Government Of West Bengal & Anr vs Essex Development Investments ...

Mr. Kishore Dutta, Advocate General Mr. Jishnu Saha, Sr. Adv. Mr. Sidharth Sethi Mr. Manoj Kumar Tiwari Mr. Ragvendra Pratap Singh Mr. Kunal Shahini Ms. Mini Agarwal ..... For the petitioners.

Mr. Sudipto Sarkar, Sr. Adv. Mr. Rantanko Banerjee, Sr. Av. Mr. Arunabha Deb Mr. Deepan Kr. Sarkar 2

Ms. Ashika Daga Mr. Samriddha Sen Mr. Raunak Das Sharma Ms. Ananya Sinha Ms. Sampurna Mukherjee .....For the respondent.

Heard On : 10.05.2024, 10.06.2024 & 21.06.2024

Judgment on : 12.07.2024

Krishna Rao, J.:

1. This is an application filed by the Government of West Bengal and West

Bengal Industrial Development Corporation Limited (hereinafter

referred to as "WBIDC") under Section 36(2) of the Arbitration and

Conciliation Act, 1996, praying for unconditional stay of operation of

the Arbitral Award dated 18th September, 2023, passed by the Arbitral

Tribunal.

2. On 11th September, 2014, a Share Purchase Agreement was entered

between the Government of West Bengal, West Bengal Industrial

Development Corporation Limited (hereinafter referred to as "WBIDC"),

Chatterjee Petrochem (Mauritius) Company (hereinafter referred to as

"CPMC"), Essex Development investments (Mauritius) Limited

(hereinafter referred to as "Essex") and Haldia Petrochemicals Limited

(hereinafter referred to as "HPL"). In the said Share Purchase

Agreement, the Government of West Bengal agreed to transfer 520

million equity shares held by it in HPL, through WBIDC to Essex "on

as-is-where-is" basis at a price of Rs.25.10/- per equity share. As per 3

the Share Purchase Agreement, the entire 520 million equity shares

have been transferred to Essex and the agreed consideration received

by Government of West Bengal.

3. As per Essex, Government of West Bengal/WBIDC were to grant HPL

certain Tax Incentives as provided in Schedule 5 of the SPA. The Essex

alleged that after introduction of GST regime on and from 1st July,

2017, HPL had not been disbursed such Tax Incentives and thus the

Essex initiated arbitration for refund of SGST deposited by HPL. The

Government of West Bengal/WBIDC has objected with regard to the

claim of Essex on the ground of maintainability as well as on merit.

4. After hearing of the parties, the Arbitral Tribunal has passed Award in

favour of the Essex on 18th September, 2023:

"Award

121. Based on the consideration recorded above, the Arbitral Tribunal, is satisfied in recording the following summary of conclusions:

(i). The prayer made in the 'Statement of Claim/Amended Statement of Claim', seeking the relief of 'specific performance' is allowed, in the manner expressed at (iii), below.

(ii). All objections raised by the Respondents -

GoWB and WBIDC, contesting the prayers/claims raised in the 'Statement of Claim',/Amended Statement of Claim', are disallowed.

(iii). The Company - HPL was promised a consolidated amount of Rs. 3285.47/- crores, towards financial incentives/benefits (-under Schedule 5, of the SPA, dated 11.09.2014). The 4

Company - HPL had already received an amount of Rs. 317,13,40,934/- (-payable upto 30.06.2017). Thereafter, the Company - HPL is still entitled to avail further financial incentives/benefits of Rs. 2968,33,59,066/- (- subject to the provisions of Schedule 5, of the SPA, dated 11.09.2014). From 01.07.2017 to 31.05.2020, the Company HPL has paid a sum of Rs. 604,85,29,435/- towards State GST, to the State of West Bengal. The Company HPL is therefore held to be entitled to the payment of the above amount of Rs. 604,85,29,435/-

towards financial incentives/benefits under Clause 1(A) (c) of Schedule 5, of the SPA dated 11.09.2014 Furthermore, from 01.06.2020 to 31.03.2022, the Company HPL has paid a further amount of Rs.479,89,00,544/- as State GST, to the State of West Bengal. The Company - HPL is therefore also held to be entitled to a further payment of the above amount of Rs.479,89,00,544/- towards financial incentives/benefits under Clause 1 (A) (c) of Schedule 5, of the SPA, dated 11.09.2014, The contention raised on behalf of me Respondents, disputing the amounts (-noted above), is declined, for reasons af Schedule recorded in paragraph 77, above. It is also the case of the Claimant-Essex, that even after 31.03.2022, the Company HPL has been paying State GST to the State of West Bengal. If that is so, the Company-HPL is also held to be entitled to all amount(s) paid by it as State GST to the State of West Bengal, till the Company HPL has received financial incentives/benefits adding up to Rs. 3285.47/- crores, or till HPL has received a lesser amount of financial incentives/benefits- but the period for the receipt of the same under Clause 1 (A) (a) has expired, whichever eventuality arises first.

(iv). The Claimant - Essex, has claimed interest on the withheld financial incentives/benefits. Since all the claims raised by the Claimant - Essex have been allowed, the Company - HPL is held to be entitled interest at the rate 6% per annum, from the date the financial incentives/benefits became due, 5

at the end of every successive quarter, commencing from 01.07.2017, till the dispersal of the amounts due.

(v). The Claimant - Essex has also claimed costs incurred by it, towards, the present arbitral proceedings. The Claimant - Essex, is held to be entitled to the reimbursement of the costs incurred by it towards the present arbitral proceed, adding up to Rs. 6,55,21,914.50/-.

(vi). The claim of costs, incurred by the Respondents GoWB and WBIDC, towards the defence of the arbitral proceedings, is declined."

5. Mr. Kishore Dutta, Learned Advocate General submits that the Essex

could not maintain a prayer for refund of tax deposited by HPL, in the

face of a clear statutory bar contained in the GST regime as well as in

view of the law settled by the Hon'ble Supreme Court under Article 141

of the Constitution of India. He submits that HPL was promised tax

incentives by the Government of West Bengal under Schedule 5 of the

SPA and there is no disagreement on this aspect of the matter and this

also reflected the contemporaneous intension and understanding of the

parties as articulated under the Share Purchase Agreement. He

submits that the parties were also ad idem the Essex's claim in the

arbitration was for refund of the State GST deposited by HPL.

6. Learned Advocate General submits that there being no pleadings by the

parties, the Tribunal ventured to decide on its own aspect "whether the

incentives extended to HPL were tax incentives or was it a mere

contractual obligation to provide financial incentives/benefits". He 6

submits that in fact no issue was framed on the point and the parties

were not invited to address the Tribunal on such crucial point which

formed the fulcrum of the Award.

