MUMBAI, Dec. 4 -- The Bombay High Court on Monday pulled up the state government for defending an "untenable" litigation against Tata Communications Limited (TCL) and imposed a cost of Rs.25 lakh for exhausting their time and money over decades. The court also struck down the state's demand for Rs.26 crore from TCL as unearned income for a plot in Bandra, which the government had allotted for staff quarters of Videsh Sanchar Nigam Ltd (VSNL). The plot had been allotted by the state government to Overseas Communication Services (OCS) - then under the ministry of telecommunications - for construction of staff quarters in 1991. Earlier, in 1986, the central government had transferred the management, control and all assets of OCS to Videsh Sanchar Nigam Limited (VSNL). Construction of the staff quarters began in 1992 and was completed in 1998. Later, the central government sold 25% of its 52% shareholding in VSNL to a Tata Group company. Over the years, the Tata Group acquired a larger stake in VSNL via the markets, and changed VSNL's name to Tata Communications Limited (TCL) in January 2008. Three years later, on March 25, 2011, the district collector issued a show-cause notice, alleging delayed construction, unauthorised transfer of land from VSNL to TCL, and misuse of the plot. In its reply, TCL clarified that no transfer of land was done; merely the name "VSNL" had been changed to "TCL", and that the building continued being used as staff quarters, for which it was allotted. However, in 2012, the collector directed TCL to pay Rs.26.06 crore as unearned income on grounds that construction was delayed without seeking an extension, and the land had been transferred by VSNL to TCL without permission. After TCL's appeals before the assistant commissioner and the revenue minister were dismissed in 2013-14, the company moved the high court. The government argued that the original allottee of the land was OCS, and therefore, "a private entity cannot be permitted to benefit at the expense of the public property". Quashing the collector's order, a single-judge bench held that mere dilution of shareholding in VSNL can neither be characterised as a transfer of land to TCL, nor can it be construed as an indirect attempt to achieve what could not be achieved directly....