Calcutta HC Stops West Bengal Govt, WBIDC From Acting on Essex Award Dispute

Calcutta High Court, led by Justice Shampa Sarkar, has restrained the West Bengal Government and WBIDC from transferring, selling, or assigning any immovable properties in Kolkata related to the award in the Essex case.

The court observed that objections to the enforceability of the award and the potential rejection of the execution case will be decided after affidavits are exchanged. However, considering the prima facie case, balance of convenience, and risk of irreparable harm, the court issued an injunction to prevent the creation of any third-party interest in the properties.

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Essex Development Investments Mauritius Ltd. vs. Government of West Bengal & Another

The Calcutta High Court, under Justice Shampa Sarkar, has prohibited the West Bengal Government and WBIDC from transferring or disposing of the properties linked to the award in the execution petition filed by Essex Development Investments.

Background:

A dispute arose from a Share Purchase Agreement (SPA) signed on September 11, 2014, between Essex Development Investments, the Government of West Bengal (GoWB), and the West Bengal Industrial Development Corporation (WBIDC). Under the agreement, GoWB and WBIDC promised financial incentives worth ₹3285.47 crores to Haldia Petrochemicals Limited (HPL). However, these incentives were stopped after the introduction of GST, despite a clause in the agreement stating that GST would not affect its terms.

This led to arbitration proceedings, resulting in an award directing GoWB and WBIDC to continue paying the incentives until the specified amount was fully paid or the scheme period ended. The award was challenged under Section 34 of the Arbitration and Conciliation Act, 1996. While this challenge was pending, the award debtors sought an interim stay under Section 36(2).

The Calcutta High Court denied an unconditional stay of the award and rejected claims that it was tainted by fraud or corruption. The court ordered the award debtors to secure 50% of the award amount in cash with the court registrar and provide a bank guarantee for the remaining 50%. The award debtors’ challenge to this order in the Supreme Court was dismissed, making the High Court’s order final.

Since the award debtors have not complied with these directions, the court found no reason to halt the execution proceedings but allowed the Advocate General to argue on the maintainability of the execution petition.

Contentions

The Advocate General argued that Section 36(1) of the Arbitration and Conciliation Act, 1996, makes the provisions of the Code of Civil Procedure (CPC) applicable to execution proceedings. This means objections to the enforceability of the award, similar to those under Section 47 of the CPC, could be raised.

However, it was emphasized that objections regarding the executability of the award, which were already presented before the High Court and the Supreme Court, cannot be raised again at the execution stage. While the CPC applies to execution proceedings, its application is limited to procedural aspects.

The Advocate General further argued that the Supreme Court’s decision left all substantive points open to be addressed under Section 34 proceedings but did not negate the earlier observations made by the Co-ordinate Bench during the Section 36(2) hearing. As such, execution of the award should proceed automatically without further objections.

Observations:

The court noted that it will decide whether objections regarding the enforceability of the award can be raised during the execution stage and whether the execution case can be rejected on this basis, after the parties exchange affidavits.

The court also pointed out that there is an existing award of ₹2171.87 crores against the respondents, which needs to be protected while the enforcement proceedings are ongoing. The final decision on whether the parties can bypass the law or whether the award is invalid will be made later.

Given the preliminary case, balance of convenience, and potential harm, the court ordered that the first award debtor be prevented from transferring, selling, or assigning any of its properties within Kolkata. The second award debtor was also restricted from transferring or selling the property at 23, Camac Street, Kolkata. The court directed the principal officers of both award debtors to file their affidavits of assets within two weeks.

An interim injunction was issued, and the case will be heard again on January 3, 2025.