7. Learned Advocate General submitted that if these are Tax Incentives,

then they have to be in consonance with the prevailing/relevant tax

legislation as well as the law settled by the Hon'ble Supreme Court of

India in the case of Amirt Banaspati Co. Ltd. & Anr. -vs- State of

Punjab & Anr. reported in 1992 (2) SCC 411 and submitted that any

agreement for refund of tax is contrary to the public policy and void

under Section 23 of Indian Contract Act, 1872.

8. Learned Advocate General submits that the Learned Arbitral Tribunal

wrongly concluded that the 'Incentives' extended to HPL were not 'tax'

incentives but Government of West Bengal had promised financial

incentives/benefits to HPL through a contractual agreement. He

submits that on the basis of the erroneous conclusion, the Tribunal

held that it will treat the incentives granted to HPL as contractual

obligations, mutually agreed to by the parties, and not as tax incentives

promised by the Government of West Bengal to HPL.

9. Learned Advocate General submits that the Learned Arbitral Tribunal

could not have unilaterally determined that it will treat the incentives

granted to HPL as contractual obligations and not as tax incentives. He

submits that the present GST regime contains a statutory bar on

refund of tax. The Essex did not dispute or distinguish the case of 7

Amrit Banaspati (Supra) and also did not join issue with the settled

legal principles laid down in the said judgment.

10. Learned Advocate General submitted that under the amended Section

36(2) and (3) of the Arbitration and Conciliation Act, 1996, this Court

has the power and discretion to pass an order to grant an

unconditional stay of the operation of the Award and in support of his

contention, he has relied upon the judgment in the case of Ecopack

India Paper Cup Private Limited -vs- Sphere International reported

in 2018 SCC OnLine Bom 540 and submitted that when the Court

considers an application for stay of the Arbitral Award for payment of

money, there cannot be a straight jacket formula that in every case, the

court could impose conditions and necessarily there has to be a deposit

of the decretal amount.

11. Learned Advocate General relied upon the judgment in the case of

Gazal Taneja & Ors. -vs- Mahanagar Telephone Nigam Limited

and Another reported in (2013) 7 SCC 543 and submitted that this

Court has the power to grant an unconditional stay of the operation of

the award.

12. Learned Advocate General submits that fraud can be of infinite

varieties, and the expression fraud in the making an award, cannot be

narrowly construed. He submits that in the present matter, the making

of Award is effected by fraud and as such, even on this ground, the

Award required to be stayed unconditionally. In support of his 8

submission, he has relied upon the judgment in the case of Union of

India & Anr. -vs- Reshmi Metaliks Limited, reported in 2023 SCC

OnLine Cal 2272 and submitted that Oxford's English Dictionary

defines fraud as - (1) Criminal deception; the use of false

misrepresentations to gain an unjust advantage (2) A dishonest article

of trick (3) A person or thing not fulfilling what is claimed or expected of

him, her, or it.

13. He further relied upon the judgment in the case of Associated

Engineering Co. -vs- Government of Andhra Pradesh & Anr.

reported in (1991) 4 SCC 93 and submitted that an arbitrator who acts

in manifest disregard of the contract acts without jurisdiction. His

authority derived from the contract and is governed by the Arbitration

Act which embodies principles derived from a specialized branch of the

law of agency. He commits misconduct if by his award he decides

matters excluded by the agreement. A deliberate departure from

contract amounts to not only manifest disregard of his authority or a

misconduct on his part, but it may also tantamount to a malafide

action. A conscious disregard of the law or the provisions of the

contract from which he has derived his authority vitiates the awards.

14. Learned Advocate General relied upon the judgment in the case of

Venture Global Engineering -vs- Satyam Computer Services

Limited and Anr. reported in (2010) 8 SCC 660 and submitted that it

is well known that fraud cannot be put in a straitjacket and it has a

very wide connotation in legal parlance. He submits that in the decision 9

of House of Lords in Reddaway (Frank) & Company Limited -vs-

George Banham & Company Limited, Lord Macnaghten explained

the multifarious aspects of fraud very lucidly, and which we quote :

"But fraud is infinite in variety; sometimes it is audacious and unblushing; sometimes it pays a sort of homage to virtue, and then it is modest and retiring; it would be honestly itself if it could only afford it. But fraud is a fraud if all the same, and it is the fraud, not the manner of it, which calls for the interposition of the Court."

15. Learned Advocate General submits that by creating a new case for

Essex, an unfair and undeserved benefit has been given to Essex. He

submits that in the name of 'legal determination', the Tribunal could

not have knowingly and deliberately disregarded the contract, the

expressed intension of the parties, their pleaded cases and evidence

adduced, their contemporaneous and subsequent conduct regarding

the manner in which they understood the contract and the extent GST

regime. He submitted that knowingly creating a new case, and also

brazenly acknowledging in the Award that it is creating a new case, the

Tribunal has exceeded its jurisdiction and regarded and ignored all

settled principles that clothe an Arbitral Tribunal with jurisdiction. He

submits that the Tribunal clearly did not fulfil what was expected of it

and its tantamounts to fraud in making of the award.

16. Per contra, Mr. Sudipto Sarkar, Learned Senior Advocate representing

the Essex submits that HPL was set up as a joint venture project in

1985 in public interest for the resurgence of industries in the West

Bengal which was languishing. He submits that HPL is the flagship 10

investment in West Bengal and a source of employment for thousands

of people. In 1994, TCG came in as a joint venture partner to set up the

project which has not materialized by then. However, dispute arose

between TCG and the Government of West Bengal concerning the

management and control of HPL leading up to extensive litigation. HPL

became sick, necessitating further infusion of funds for survival. The

lenders insisted on the joint venture partners settling their disputes.

The West Bengal Government sought to settle such dispute with TCG in

public interest in order to revive HPL and accepted the proposal dated

1st March, 2014 of TCG where the following essential conditions were

made : (i) TCG would purchased 520 million shares of HPL from WBIDC

at the rate of Rs. 25.10 share (ii) The payment would be subject to

further details to be worked out as part of rejuvenation effort by all

stakeholders of HPL , (iii) The entire rejuvenation procedure would

require reinstating utilized incentives in a suitable manner, (iv)

Government of West Bengal could ensure that not less than 75% of the

unutilized incentives will be restored and details would be worked out

for the restructuring package in such a manner so as to ensure cash

flow of HPL from the incentives for meeting the liabilities of the lenders

on prudential norms.

17. Mr. Sarkar submits that the object of change in control and

management of HPL through share purchase was to ensure was HPL

did not become a Non-Performing Asset and was not subjected to action 11

under the Scrutinization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002.

18. Mr. Sarkar submits that Share Purchase Agreement was entered into

on the part of the petitioners in overwhelming public interest and was a

comprehensive contract which contemplated revival of HPL in the

following manner :

i. Handing over management and control of HPL by WBIDC to TCG through purchase of shares of HPL by Essex; and

ii. Disbursal of financial benefits to HPL by Government of West Bengal.

