Arbitral Tribunal finds SJDA at fault; directs to refund bid amount of Rs 84.24 crores to the claimant in New Township Project 

Arbitral Tribunal, New Delhi: The Arbitral Tribunal comprising of B.P. Singh (Retd.), A.K. Patnaik (Retd.) and Gyan Sudha Misra (Retd.), JJ., directed  SJDA to refund the bid amount Rs.84.24 crores deposited by the claimant with regard to New Township Project. Finding the respondent at fault, the Tribunal stated in the absence of a lease deed in its favour, and in the absence of conversion permission for utilizing the agricultural lands for construction activities, the possession of the lands served no useful purpose.

Siliguri Jalpaiguri Development Authority (SJDA), the Respondent is a statutory body constituted under the West Bengal Town and Country (Planning and Development) Act, 1979, statutorily empowered as a planning authority and development agency for the Siliguri Jalpaiguri planning area. Considering the anticipated increase in population resulting in increased demand of residential property, the SJDA acquired 500 acres of land to develop it for residential use. Accordingly, a Notice Inviting Expression of Interest was floated for inviting tenders from suitable private sector entities/developers for development of 232.4 acres of land for “New Township Project” (NTP) by way of public private partnership. The Claimant-company, Bengal Unitech Universal Siliguri Projects Ltd., being the highest bidder, was awarded the project.

Attempt of Conciliation and Constitution of Arbitral Tribunal

However, since the parties were not able to come to any understanding, the disputes and differences persisted, and a request for conciliation under Section 62 of the Arbitration and Conciliation Act, 1996 was made. Unfortunately, the Conciliator vide his order terminated the conciliation proceeding, holding that despite efforts at conciliation, further efforts seemed to be no longer justified.

It was in the aforementioned backdrop that the Claimant invoked the arbitration clause and appointed its nominee arbitrator. The Respondent also appointed its nominee arbitrator and both the nominated arbitrators thereafter appointed the Presiding Arbitrator and the Arbitral Tribunal stood duly constituted.

Grievances of the Claimant

It was the case of the Claimant that on acceptance of its bid, it proceeded to deposit a sum of Rs.79.24 crores in performance and compliance of the bid and Rs. 5 crores had been deposited earlier with the bid by way of earnest money. 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. Further, the claimant made following grievances:

  1. Pursuant to the deposit made by the claimant, the Respondent Authority handed over the possession of only 90.19 acres of land to the Claimant in contravention of 92.96 acres stipulated under the Agreement. The claimant submitted that possession was only on paper, symbolic in nature.
  2. Despite pendency of the execution of the lease deed and for want of clear title and conversion certificate with respect to the lands for which the amount of Rs.84.24 crores already stood deposited by the Claimant, the Respondent made unjustified claim of Rs.154.37 crores, for second and third instalments.
  3. The inability of Respondent in performing conversion permission of the land as per the statutory requirement under West Bengal Land reforms Ac, 1955 which is a clear breach of Clause 5(a) of the Development Agreement as well as other crucial details vital for designing and planning of the project etc.
  4. The respondent failed to provide transfer deeds in favour of the Claimant which were the basis for proving the title of the subject land and also to authenticate the survey map of the subject land, hence, the claimant was not in a position to complete the Master Plan and implement the project.

Was the Claimant handed over actual physical possession or whether handing over of possession was merely a paper transaction and only symbolic in nature?

Noticeably, delivery of possession of 90.19 acres of land was evidenced by issuance of a Possession Certificate which had been produced by the Claimant itself. Therefore, the Tribunal was of the view that prima facie, the certificate issued by the Respondent Authority and also signed by the DGM of the Claimant was conclusive with regard to handing over of possession.

With regard to the allegation that possession was only symbolic and a paper transaction, and no actual physical possession was given, the Tribunal noticed the claimant at no point complained that the lands handed over were not free from encumbrances, further the claimant had admitted to have given conditional consent at one point regarding the commencement of the project only on 92.96 acres of land, and reasonable instalments for payment of interest being allowed to it, i.e. the project may be curtailed and executed only on 92.96 crores of land for which a sum of Rs.84.24 crores had already been paid. The Tribunal opined that the Claimant could not have made such an offer, if it did not have possession of the lands.

Therefore, the Tribunal held that an area of 90.19 acres was delivered to the Claimant on payment of a sum of Rs.84.24 crores and the plea that the possession said to have been given was only symbolic was an afterthought and a myth.

Who was responsible for the delay of the project ultimately leading to its termination?

So far as the lease deed was concerned it should have been executed on 26-05-2007, however, the lease deed was never executed. Noticing that initially the claimant consistently requested the respondent to provide the draft of the lease deed to be executed between the parties to which no heed was paid by the respondent Authority and subsequently the conduct of claimant became lackadaisical, the Tribunal opined that both the parties were responsible for the delay in execution of the lease deed.

Observing that 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, the Tribunal stated that in the absence of a lease deed it was pre-mature to call upon the Developer to proceed with the development work.

Findings

It was an admitted position that the lands were agricultural land, hence both the parties knew the law required them to obtain permission and certificate of conversion for change of land use from agricultural to development of new township project under the West Bengal Land Reforms Act, 1955 before raising any construction on agricultural lands. The statutory provision clearly casts an obligation on the Respondent to obtain conversion permission in favour of SJDA. Admittedly,

“No permission for conversion of land was obtained and, therefore, even if all other conditions were fulfilled, the Claimant-Developer could not have commenced construction activities on the agricultural lands without obtaining conversion of land use.”

Therefore, the Tribunal concluded that since the Respondent Authority clearly failed to comply with the obligation cast upon it to obtain conversion permission, so as to enable the Claimant to commence construction activities on the lands, the claimant could not be held responsible for the failure of the project.

Cost

In the backdrop of above, the Tribunal directed the respondent authority to refund Rs.84.24 crores together with simple interest at the rate of 6% per annum payable for the period from the date of deposit to the date of full payment of the said amount to the claimant which it had deposited with the respondent authority. The Claimant was directed to hand over possession of 90.19 acres of land to the respondent.

The Tribunal added, in case the full amount with interest is not paid within three months, the said amount shall carry interest at 9% per annum from the date of award till the date of payment. Rs. 25 lakhs was also awarded to the claimant towards reimbursement of litigation and arbitral costs which was to be paid by the respondent. [Bengal Unitech Universal Siliguri Projects Ltd. v. Siliguri Jalpaiguri Development Authority, decided on 27-12-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For the Claimant: Advocate Siddharth Batra, Advocate Moumita Chakraborty, Advocate Chitra Narang and Advocate Harsh Nivas

For the Respondent: Sr. Advocate Kalyan Bandopadhyay and Advocate Sirsanya Bandopadhyay

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