The tussle between West Bengal government and Tata Motors in Singur | Explained

Per an exchange filing by Tata Motors on Monday, an arbitration panel directed West Bengal Industrial and Development Corporation (WBIDC) to compensate them for the loss of capital investments made in the Singur Nano manufacturing facility.

November 02, 2023 07:25 pm | Updated 07:46 pm IST

File photo: A private security guard walks outside the closed Tata Motors Nano car factory in Singur in this April 27, 2011.

File photo: A private security guard walks outside the closed Tata Motors Nano car factory in Singur in this April 27, 2011. | Photo Credit: Reuters

The story so far: In what could serve as an epilogue to a long-drawn tussle between Tata Motors and the West Bengal Industrial Development Corporation (WBIDC), an arbitration panel on Monday directed the latter to compensate the automobile manufacturer for “the loss of capital investments” for the suspended Nano manufacturing facility at Singur. Tata Motors was forced to exit the town in southern Bengal following protests by Trinamool Congress leader Mamata Banerjee alleging “forcible acquisition of land” and forced displacements. 

In an exchange filing on Monday, Tata Motors revealed the conclusion of the arbitration panel’s proceedings in its favour. With unanimous agreement, Tata Motors was deemed eligible to recover a sum of Rs 765.78 crore at an interest of 11% per annum from the WBIDC until actual recovery. This would be for the period beginning from September 1, 2016 — when the Supreme Court declared the acquisition of the land in central Bengal as “void and unconstitutional.” It also directed the WBIDC to pay a sum of Rs 1 crore to Tata Motors towards “cost of proceedings” (or legal charges).

Reacting to the development, TMC MP from Dum Dum (West Bengal) Sougata Roy said the tribunal’s order was neither the final verdict nor a judgment of the Supreme Court. “Legal avenues are still open for the State government,” news agency PTI quoted him as saying.

What led to the legal battle?  

In 2006, the Left government in West Bengal headed by Buddhadeb Bhattacharya allocated 1,000 acres of land to Tata Motors for manufacturing the affordably-priced hatchback Nano in Singur. This was on a lease of 99 years and processed by the WBIDC. However, alleging forcible acquisition of the land and citing concerns about people being displaced from their lands, then opposition leader Mamata Banerjee launched the Singur land movement. 

Observing the disruptions at the site, Tata Motors began contemplating a move to another site in mid-2008. This was eventually finalised in October 2008. 

In 2011, the newly-elected Trinamool Congress government got the Singur Land Rehabilitation & Development Act, 2011 passed in the legislative Assembly. This became the epicentre of a legal battle as it proposed to take possession of the land leased out to Tata Motors. It also aspired to return the land to owners who had not accepted the compensation granted to them by the previous Left-front government. The balance portion, the Act stated, was to be utilised for “public interest and benefit of the State.”  

Observing the disruptions at the site, Tata Motors began contemplating a move to another site in mid-2008. This was eventually finalised in October 2008. 

How did Tata Motors react to the Singur Act?  

The automobile manufacturer challenged the Singur Act in the Calcutta High Court in June 2011. Since then, it has argued that it has not been provided with “reasonable compensation,” with the Act also taking away their rights over the land. 

Also read: Singur imbroglio

In fact, as reported widely in the press, Tata Group Chairman Ratan Tata, during a press conference with the then Minister of Commerce and Industries Nirupam Sen in 2009, had expressed his willingness to return the land in return for adequate compensation. “We have no plans for Singur but will cooperate with the government if they have a plan that makes sense to the government and us. We do not wish to sit on the land,” the now Chairman Emeritus of Tata Sons was quoted as saying. 

How have the legal proceedings panned out?  

The Division Bench of the Calcutta High Court delivered a setback to the TMC-administered State government. In June 2012, the Court declared the Act to be “void and unconstitutional.” It also observed that the Act had not received assent from the President of India. This was a shot in the arm for the automobile company, which had made investments of Rs 1,800 crore in the project. Furthermore, as also highlighted in the press conference mentioned previously, after recoveries, ‘sunk costs’ amounted to Rs 500 crore. “All the equipment had been installed and trial production had begun. In fact, about 15 to 20 cars were ready for roll-out,” a statement in June 2011 said.

The State government, however, decided to challenge the verdict in the Supreme Court. In August 2016, the Supreme Court deemed the acquisition of the land itself (for the car manufacturing facility) from cultivators and landowners to be “illegal and void.” It directed that the land be restored to the landowners and/or cultivators within 12 weeks from the date of the judgement. 

Furthermore, it held, “The compensation which has already been paid to the landowners/cultivators shall not be recovered by the State government as they have been deprived of the occupation and enjoyment of their lands for the last ten years.” 

How did the case reach the arbitration tribunal? 

The initial lease agreement signed with the Left-front government contained a clause that should the acquisition be declared illegal, the West Bengal government would have to indemnify Tata Motors.  Other than this, it also provided for arbitration as a mechanism to resolve disputes between the two coordinating parties, that is, Tata Motors and WBIDC. This was under the provisions of the Arbitration and Reconciliation Act, 1996.

Subsequently, the automobile manufacturer’s request for compensation was declined. It was then that Tata Motors exercised its right for initiating arbitration proceedings. The tribunal consisted of two retired judges from the Calcutta High Court and was presided over by a retired judge of the Supreme Court. The proceedings commenced in May 2019. After WBIDC’s counterclaim, the tribunal initiated proceedings in October 2021, heading towards cross-examinations of the parties. 

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