He submits that the proposal was to purchase the shares of HPL

in two tranches. Pursuant to the completion of first tranche of shares,

several undertakings were made by the Government of West Bengal. He

submits that the said undertakings were made specifically to Essex and

no one else. He submits that the fundamental basis of Share Purchase

Agreement was revival of HPL through, inter alia, extension of financial

benefits contractually through incentives to ensure cash flow to HPL.

19. Mr. Sarkar submits that the Government of West Bengal and WBIDC

had jointly and severally undertook to Essex in the Share Purchase

Agreement that to ensure the revival of HPL, unutilized benefits which

has been granted under the West Bengal Incentive Scheme (hereinafter

referred to as "WBIS"), which had expired in 2012 would be extended to

HPL under the Share Purchase Agreement since HPL did not have any 12

right to receive the expired benefits under the WBIS which had expired

in 2004. He submits that it was agreed by and between the parties

under the Share Purchase Agreement that:

(i) HPL would be allowed to carry forward and utilize 75% of the unutilized benefit of incentives under WBIS over a period of 19 years. [75% of Rs.4380.62 crores (unutilized benefit) amounted to Rs.3285.47 crores approximately]. Significantly, it is only a part of such unutilized expired incentives which has agreed to be paid contractually under the SPA and not the whole of it, which would have been the case if the incentives, which had expired, were being sought to be restored by the SPA.

(ii) Input tax was to be refunded quarterly by way of State support at the applicable discount of 25%.

(iii) The financial benefit was to continue even if there was a change in law (such as GST) with the exception that incentive would be payable to HPL only to the extent the tax accrues to the State so as to not cause any loss to the State.

20. Mr. Sarkar submits that the Government of West Bengal and WBIDC

had unequivocally represented to Essex that they had the requisite

capacity to perform all obligations which constituted legal, valid and

binding obligations enforceable against them. He submits that there is

a cap on the quantum and the period within which the benefit has to

be earned, but the earning would be dependent on the performance and

the tax payable by HPL during such period.

21. Mr. Sarkar submits that declared object of the Share Purchase

Agreement was to salvage HPL and to grant financial assistance to HPL 13

to enable it to use the assistance for its business and growth in

whatever manner is possible. He submits that after purchase of the

first tranche of shares of HPL by Essex, the Assistant Secretary to the

Government of West Bengal circulated an internal letter dated 15th

March, 2016, directing that HPL be granted unutilized incentives for

the period of 17 years 11 months and that the certificate be revalidated

in favour of HPL with effect from 1st January, 2016.

22. Mr. Sarkar submits that on and from 1st January, 2016 to 30th June,

2016, the financial benefits were disbursed to HPL by the Government

of West Bengal but such benefits were stopped from 1st July, 2017 i.e.

coming into force of the Goods and Services Tax (herein after referred to

as "GST" regime). The claim of the Essex before the Arbitral Tribunal

was for disbursement of incentives promised to HPL under the Share

Purchase Agreement. He submits that it was not the case before the

Tribunal for refund of tax paid.

23. Mr. Sarkar submits that for grant of unconditional stay of an Arbitral

Award under Section 36(2) of Arbitration and Conciliation Act, 1996,

unless the case is made out falls under either the heads of fraud or

corruption as provided in the second proviso of Section 36(3) of the

1996 Act. He submits that as per second proviso of Section 36(3)

permits unconditional stay of an arbitral award only when there is an

irrefutable case of fraud of corruption is made out but in the present

case, the petitioners have not made out any such case. 14

24. Mr. Sarkar relied upon the judgment in the case of SRMB Srijan

Limited -vs- Great Eastern Energy Corporation Limited reported in

2024 SCC OnLine Cal 2089 and submitted that prima facie case

under Section 36(3) of the Arbitration and Conciliation Act, 1996 must

mean a finding of fraud on the face of the record or from a first-blush

look at the award. It would mean that the fraudulent inducement or

effectuation qua the making of the award must be plain and ready to be

discovered even without going into the merits or a detailed enquiry into

the facts.

25. Mr. Sarkar submits that no case of inducement or effectuation of fraud

by Essex has been alleged or made out or pleaded by the petitioners in

their application. He submits that findings arrived upon by the Arbitral

Tribunal in the said award was based on matters of undisputed record

to the knowledge and notice of all parties and submissions made before

the Arbitral Tribunal in openly conducted proceedings. He submits that

the submissions made by all the parties are recorded and dealt with by

the Arbitral Tribunal.

26. Mr. Sarkar relied upon the judgment in the case of WBSIDC -vs- Kitco

recorded in 2023 SCC OnLine Cal 2142 and submitted that the words

making of award qua inducement and effectuation of fraud mean that

an award must be obtained by the fraud of a party to the Arbitration or

by the fraud of another to which the party to the Arbitration was privy.

He submits that a Court or Tribunal cannot become fraudulent or act 15

fraudulently on its own i.e. without being induced or affected by any

litigating or third party.

27. Mr. Sarkar relied upon the case reported in (2009) 5 SCC 313 (Bank

of India & Anr. -vs- K. Mohandas & Ors.) and submitted that the

true construction of a contract must depend upon the import of the

words used and not upon what parties choose to say afterwards. Nor

does subsequent conduct of the parties in performance of the contract

affect the true effect of the clear and unambiguous words used in the

contract. The intention of the parties must be ascertained from the

language they have used, considered in the light of the surrounding

circumstances and object the contract. The nature and purpose of the

contrast is an important guide in ascertaining the intention of the

parties.

28. On conclusion of hearing, both the parties have filed their respective

written arguments on 10th May, 2024. Subsequent to filing of written

arguments, the Learned Counsel for the respondent has mentioned the

matter through virtual mode on 15th May, 2024 as this Court was

holding Circuit Bench at Jalpaiguri stating that there is some

discrepancies in the written notes of argument filed by the petitioners

and the respondent intents to clarify the same, this Court has fixed the

matter as to be mentioned on 10th June, 2024 as in between there was

summer vacation of the Court till 9th June, 2024. 16

29. On 10th June, 2024, learned Counsel for the respondent submitted that

in the written argument of the petitioners, the petitioners have made

some submissions which the Learned Counsel for the respondent did

not submit the same. It was also submitted that the petitioners have

casted aspersion on the Learned Senior Advocate of the respondent.

Learned Counsel for the respondent pointed out the paragraph 35(ii),

paragraph 40(i), (ii) and (iii) and paragraph 41 of the written notes of

argument of the petitioners. This Court by an order dated 10th May,

2024, recorded the submissions of both the parties and reserved for

judgment.

