Calcutta High Court Injuncts State Govt, WBIDC From Disposing Of Property In KMC Area Over Essex Arbitral Award Case

The Calcutta High Court bench of Justice Shampa Sarkar has injuncted the West Bengal Government and WBIDC from disposing of subject matter of the Award in the execution petition filed by the award-holder in Essex case.Background:This execution petition stems from a dispute under a Share Purchase Agreement (SPA) which was signed between between Essex Development Investments (Mauritius) Limited (Essex), the Government of West Bengal (GoWB), and West Bengal Industrial Development Corporation (WBIDC) on September 11, 2014. Under the Agreement, GoWB and WBIDC promised to pay financial incentives to the tune of Rs. 3285.47 crores to Haldia Petrochemicals Limited (HPL) which could not be utilised completely. GoWB and WBIDC stopped giving incentives after implementation of the GST despite having a clause in the agreement that the GST will have no impact on the terms of the agreement. Thereafter, Arbitration Proceedings were initiated which led to passing an award in favour of the HPL in which GoWB and WBIDC were directed to pay the incentives until the specified payment is received or the scheme period ends. This award was challenged under section 34. When this petition was pending adjudication, an interim stay on the award was sought under section 36(2).The application under Section 36(2) of the Arbitration and Conciliation Act, 1996 was taken up by a Coordinate Bench and the same was disposed of. The prayer for unconditional stay of the award made by the award-debtor was rejected. The plea that the award was vitiated by fraud and corruption, was not accepted. Direction was issued upon the award-debtors to secure 50% of the award in cash by transmitting the funds directly to the account of the Registrar, Original Side, High Court at Calcutta and remaining 50% was directed to be secured by furnishing a bank guarantee. This order was challenged by the award-debtors before the Hon'ble Apex Court, but the Special Leave Petition was dismissed.Under such circumstances, it was observed that the order passed by the learned Coordinate Bench has attained finality. As the award debtors have not secured the amount as yet, this Court does not find any reason to stall the execution proceeding. Still, the court heard the learned Advocate General on the maintainability of the execution petition.ContentionsThe Advocate General submitted that Section 36(1) of the Arbitration and Conciliation Act, 1996 makes the provisions of Code of Civil Procedure applicable. In such view of the matter, objections to the executability of the award on the grounds akin to those provided under Sections 47 of the Code of Civil Procedure, 1908, could be raised.That an award under the Arbitration and Conciliation Act, 2016 has to be executed in terms of the provisions of the Code of Civil Procedure, 1908. Such 3 provision also allows raising of objections by filing an application akin to one under Section 47 of the CodeSection 54(9) of the West Bengal State Goods and Services Tax Act, 2017, is relied upon to show that notwithstanding any decree or order of Court or an Appellate Tribunal, GST cannot be refunded. The award has been placed along with the clauses of the contract, in support of the contention that a contractual obligation could not override the statutory bar.That the clause in the contract provided that in case of change of law and with the promulgation of the GST Act, the clause would remain the same. GST Act may have been made applicable, but the applicability of such law could not be contrary to law. Per contra, the respondents submitted that similar point was raised in the proceedings under Section 36(2) of the Act and also in the special leave petition filed by the award-debtors before the Hon'ble Apex Court. Once, the proceeding under Section 36(2) was disposed of upon taking note of the various objections raised by the learned Advocate General and the Court had elaborately discussed the reasons why the award should not be stayed unconditionally, the observations of His Lordship would be binding.That at the stage of execution, no further objections with regard to the executability of the award on the same point which were urged before His Lordship and also before the Hon'ble Apex Court, could be entertained.Although the provisions of the CPC was made applicable to execution, such applicability was limited to the procedural aspect. That the Hon'ble Apex Court had left all points open, to be agitated in the proceeding under Section 34 of the said Act and that the order of the Hon'ble Apex Court could not be interpreted to mean that the observation of the Co-ordinate Bench in the proceedings under Section 36(2) would not be applicable in the execution case. The execution under such circumstances should be automatic. Observations:The court noted that the point as to whether objection as to executability of the award can be raised at the stage of execution and whether the execution case can be rejected on this ground alone, shall be decided ...

Calcutta High Court Injuncts State Govt, WBIDC From Disposing Of Property In KMC Area Over Essex Arbitral Award Case

Mohd Malik Chauhan

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