SC junks WB plea against arbitral award in favour of Mauritius-based firm

Observing "citizens cannot be taken for a ride", the Supreme Court on Monday refused to entertain an appeal of the West Bengal government against an arbitral award that asked it to pay a Mauritius-based company towards promised tax incentives.

A bench comprising Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar upheld the July 12 order of the Calcutta High Court that refused to stay the arbitral award asking the state government to deposit Rs 2,063 crore approximately in favour of Essex Development Investments (Mauritius) Limited.

The dispute pertained to the payment of assured tax incentive to Essex which had purchased West Bengal government's shares in Haldia Petrochemicals Ltd (HPL) as per a share purchase agreement (SPA).

 

The bench was hearing the appeal of the state government and the West Bengal Industrial Development Corporation Limited (WBIDC) against the high court judgement dated September 18, 2023.

The citizens cannot be taken for a ride. Here is a private company (Essex) which pumped in money to purchase the shares based on the SPA and believing that that you will give tax incentives, said the CJI, adding the state government couldn't take a plea for change in tax regime (GST) for not performing the contractual obligations.

This is a case of legitimate expectations, the bench said, adding that it was not inclined to stay the high court order.

The CJI suggested the state government settled the dispute with Essex, which was represented by senior advocate Mukul Rohatgi and advocates Arunabha Deb and Ruby Singh Ahuja of Karanjawala & Co.

Essex is a part of "The Chatterjee Group" which by way of acceptance of the offer of March 1, 2014 took over management and control of HPL in order to revive its business by purchasing certain shares of HPL owned by WBIDC.

The SPA was executed in public interest and financial benefit was quantified at Rs 3,285.47 crore.

However, with the introduction of the GST regime on and from July 1,2017 payment of incentives was stopped even though the SPA clearly stated that with the introduction of GST, the incentives would be continued to be paid to the extent the GST component would accrue to West Bengal.

Essex, aggrieved by non-payment of the tax incentive, commenced the arbitral proceedings against the West Bengal government and WBIDC.

A unanimous arbitral award of September 18, 2023 allowed the claims of Essex and directed the state government and WBIDC to continue to pay financial incentives adding up to Rs 3,285.47 crore or till the expiry of the balance remaining period for which incentives are to be paid.

The arbitral award was challenged by the state government in the high court which is pending adjudication. HPL is a modern naphtha-based petrochemical complex at Haldia near Kolkata in West Bengal.

As per the SPA, the entire 520 million equity shares were transferred to Essex and the sale amount was received by the state government.