30. Subsequently again the matter was mentioned before this Court by the

Learned Counsel for the petitioners on 21st June, 2024, and submitted

that the petitioners have filed an interlocutory application being G.A.

(Com) 1 of 2024 by incorporating excerpts from the arguments of the

respondent dated 5th March, 2024 from the recording of the Court

proceedings available on YouTube. In the application, Learned Counsel

for the petitioners have quoted the arguments of the Learned Counsel

for the respondent on 5th March, 2024 at Time Stamp - 25:51 to 26:17,

28:26 to 29:36 and 1:08:59 to 1:09:17.

31. On the other hand, the Counsel for the respondent has filed written

notes of argument to the application being G.A. (Com) 1 of 2024 by

reverting the contents made in the said application. 17

32. The petitioners in the said application have also submitted pen drive of

recordings of the Court proceedings of the present matter dated 5th

March, 2024.

33. This Court has perused the application, written argument and also

gone through the YouTube proceeding of the present case dated 5th

March, 2024. Submissions of the Learned Counsel for the respondent

on 5th March, 2024 at Time Stamp reads as follows:

 Time stamp - 25:51 to 26:17

".......Lets say mylord- I am arguing before your lordship - I make an impossible argument - mylord cannot be sustained at all - lordship, for some reason mylord, maybe mylord (with respect lordship does not mind) gets confused mylord and accepts it - that is not a fraud. It is mylord, lordship mylord, not being able to exercise jurisdiction properly, not being able to appreciate the law or the pleadings mylord and coming to an erroneous finding......."

34. After going through the argument of the Learned Counsel for the

respondent, this Court finds that Mr. Sarkar, Learned Senior Advocate

submitted that if this Court get confused and not able to exercise

jurisdiction properly and not appreciated the law and the pleadings and

came to an erroneous finding, whether it can be said that this Court

committed fraud or corruption.

35. Argument of the learned counsel for the respondent at Time Stamp

28:26 to 29:36 on 5th March, 2024 reads as follows:

 Time stamp - 28:26 to 29:36 18

"..................Now mylord, the question is - arguments have been advanced, tribunal has accepted a view, taken a view and accepts some arguments - that can never mylord, amount to fraud of any kind and that's the only allegation, subject to correction mylord. No other allegation has been made. Then mylord, then mylord kindly see 20 now - the last paragraph which is relevant - paragraph 20 at page 23. "It is also relevant to mention herein that what Essex sought in arbitration is not simplicitor money award but one which sought refund of tax already deposited, to be deposited by HPL.... pith and substance Essex prayed and granted so and so..." Very well mylord, this is granted. So an error has taken place....

Look at 21, "For all the above reasons amongst others....Unconditionally"". No ground mylord has been made out, with respect.

And mylod now, kindly mylod, I believe mylord para 26 has some mention somewhere of fraud- Mr. Banerjee mylord reminds me. 26 mylord, now mylord - 26 says that Award is contrary to law of mylord - Amrit Banaspati. Now mylord, the award..arbitrators have gone wrong.....Now see the next sentence, "As held in this case, the relief granted to Essex is a fraud on the consti and breach on the faith of the people" So mylord, where is the inducement? Amrit Banaspati, mylord, was cited by them - arbitrators could not follow what they had cited according to them

- so there was no inducement from our side.....

36. Mr. Sarkar, Senior Advocate while making the above submissions has

referred to paragraphs 20, 21 and 26 of the application filed by the

petitioners under Section 36(2) of the Arbitration and Conciliation Act,

1996. As per the submissions of Mr. Sarkar that if the Arbitral Tribunal

has accepted the submissions of the petitioners, can it amount to any 19

fraud. Para 20 and 26 of the application under Section 36(2) of the

Arbitration and Conciliation Act, 1996 reads as follows:

"20. It is also relevant to mention herein that what Essex sought in the arbitration was not a simpliciter money award but one which sought refund of tax already deposited/ to be deposited by HPL. In pith and substance, what Essex prayed and has been granted is a refund of tax to HPL.

26. Since the impugned Award prima facie suffers from various blatant irregularities and illegalities, any proceeding arising out of the same for enforcement will be highly detrimental to the interest of the Petitioners. As mentioned above, the prayer granted in favour of Essex is statutory barred by the extant GST regime, and it is in any event, also contrary to the law laid down by the Hon'ble Supreme Court in the case Amrit Banaspati. v. State of Punjab, (1992) 2 SCC 411. As held in this case, the relief granted to Essex is a fraud on the Constitution and a breach of faith of the people."

37. Mr. Sarkar by referring the averments of the application of the

petitioners and submitted that only in paragraph 26 of the application,

the petitioners have contended that the prayer granted in favour of the

respondent is statutorily barred by the extent of GST regime and

contrary to the judgment of the Hon'ble Supreme Court in the case of

Amrit Banaspati (Supra) thus the relief granted to the respondent is

fraud on the constitution and breach of faith of the people. Mr. Sarkar

submitted that the arbitrators could not follow what they had cited to

them. Mr. Sarkar submitted that there is no inducement on the side of

the respondent and there is no evidence that the respondents have

induced fraud upon the arbitrators. Merely, the arbitrators have not 20

followed the citation cannot be said to be fraud. This Court perused the

Award and finds that the Arbitral Tribunal has considered the

judgement of Amrit Banaspati and distinguished the same from the

facts of this case.

38. In the time stamp 1:08:59 to 1:09:17 the argument of Mr. Sarkar as

follows:

 Time stamp - 1:08:59 to 1:09:17

".....Now mylord, I come on the contract, Lordship's question. Now mylord, Assuming that your lordship is - thinks that it can't be done, I submit there is no fraud or corruption, it is an error of law. Assuming it can't be done....."

39. In the said argument, Mr. Sarakar has submitted that if this Court is

not agree with the findings of the Arbitral Tribunal, can it be said to be

fraud or corruption. He submitted that if this Court will not accept the

findings of the Arbitral Tribunal, it is an error of law. Mr. Sarkar to

buttress his submission has referred the Share Purchase Agreement

wherein Clauses A and B reads as follows:

A. The company is a public limited company incorporated in India and is, inter alia, engaged in the business of manufacture and sale of various petrochemical related polymers and other value added chemical products ("Business"). The company was incorporated in 1985 as a vehicle for implementation of the 'Haldia Petrochemical Project', which was intended to drive the industrial resurgence in the State of West Bengal.

B. The company is the flagship investment in West Bengal. The Company has played a 21

significant role in economic development of the State of West Bengal and has spurred development of related downstream petrochemical industry in the last decade in the eastern region of India, Significant downstream industries have spawned which utilize the Company's products as feed to manufacture a variety of products. These downstream units have created enormous job opportunities in the state."

