JUDGMENT :

DHANANJAYA Y. CHANDRACHUD, J.

A. Background

B. Proceedings before this Court

C. Salient features of the transaction documents

D. Submissions of the parties

E. Analysis

E.1. Maintainability of the writ petition under Article 226

E.2. Contractual right to compensatory payment

E.3. Apportionment of the liabilities between the instrumentalities of the state of Andhra Pradesh and Telangana

F. Summation

A. Background

1. The appeals arise from a judgment dated 1 April 2019 of a Division Bench of the High Court for the State of Telangana. Three appeals will form the subject matter of these proceedings. The three appeals which arise have been instituted by -

(i) UNITECH Limited (“Unitech”);

(ii) Telangana State Industrial Infrastructure Corporation (“TSIIC”); and

(iii) State of Telangana.

2. In September 2007, the Andhra Pradesh Industrial Infrastructure Corporation Ltd. (“APIIC”) invited bids to “develop, design and construct” an integrated township project / multi services aerospace park in the area of about 350 acres of land in Nadergul Village, Saroornagar Mandal, Ranga Reddy District. In pursuance of its press release, APIIC floated a bid document.

3. On 28 November 2007, the bid submitted by Unitech was accepted upon payment of an earnest money deposit of 20 crores. It was contractually required to pay an amount of Rs 140 crores as project land cost and Rs 5 crores towards project development expenses. A litigation in regard to the land was pending. While issuing a Letter of Award (“LoA”), APIIC made the allotment of the land subject to the outcome of the pending litigation. The LoA stipulated that:

"17. The allotment of said land is subject to the outcome of the Appeal Suit No. 274/2007 in (OS No. 155/05), WP Nos. 19670/07, 20667/07 and 22043/07 pending before the Hon'ble High Court of Andhra Pradesh."

4. Pursuant to accepting the LoA on 3 December 2007, Unitech paid the first installment of Rs 15 crores towards the purchase price of the land. This was followed by the second installment for Rs 20 crores on 4 December 2007. On 27 December 2007, it deposited an amount of Rs 5 crores towards project development expenses. On 1 January 2008, it paid the third installment of Rs 35 crores towards the purchase price of the land.

5. On 5 January 2008, APIIC while acknowledging the receipt of the three installments of Rs 70 crores towards the cost of land directed the Zonal Manager, Shamshabad Zone, Hyderabad to hand over the project site to enable Unitech to commence survey and planning work. The fourth installment of Rs 35 crores towards the purchase price of the land was paid on 11 January 2008, while the fifth installment for another Rs 35 crores was paid on 25 January 2008. Unitech paid, in the above manner, a total amount of Rs 165 crores: Rs 140 crores towards the cost of land, Rs 20 crores towards earnest money deposit and Rs 5 crores towards project development expenses.

6. On 19 August 2008, a Development Agreement was entered into between APIIC, Unitech and Nacre Gardens Hyderabad Limited, formerly known as (Unitech Hyderabad Township Limited), a special purpose vehicle formed to execute the project.

7. On 29 April 2011, APIIC issued a notice to show cause to Unitech to commence work on the project land. On 11 May 2011, Unitech requested APIIC to intimate, within seven days, the steps being taken to handover the land with reference to the provisions of Article 13.3(b) of the Development Agreement which mandated an encumbrance-free handover. The response to APIIC’s show-cause notice dated 29 April 2011 was further re-iterated in Unitech’s letter dated 14 May 2011 stating that APIIC would have to first establish its title to the land and to remove the encumbrances, before work could commence.

8. On 21 May 2011, APIIC was informed that a ‘political force majeure event’ within the meaning of the Development Agreement had taken place. O