Overview A dispute between the Kerala government and Dubai-based Tecom Investment regarding the nature of Tecom's exit from the SmartCity Kochi project continues. This issue has persisted for over a year since the State Cabinet approved an exit plan. The core disagreement revolves around which legal framework should govern the exit terms. Key Developments Disagreement on Applicable Treaty Tecom's Position: Tecom insists that any exit should be treated under the provisions of the Indo-UAE treaty . Government's Position: The Kerala government objects, arguing that the project falls under the Original Framework Agreement signed between the parties. Government Notice: The government issued a notice to Tecom citing the violation of clause 7.2.2 of the agreement. Central Intervention: Tecom approached the Centre’s Inter-Ministerial group seeking to apply the bilateral trade treaty to the project. Negotiation Deadlock Meetings at the Central level have failed to produce a mutually acceptable understanding. A meeting scheduled for Wednesday, January 7, 2026 , was postponed. Tecom insists on a mutually acceptable center for arbitration, unlike the Original Framework Agreement, which fixed Kochi as the arbitration center. Violation of Agreement The notice issued to Tecom cites the violation of clause 7.2.2 of the agreement. This clause required Tecom to build 88 lakh sq ft with a ceiling of 70% for IT and generate 90,000 jobs in 10 years . The government found Tecom's grounds for exiting the project in 2024 flimsy. SmartCity Kochi has been without a Chief Executive Officer for nearly two years. Government's Recourse In the event of default by Tecom, the framework agreement empowers the government to terminate the lease. The government can buy out Tecom's shares at a price determined by an independent evaluator. The value of land will be taken as ₹91.52 crore , the advance lease premium paid by SmartCity Kochi. The value appreciation of the land will not be considered in any buyout. Mutually Agreed Policy The government decided to pursue a mutually agreed exit policy for Tecom. Arbitration under the Arbitration and Conciliation Act of 1996 is considered time-consuming. The land could be rendered out of use for a long time due to prolonged arbitration. Current Status The sole IT tower of SmartCity Kochi hosts 27 IT and ITeS companies . These companies cater to approximately 5,500 jobs . There are also five projects developed by co-developers. UPSC Relevance This news article is relevant to the UPSC Civil Services Exam , particularly for GS Paper 3 (Economy) and GS Paper 2 (Governance) . It highlights the complexities of public-private partnerships, international investment disputes, and the importance of contractual agreements. Understanding the nuances of such disputes is crucial for aspirants. Key Terms for UPSC Indo-UAE Treaty: Bilateral agreements impacting trade and investment. Arbitration: Dispute resolution mechanisms. Framework Agreement: Foundational agreements for projects. ITeS: Information Technology enabled Services sector.