40. Considering the above facts and circumstances, this Court finds that

the respondents have neither acknowledged nor have admitted in

unequivocal terms that the Arbitral Tribunal has ignored the pleading

of the parties, contemporaneous letters and committed an error.

41. In view of the above, G.A. (Com) 1 of 2024 is rejected.

42. Heard the Learned Counsel for the respective parties, perused the

materials on record and the judgments relied by the parties. The

petitioners have prayed for an unconditional stay of operation of the

Award dated 18th September, 2023, passed by the Arbitral Tribunal.

The petitioners have also filed an application under Section 34 of the

Arbitration and Conciliation Act, 1996, challenging the impugned

award but the petitioners have at present prays for unconditional stay.

43. Section 36 (2) and (3) of the Arbitration and Conciliation Act, 1996,

reads as follows:

"(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of 22

sub-section (3), on a separate application made for that purpose.

(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.

[Provided further that where the Court is satisfied that a prima facie case is made out that, -

(a) the arbitration agreement or contract which is the basis of the award; or

(b) the making of the award,

was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.

Explanation. - For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).]"

44. Section 36 of the Arbitration and Conciliation Act, 1996 is under

Chapter VII of the said Act. Chapter VII of the Act has dealt with finality

and enforcement of arbitral awards. Section 36 of the Act has provided

for the enforcement of the arbitral awards. Under Sub-Section (1) of

Section 36, an arbitral award can be enforced in accordance with the 23

provisions of the Code of Civil Procedure, 1908, in the same manner as

if it were a decree of a court where the time for making an application

for arbitration award under Section 34 of the Act of 1996 has expired

and subject to the provisions of Sub-Section (2) of Section 36. Sub-

Section (2) of Section 36 has recognized that, an application for setting

aside of the arbitral award by itself shall not render the award

unenforceable, unless the Courts grant an order of stay of operation of

such award for reasons could be recorded in writing. Prior to the

Arbitration and Conciliation (Amendment) Ordinance, 2020, sub-

section (3) of Section 36 of the Act of 1996 had a proviso. The proviso to

such sub- section has stipulated that, the court shall, while

considering the application for grant of stay in the case of an award for

payment of money, have due regard to the provisions for grant of

money in decree under the provisions of Code of Civil Procedure, 1908.

The Arbitration and Conciliation (Amendment) Ordinance, 2020, has

added one more proviso of sub-section 3 of Section 36 of the Act of

1996. It has added the following proviso:

"Prided further that were the court is satisfied that a prima facie case is made out:-

a) That the arbitration agreement or contract which is the basis of the award; or

b) The making of the award was induced or affected by fraud or corruption; it shall stay the award unconditionally pending disposal of the challenge under Section 34 of the award."

Explanation: For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to a arbitral 24

proceedings, irrespective of whether the arbitral of court proceedings were commenced prior to or after the commencement of Arbitration and Conciliation (Amendment) Act, 2015.

The second proviso to sub-section (3) of the Section 36 of the Act of 1996 has stipulated that, the court on prima facie finding that the arbitration agreement or the contract which is the basis of the award, or the making of award had been induced or affected by fraud or corruption, stay such award unconditionally pending disposal of challenge under section 34 of the Arbitration and Conciliation Act, 1996."

45. The Advocate General has relied upon the judgment reported in 2018

SCC OnLine Bom 540 (Ecopack India Paper Cup Private Limited -

vs- Sphere International), wherein the Bombay High Court held that:

"10. A bare perusal of the provisions of Section 36 shows that the jurisdiction so conferred on the Court is a discretionary jurisdiction. The proviso to Sub-section (3) further makes it implicit that the provisions of Order 41 Rule 1 Sub-Rule 3 and Rule 5 would become relevant. In exercising powers under Order 41 Rule 5 the Court exercises its discretion and may grant a stay to the execution of a decree if "sufficient cause" is made out and the party seeking stay satisfies the Court that it will sustain substantial loss and inter-alia satisfies the condition as stipulated in sub-Rule 3 of Rule 5. Thus, the under scheme of the provisions of Section 36 read with Order 41 Rules 1 and 5 of the C.PC, the party opposing grant of a stay cannot assert a proposition that it would be mandatory for the Court to impose a condition for a stay to the execution proceedings. It is for the Court to consider the facts and circumstances of the case and exercise its discretion either to grant a stay to the execution of the decree or impose or not impose any other condition, as the Court may deem appropriate. The above position in law has been clearly recognized by the Supreme Court in Malwa Strips Private Limited v. Jyoti Limited. The discretion so vested in the Court is required to be 25

exercised judicially and not arbitrarily and in the interest of justice. (see Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhai & Co.. (supra). Adverting to these principles of law, the learned Single Judge in the facts of the case, has appropriately exercised discretion as vested with the court under the provisions of Section 36(3) of the Act read with provisions of Order 41 Rule 5 in passing the impugned order."

46. Learned Advocate General has also relied pon the judgment reported in

(2013) 7 SCC 543 (Gazal Taneja & Ors. -vs- Mahanagar Telephone

Nigam Limited & Anr.), wherein the Hon'ble Supreme Court has

stayed the operation of the impugned Judgment and Decree.

47. Mr. Sarkar, Learned Senior Advocate, representing the respondent has

relied upon the judgment reported in (2019) 8 SCC 112 (Pam

Developments Private Limited -vs- State of West Bengal), wherein

the Hon'ble Supreme Court has considered the provisions of Section

36(3) in the contract of an Arbitral Award against the State Government

for payment of money. It has considered the interplay of the provisions

of Section 36(3) of the Act of 1996, Order 27 Rule 8-A of the Code of

Civil Procedure, 1908 and Order 41 Rule 5 (3) of the Code of Civil

Procedure, 1908. It has held that:

"19. In this backdrop, we have now to consider the effect of Section 36 of the Arbitration Act, vis-à-vis the provisions of Order 27 Rule 8-A CPC. Sub-section (3) of Section 36 of the Arbitration Act mandates that while considering an application for stay filed along with or after filing of objection under Section 34 of the Arbitration Act, if stay is to be granted then it shall be subject to such conditions as may be deemed fit. The said sub- section clearly mandates that the grant of stay of 26

the operation of the award is to be for reasons to be recorded in writing "subject to such conditions as it may deem fit". The proviso makes it clear that the Court has to "have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure". The phrase "have due regard to" would only mean that the provisions of CPC are to be taken into consideration, and not that they are mandatory. While considering the phrase "having regard to", this Court in Shri Sitaram Sugar Co. Ltd. v. Union of India [Shri Sitaram Sugar Co. Ltd. v. Union of India, (1990) 3 SCC 223] has held that : (SCC p. 245, para 30)

"30. The words "having regard to" in sub-

section are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory".

