Bombay High Court Quashes ₹26 Crore Demand On Tata Communications Limited, Directs State To Pay ₹25 Lakh Costs For Pursuing Unsustainable Orders
Isabella Mariam
The High Court of Maharashtra Single Bench of Justice Kamal Khata set aside the Maharashtra Government’s revenue orders that fastened a liability of about ₹26.06 crore on Tata Communications Limited (formerly Videsh Sanchar Nigam Limited) as “unearned income” in relation to land allotted for staff quarters and directed the State to pay ₹25 lakh as costs within four weeks. The dispute stemmed from allegations by State authorities that the land interest had been transferred without prior permission and that the grant conditions were breached following disinvestment-led shareholding changes and the name change to Tata Communications Limited. The Court held the demand to be legally unsustainable and violative of natural justice, and recorded that the State’s defence compelled prolonged litigation, misusing public funds and court time.
The petitioner, Tata Communications Limited (formerly Videsh Sanchar Nigam Limited), challenged the order dated 1 June 2014 passed by the Revenue Minister, which upheld earlier orders of the Collector and Additional Commissioner directing payment of ₹26,06,74,446 as unearned income, recoverable as arrears of land revenue.
The dispute concerns land admeasuring 3947.37 sq. m. at Bandra, allotted in 1991 by the State of Maharashtra to Overseas Communication Services (a Department of the Government of India) for construction of staff quarters, with a final allotment order issued on 27 March 1992. Construction commenced in 1992 and was completed in 1998, when BMC issued the occupation certificate. Pursuant to disinvestment, the Central Government diluted its shareholding in VSNL and the company’s name was later changed to Tata Communications Limited. Relying on a 1990 Circular, the Collector issued a show cause notice in March 2011 alleging delayed construction, transfer of the writ land without permission, and user for a different purpose.
Despite TCL’s reply denying any transfer and asserting continued use as staff quarters, the Collector (11 April 2012), the Additional Commissioner (16 January 2013) and the Revenue Minister (1 June 2014) upheld the demand, treating the change in shareholding and control as a “transfer” attracting unearned income. TCL filed the present writ petition in July 2014, in which this Court granted interim protection and ultimately examined the legality of the show cause notice, the findings on “transfer”, and the alleged breaches of the conditions of grant and principles of natural justice.
The Court held that “the very basis on which the Collector passed the impugned order was contrary to law, and the consequent affirmation by the Assistant Commissioner and the Revenue Minister is equally flawed.” It found the first ground in the show cause notice, namely non-completion of construction within two years, “wholly unsustainable as it is clearly barred by limitation” since no explanation was offered for action initiated “fourteen years after the building was completed.” The third ground, alleging user for a different purpose, was likewise rejected as “equally unsubstantiated” because “no documentary material” was produced to justify the allegation.
On the core issue whether disinvestment and change in shareholding amounted to transfer of assets, the Court noted that a consistent line of Supreme Court authority establishes that “a company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders.” Referring to this settled position, the Court held that “a transfer of shares does not amount to transfer of the assets of the Company” and that treating dilution of the Government’s shareholding in VSNL as a transfer of the writ land to TCL was legally untenable. It further recorded that the case relied upon by the State (Gotan Limestone) had “no application in the present case” because the factual matrix was “entirely different.”
The Court also found a fundamental defect in the show cause notice: it “does not state that the alleged change in shareholding amounted to a ‘transfer’ forming the basis of the demand. This omission alone vitiates the notice.” Applying T. Takano v. SEBI, it held that “a show-cause notice that fails to disclose the material relied upon violates the principles of natural justice and must be set aside.” The justification offered in the impugned orders was found to “rest on grounds wholly outside the scope of the show cause notice,” which could not subsequently be supplied or supplemented.
In strong terms, the Court observed that “all three grounds of the SCN are unsubstantiated and unjustified” and that the State, having remained inactive for over twenty-five years, had raised a claim that was “misconceived and hopelessly time-barred.” It criticised the authorities for defending orders “contrary to settled law” and stated that the Government is “no ordinary party” but must function as a “model litigant” by meeting just claims instead of compelling citizens to engage in “avoidable litigation” at public expense.
The Court held that “all three grounds of the SCN are unsubstantiated and unjustified.” It recorded that the demand raised by the authorities was “not only unsubstantiated but also grossly belated” and therefore could not be sustained. The Court stated that “the impugned order of Respondent No.1, as well as the impugned orders passed by Respondent Nos.2 and 3, are contrary to law and are liable to be set aside.”
The Court directed: “Having regard to the length of time (nearly a decade) for which the Petitioners were forced to pursue this litigation, the significant legal costs incurred by the Petitioners in engaging attorneys and counsel, and the necessity of jolting the concerned authorities – whose indifferent approach, despite repeated judicial exhortations over four decades, has resulted in such avoidable proceedings – out of their apathy, costs of ₹ 25 lakhs are imposed on the Respondents, to be paid to the Petitioners within four weeks of the uploading of this order on the website of the Bombay High Court.”
“The writ petition succeeds and is allowed in terms of prayer clauses (A) and (B).”
Advocates Representing the Parties
For the petitioner: Mr. Virendra Tulzapurkar, Senior Counsel, with Mr. Raj Panchmatia, Mr. Pranav Sampat and Mr. C. Nageshwaran, instructed by Khaitan & Co.
For the respondents: Mr. Vishal Khanavkar, Assistant Government Pleader.
Case Title: Tata Communications Limited v. State of Maharashtra & Ors.
Neutral Citation: 2025: BHC-OS:23147
Case Number: Writ Petition No. 362 of 2015
Bench: Justice Kamal Khata
