TATA GROUP RECEIVED A SUBSTANTIAL AWARD OF INR 766 CRORE FOR THE SINGUR PROJECT

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Tata Motors has been authorized to recover a sum of INR 765.68 crore from the West Bengal Industrial Development Corporation (WBIDC) as compensation for the sunk cost in the Singur automobile factory, originally intended for producing the Nano car, which was marketed as an affordable, people’s car when it was unveiled in January 2008. A three-member arbitral panel, chaired by former Supreme Court judge V.S. Sirpurkar, recently reached a unanimous decision, determining that the company is also entitled to an interest rate of 11 percent per annum on this amount, dating back to September 1, 2016, until the time of recovery. As a result, the total value of the award now stands at over INR 1350 crore as of the latest update.

Tata Motors initially left the Singur site due to mounting protests by landowners, led by the then Opposition leader Mamata Banerjee in 2008. They filed a compensation claim of INR 934 crore, based on a clause in the lease agreement they had signed with WBIDC in March 2007. However, the arbitral panel ultimately settled for a lower compensation amount.

The company was compelled to relocate the plant from Singur in Bengal to Sanand, Gujarat, with the support of then Chief Minister Narendra Modi, where it eventually evolved into an automobile hub.

In a regulatory disclosure to the stock exchanges, Tata Motors specified that the compensation from WBIDC has been calculated based on various factors, including the loss of capital investment. They also mentioned that the claimant (TML) is entitled to recover INR 1 crore from the respondent (WBIDC) for the cost of the proceedings. With the issuance of the final arbitral award as described above, the arbitral proceedings have concluded, according to Tata Motors.

Officials in WBIDC and the Bengal government are currently reviewing the arbitral award and will prepare a response in due course. Legal experts have suggested that the state might challenge the award in the Calcutta High Court.

The Background:
This arbitral award adds another chapter to the Singur saga and sheds light on a series of events that collectively reshaped the state’s political landscape. Tata Motors was persuaded by former Chief Minister Buddhadeb Bhattacharjee to establish the small car plant in Bengal in 2006. A 997-acre plot was identified in Singur, Hooghly, approximately 40 kilometers north of Kolkata. The land was acquired under the then Land Acquisition Act and transferred to WBIDC.

The state agency then leased 645.67 acres of this land to Tata Motors for a period of 90 years, while the remainder was reserved for vendors supplying the small car factory. The lease agreement, signed between WBIDC and Tata Motors in March 2007, included a clause stipulating that the lessor would indemnify and compensate the Tatas for any losses they might incur if a court ruled that the land acquisition was legally flawed.

In a ruling on August 31, 2016, the Supreme Court declared the land acquisition to be illegal and void, invalidating the acquisition proceedings. In 2017, Tata Motors invoked the arbitration clause in the lease agreement and sought compensation. In response, WBIDC counterclaimed that the Tatas had abandoned the project, breached the lease agreement, and sought compensation from the company. Tata Motors argued that they had invested INR 1,800 crore in the factory and were on the verge of rolling out the Nano from Singur before being compelled to leave the state.

However, the tribunal concluded that WBIDC was responsible for indemnifying and compensating for the capital investment losses incurred on the land.

Legal Developments:
After Mamata Banerjee’s victory in ending the 34-year rule of the Left Front in 2011, largely on the back of her anti-land acquisition movement in Singur and Nandigram, her government issued an ordinance to reclaim the land. This was followed by the Singur Act of 2011, which aimed to return the land to the original landowners.

The Singur Act faced legal challenges and was initially upheld by a single bench of the Calcutta High Court. However, it was subsequently struck down by a division bench of the High Court. The matter was then taken to the Supreme Court, which declared the land acquisition illegal in 2016. Following the Supreme Court’s judgment, the state government returned the land to its original owners.

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