20. In our view, in the present context, the phrase used is "having regard to" the provisions of CPC and not "in accordance with" the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Rule 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. the Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. The provisions of CPC are to be followed as a guidance, whereas the provisions of the Arbitration Act are essentially to be first applied. Since, the Arbitration Act is a self- contained Act, the provisions of CPC will apply only insofar as the same are not inconsistent with the spirit and provisions of the Arbitration Act.

29. Although we are of the firm view that the archaic Rule 8-A of Order 27 CPC has no application or reference in the present times, we may only add that even if it is assumed that the provisions of Order 27 Rule 8-A CPC are to be applied, the same would only exempt the Government from furnishing security, whereas 27

under Order 41 Rule 5 CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount. Rule 8-A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof.

48. Mr. Sarkar relied upon the judgment reported in 2023 SCC OnLine

Cal 2142 (West Bengal Small Industries Development Corporation

Limited WBSIDC -vs- Kaushalya Infrastructure Development

Corporation Limited KIDCO), wherein the Coordinate Bench of this

Court held that:

"10. Since the Act does not provide any clarity or explanation on the circumstances which would escalate matters to the level of fraud or corruption in the making of the award, it would be profitable to refer to a few decisions where the concepts of fraud and corruption were considered and dealt with.

Fraud

11. Kerr on the Law of Fraud and Mistake, Seventh Edition, describes fraud as understood by Civil Courts of Justice, to include all acts, omissions and concealments which involve a breach of legal or equitable duty, trust or confidence, justly reposed and are injurious to another or by which an undue or unconscientious advantage is taken of another. The description proceeds to include:

"All surprise, trick, cunning, dissembling and other unfair way that is used to cheat any one is considered as fraud.

Fraud in all cases implies a wilful act on the part of any one, whereby another is sought to be deprived, by illegal or inequitable means, of what he is entitled to."

12. In Venture Global Engineering v. Satyam Computer Services Ltd., (2010) 8 SCC 660, the Supreme Court considered a case for setting aside of an award under Explanation 1 to section 28 34(2)(b)(ii) which provides for the circumstances when an award would be in conflict with the public policy of India and includes the making of the award being induced or affected by fraud or corruption in one of the three sub-clauses under Explanation 1(i). The Supreme Court held that fraud cannot be put in a straitjacket as it has wide connotation in legal parlance and referred to a decision of the House of Lords in Reddaway (Frank) & Co. Ltd. v. George Banham & Co.

Ltd., [1896] A.C. 199 where "fraud" was described in the words of Lord Macnaghten as:

"But fraud is infinite in variety;

sometimes it is audacious and unblushing; sometimes it pays a sort of homage to virtue, and then it is modest and retiring; it would be honesty itself if it could only afford it. But fraud is fraud all the same; and it is the fraud, not the manner of it, which calls for the interposition of the Court."

13. Directing the gaze to India, section 17 of the Indian Contract Act, 1872, defines fraud as-

"17.- "Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract-

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent.

Explanation.- Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, 29

regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech"

15. Considering the legal and factual position, the Supreme Court in Venture Global held that concealment of relevant and material facts, which should have been disclosed before the arbitrator, would amount to an act of fraud. Russell on Arbitration, 23rd Edition, reiterates the position that an award will be obtained by fraud if the consequence of deliberate concealment is an award in favour of the concealing party.

18. The words "making of the award" was also considered by the Court in Elektrim SA v. Vivendi Universal SA, (2007) 2 All ER 365 (Comm), which held that an award must be obtained by the fraud of a party to the arbitration or by the fraud of another to which the party to the arbitration was privy. The Court in Vivendi Universal SA elaborated the concept further in the following words:

"an award will only be obtained by fraud if the party which has deliberately concealed the document has, as a consequence of that concealment, obtained an award in its favour. The party relying on Section 68(2)(g) must therefore also prove a causative link between the deliberate concealment of the document and a decision in the award in favour of the other successful party"

19. The definition of fraud, as settled in the decisions referred to above, substantially point to a consensus that the facts concealed or suppressed must have a causative link with the facts constituting/culminating in the award or inducing the making of the award. The Supreme Court in Venture Global was of the view that disclosure of the concealed facts post-award would become relevant for setting aside of the award on a causal connection being found between the concealment and the award.

23. The above discussion on the definition of fraud and corruption makes it evident that an award-debtor, who seeks unconditional stay of an 30

award, must discharge the onus of establishing a case, prima facie, that the procedure resulting in the making of the award warrants undoing of the award altogether on grounds of fraud or corruption. The burden on the party is onerous; it is simply not enough to show that the party was kept in the dark on the appointment of the arbitrator or of the proceedings thereafter, that the party was not given adequate or effective hearing or even that there has been a breach of the principles of natural justice."

49. As per the case of the petitioners, in the present case, the impugned

award is affected by fraud and as such the award is to be stayed

unconditionally. The petitioners say that by creating a new case for

Essex, an unfair and undeserved benefit has been given to Essex. They

say that in the name of legal determination, the Tribunal could not

have knowingly and deliberately disregarded the contract, the

expressed intension of the parties, their pleaded cases and evidence

and their contemporaneous and subsequent conduct regarding the

manner in which the Tribunal understood the contract and the extent

of GST regime. It is also the case of the petitioners that the Tribunal

has exceeded its jurisdiction and disregarded and ignored all settled

principles that clothe an Arbitral Tribunal with jurisdiction. As per the

case of the petitioners, the same could tantamount to fraud in making

the award.

50. It is not the case of the petitioners that the Essex had committed any

fraud of corruption. The Arbitral Tribunal has arrived upon the findings

after considering the materials placed before the Tribunal and the 31

submissions made by the respective parties before the Tribunal. The

Tribunal has recorded all the submissions of the parties in the Award.

Considering the case of the petitioners, the judgments relied by the

parties and the Award passed by the Arbitral Tribunal, this Court finds

that the no case is made out by the petitioners with respect to fraud

and corruption while passing the Award by the Tribunal.

51. The petitioners have relied upon the judgment Amrit Banaspati

(supra), wherein the Hon'ble Supreme Court has held that:

"11. Exemption from tax to encourage industrialisation should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. For instance tax holiday or concession to new or expanding industries is well known to be one of the methods to grant incentive to encourage industrialisation. Avowed objective is to enable the industry to stand up and compete in the market. Sales tax is an indirect tax which is ultimately passed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacturer and consumer gain, one by concession of non-levy and other by non-payment. Such provisions in an Act or Notification or orders issued by Government are neither illegal nor against public policy.

