyan Sudha Misra (Retd.).

The tribunal held that both the parties had delayed in performing their respective obligations on two counts.

The first relates to the execution of the lease deed by the parties and the second with regard to obtaining necessary conversion of land use from the authorities concerned for the execution of the project by converting agricultural land use into use for residential development.

“both the parties are guilty of not proceeding swiftly in the matter of execution of the lease deed which only would have entitled the Claimant to proceed with the development work, having acquired all the lease hold rights in respect of the lands given to it under the lease deed.”

"Only upon execution of the lease deed, the Claimant could have claimed a good, valid, clear and marketable title to the project lands free of any encumbrance or claims as provided under Clause 3.6 of the Development Agreement. In the absence of a lease deed, it may be pre-mature to call upon the Developer to proceed with the development work, it added."

Bengal Unitech was aware that lands were agriculture lands

On the aspect of conversion certificate, the tribunal affirmed that both the parties knew about the nature of land at the time of entering into the bid process. Accordingly, they were required to obtain permission for change of land use from agricultural to development of new township project, which involved construction of dwelling units for residential use.

“It is an admitted position that the lands were agricultural lands. This is borne out from question no.36 put to the Claimant’s witness. He was questioned as to whether at the time the Claimant submitted the bid it was aware that the lands were agricultural lands. The answer to this question was in the affirmative. This, therefore, establishes that both the Claimant and the Respondent Authority knew that the project lands were agricultural lands, and consequently the law required them to obtain permission for change of land use from agricultural to development of new township project, which involved construction of dwelling units for residential use.”

Ray of hope for home buyers

The Arbitration Tribunal found justification in Bengal Unitech's claim for a refund of Rs. 84.24 crores with an interest at the rate of 6% per annum.  The said amount will be payable from the date of deposit till the date of final payment and will total to about Rs. 155 crores. This money to be received can be utilized by Unitech Ltd. to complete the unfinished projects giving a much-needed relief to the homebuyers and other stakeholders. at whose instance the Supreme Court took up a massive task of redressing the grievances of the homebuyers and other stakeholders.

Supreme Court’s active intervention played a key role

Bengal Unitech is a company with expertise and state-of-the-art technology to carry out mega infrastructure projects and is involved in the execution of some significant projects. Lately the company ran into financial difficulties.  

The new board appointed by the Union of India has placed before the Supreme Court a resolution framework which is pending consideration. The Supreme Court is actively taking up the matter in order to resolve the mismanagement done by the erstwhile management of Unitech Ltd. 

The affairs of Unitech Ltd. have been under the radar of the Supreme Court of India. The Apex court approved a government appointed board vide an order dated 20.01.2020 to look into the affairs of Unitech Ltd.

Before the Arbitration Tribunal, Bengal Unitech was represented by Mr. Siddharth Batra, Advocate on Record Supreme Court of India and SJDA was represented by Mr. Kalyan Bandopadhyay, Senior Advocate.