12. But refund of tax is made in consequence of excess payment of it or its realisation illegally or contrary to the provisions of law. A provision or agreement to refund tax due or realised in accordance with law cannot be comprehended. No law can be made to refund tax to a manufacturer 32

realised under a statute. It would be invalid and ultra vires. The Punjab Sales Tax Act provided for refund of sales tax and grant of exemption in circumstances specified in Sections 12 and 30 respectively. Neither empowered the Government to refund sales tax realised by a manufacturer on sales of its finished product. Refund could be allowed if tax paid was in excess of amount due. An agreement or even a notification or order permitting refund of sales tax which was due shall be contrary to the statute. To illustrate it the appellant claimed refund of sales tax paid by it to the State Government on sale made by it of its finished products. But the tax paid is not an amount spent by the appellant but realised on sale by it. What is deposited under this head is tax which is otherwise due under the provisions of the Act. Return or refund of it or its equivalent, irrespective of form is repayment or refund of sales tax. This would be contrary to Constitution. Any agreement for such refund being contrary to public policy was void under Section 23 of the Contract Act. The constitutional requirements of levy of tax being for the welfare of the society and not for a specific individual the agreement or promise made by the government was in contravention of public purpose thus violative of public policy. No legal relationship could have arisen by operation of promissory estoppel as it was contrary both to the Constitution and the law. Realisation of tax through State mechanism for the sake of paying it to a private person directly or indirectly is impermissible under constitutional scheme. The law does not permit it nor equity can countenance it. The scheme of refund of sales tax was thus incapable of being enforced in a court of law."

On and from 1st July, 2017, as per the representation, HPL is

entitled to receive further incentives being remission or refund or

exemption as the case may be, of GST accruing to the Government of

West Bengal to the extent of Rs.2968,33,59,066/- within any time

before 1st December, 2033. Upon coming into force of the GST regime, 33

HPL has not been given remission or exemption for payment of GST but

HPL has been making payment of GST to the Government of West

Bengal.

52. At the time of execution of the Share Purchase Agreement, the parties

had expressly contemplated change in law i.e. implementation of GST.

Clause 1(B)(c) of Schedule 5 of the Share Purchase Agreement was

incorporated and agreed to by the parties which provides that in the

event of any change in law, as a result of which tax does not accrue to

the Government of West Bengal, incentives would be suitably adjusted

so as not to cause of any loss to the State Government on such account

and incentives would be payable only to the extent the tax accrue to the

State Government. The onus on the Government of West Bengal to

show that any loss has been caused to them which they have failed to

discharge. The Government of West Bengal has not provided any

particulars in relation to any hardship or loss or unfair advantage. It is

agreed by and between the parties that pursuant to the GST, the

incentives are payable to HPL only to the extent the tax accrued to the

Government of West Bengal. The Government of West Bengal has not

made out any case that the Share Purchase Agreement became

frustrated after the change in law.

The Learned Arbitral Tribunal has categorically come to the

conclusion that the claim of Essex is a contractual claim under the

Share Purchase Agreement and the Government West Bengal has

promised to disburse financial benefits to HPL which were previously 34

granted to HPL under the WBIS which expired in 2004 and the benefits

granted under the WBIS to HPL expired in 2012. The claim of the Essex

is for payment of promised financial assistance under the contract. The

amount of tax paid to the Government of West Bengal is merely used as

standard to ascertain the quantum of financial benefit payable to HPL.

The Share Purchase Agreement does not specify the mode and manner

in which the financial assistance is to be rendered to the HPL. The

Share Purchase Agreement contemplates monetary payment of expired

incentives. It is for the State of West Bengal to decide the mode of such

disbursal.

53. In the case of Commissioner of Sales Tax, Orissa -vs- Crown Re-

Roller (P) Ltd. and Others reported in (2007) 3 SCC 659, the Hon'ble

Supreme Court considered the judgment of Amrit Banaspati (Supra)

and held that:

"18. In that case, the issue was as to whether the manufacturer of Banaspati had set up an industry in the State of Punjab, on the assurance that the sales tax amount actually collected by it from the ultimate purchasers, would be refunded to it by way of incentive, can be enforced by a court of law. Such a prayer was declined on the ground that refund of tax is made in consequence of excess payment of it. This case, however, deals with completely different situation as despite the exemption notification issued in terms of a statute, the respondent was compelled to pay tax through its purchase price when it purchased the scrap material from subsequent sellers. The State cannot resile itself from the statutory provisions of exemption made by it. In our opinion, in equity, the State in a situation of this nature, must act in letters and spirit of the Act. However, the State can only refund what it actually collected and not any amount which it had not collected. We, therefore, 35

are of the opinion that the interest of justice would be subserved if an opportunity is given to the respondent to produce evidence before the assessing authority in regard to existence of the legal requirements, as noticed hereinbefore, for maintaining its claim of refund. The assessing authority shall give an opportunity to the respondent to place all materials in connection therewith or in relation thereto. It would also be open to the assessing authority, if any situation arises therefor, to call for any record from the Rourkela Steel Plant or any other "dealer". We, furthermore, are of the opinion that the respondent would not be entitled to any interest on the refund amount for the present as the quantum thereof is yet to be determined."

In the case of Hero Motocorp Limited -vs- Union of India and

Others reported in (2023) 1 SCC 386, the Hon'ble Supreme Court held

that:

"68. However, a common thread in all these judgments that could be noticed is that all these judgments consistently hold that there can be no estoppel against the legislature in the exercise of its legislative functions. The Constitution Bench in M. Ramanatha Pillai [M. Ramanatha Pillai v. State of Kerala, (1973) 2 SCC 650 : 1973 SCC (L&S) 560] has approved the view in American Jurisprudence that the doctrine of estoppel will not be applied against the State in its governmental, public or sovereign capacity. It further held that the only exception with regard to applicability of the doctrine of estoppel is where it is necessary to prevent fraud or manifest injustice. The analysis of all the judgments of this Court on the issue would reveal that it is a consistent view of this Court, reiterated again in Godfrey Philips , that there can be no promissory estoppel against the legislature in the exercise of its legislative functions.

69. Undisputedly, the Notification dated 18-7- 2017 withdrawing the exemption notifications was issued in pursuance of the statutory mandate as provided under Section 174(2)(c) of the CGST Act. If 36

the contention as raised by the appellants is to be accepted, it would make the provisions under the proviso to Section 174(2)(c) of the CGST Act redundant and otiose. The legislature in its wisdom has specifically incorporated the proviso to Section 174(2)(c) providing therein that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded. If the contention is accepted, it will amount to enforcing a representation made in the said OM of 2003 and the 2003 Notification contrary to the legislative incorporation in the proviso to Section 174(2)(c) of the CGST Act. In other words, it will permit an estoppel to be operated against the legislative functions of Parliament. We are, therefore, of the considered view that the claim of the appellants on estoppel is without merit and deserves to be rejected.

70. It is further to be noted that this Court has also consistently held that when an exemption granted earlier is withdrawn by a subsequent notification based on a change in policy, even in such cases, the doctrine of promissory estoppel could not be invoked. It has been consistently held that where the change of policy is in the larger public interest, the State cannot be prevented from withdrawing an incentive which it had granted through an earlier notification. Reliance in this respect could be placed on the judgments of this Court in Kasinka Trading v. Union of India, Shrijee Sales Corpn. v. Union of India , State of Rajasthan v. Mahaveer Oil Industries , Shree Sidhbali Steels Ltd. v. State of U.P. [Shree Sidhbali Steels Ltd. v. State of U.P., and DG of Foreign Trade v. Kanak Exports.

71. Recently, this Court, in Unicorn Industries, after surveying the earlier judgments of this Court on the issue has observed thus : (SCC p. 589, para

26)

"26. It could thus be seen that, it is more than well settled that the exemption granted, even when the notification granting exemption prescribes a particular period till which it is available, can be withdrawn by the State, if it is found that such a withdrawal is in the public interest. In such a case, 37

the larger public interest would outweigh the individual interest, if any. In such a case, even the doctrine of promissory estoppel would not come to the rescue of the persons claiming exemptions and compel the State not to resile from its promise, if the act of the State is found to be in public interest to do so."

Schedule-5 reads as follows:

"SCHEDULE 5

Tax incentives to be granted by GoWB an and effective from the First Completion

1) The company has unavailed incentives under The West Bengal Incentive Scheme, 1999, benefits of which will be made available by extension of the same as hereunder:

A. Benefits with respect to Unutilized Incentives granted under 1999 Scheme

a) HPL will be allowed to carry forward and utilise 75 per cent of the unutilised benefit of incentives under WBIS 1999 over a period of 19 years. "The unutilised benefit being Rs.4380.62 crore and 75 percent thereof works out to Rs.3285.47 crore, approximately.

b) Input Tax paid would be refunded quarterly by way of State Support at the applicable discount of 25%.

B. Conditions:

a. This benefit would be effective on and from the date of receipt of First Tranche of Payment (First Completion) and withdrawal of legal proceedings in terms of Clause 5.7 hereinabove and no benefit pertaining to period prior to that would be applicable.

b. There shall be no benefits on Motor Spirit and the parties shall not press for the same.

c. In the event of any change in law (such as GST), as a result of which the tax does not 38

accrue to the State Government, the incentives would be suitably adjusted so as not to cause any loss to the State Government on that account and the incentives would be payable only to the extent the tax accrues to the State Government,

d. The total period of the incentives would stand reduced to 10 years and no further incentives would be applicable to HPL, in case:

i. the entire second tranche with interest for the remaining 260 million shares (Additional Sale Shares) is not received within the ? Years during which the amount is payable, or

ii. Based on the award of ICC, Paris, If amounts become payable to GoWB/WBIDC against the ICC Shares and the said amounts are not received within the stipulated time frame."

54. The incentives provided to HPL did not arise out of the West Bengal

Incentive Scheme, 1999. The West Bengal Incentive Scheme, 1999 had

expired on 19th May, 2012 well before the Share Purchase Agreement

was executed between the parties. The tax incentives granted to HPL

under the West Bengal Incentive Scheme, 1999, are concerned, the

same could be availed by HPL till 2014 but under the Share Purchase

Agreement, the validity period extended till 2033 as per Clause 1(A) (a)

of the Schedule-5 of the Share Purchase Agreement. It is, therefore,

evident that the incentives was not extended to HPL under the West

Bengal Incentive Scheme, 1999. The Government of West Bengal

allowed the incentives to HPL under the Schedule-5 of the Share

Purchase Agreement were not a tax incentives, the only inference can

be drawn that the same would be contractual obligations as agreed by 39

the Government of West Bengal. Clause 1(B) (c) of the Schedule-5 of the

Share Purchase Agreement become operational in the event of change

in the law. The said situation arose with effect from 1st July, 2017, on

the implementation of West Bengal Goods and Services Tax Act, 2017.

Clause 1(B)(c) provides that in the event of any change in law (such as

GST), the incentives would be payable only to the extent the tax

accrued to the State Government. In view of the same, it is not an

exemption, remission or refund of tax.

Under Clause 1(A)(b) of Schedule-5 of the Share Purchase

Agreement, the mode and method of the payment of incentives to the

HPL was consciously guaranteed to the HPL by way of State Support.

Clause 1(A)(b) ensures that the payment of the promised incentives to

the HPL would be made under change circumstances out of all the

available sources available with the State of West Bengal.

Clause 1(B)(c) of Schedule-5 of the Share Purchase Agreement

provided an assurance on behalf of the State of West Bengal that the

incentives extended to the HPL would not get reduced or wiped out even

in the event of introduction of the GST regime, in place of the prevailing

tax regime. In the said clause, it is made clear that the Government of

West Bengal would extend the incentives to HPL irrespective of any

change in the tax regime.

55. In Clause 11.1(a) of the Share Purchase Agreement, the Government of

West Bengal confirms and undertakes that Government of West Bengal 40

shall not impose any new State taxes (whether direct or indirect) on the

Company in any manner whatsoever and in Clause 11.1(d) of the

Agreement, it is was also agreed that the Government of West Bengal/

WBIDC shall grant to the company, tax incentives as detailed in

Schedule-5.

56. In the month of October, 2017, the HPL requested the Government of

West Bengal to continue with the incentives in a suitable form from

July, 2017, so as to honour its promise and support to the two flagship

companies of the State, which together directly and indirectly provide

employment to more than 2,00,000 people. The contents of the said

communication reveal that it was never the case of HPL for refund of

tax.

57. Considering the above, this Court is not satisfied that the petitioners

have made out any prima facie case for grant of unconditional stay of

the operation of the Award dated 18th September, 2023. The petitioners

are directed to secure the entire awarded amount with the Registrar,

Original Side within a period of six weeks from date. 50% of the

awarded amount shall be transferred through bank in the account of

the Registrar, Original Side of this Court and the Registrar, Original

Side on receipt of the said amount shall invest in an interest bearing

fixed deposit with the nationalised bank and remaining 50% of the

awarded amount by way of Bank Guarantee within the time period

mentioned above. The Award dated 18th September, 2023, shall be

stayed from the date of securing of the total awarded amount as 41

mentioned above. If the petitioners fail to secure the awarded amount,

the award holder shall be at liberty to take steps for enforcement of the

Award in accordance with law

58. A.P. (Com) No. 28 of 2023 is disposed of.

Parties shall be entitled to act on the basis of a server copy of the

Judgment placed on the official website of the Court.

Urgent Xerox certified photocopies of this judgment, if applied for,

be given to the parties upon compliance of the requisite formalities.

(Krishna Rao, J.)