AI OCR 
TaxTMI 
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2024 (7) TMI 989
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....ngal 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 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. Af....
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....ial 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, 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....
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....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 ....
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....s 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 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. Ho....
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....hat 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 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 ....
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.... 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 inducemen....
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....une, 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. 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....
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....te 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 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 Pu....
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....nt 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 s....
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....t, 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 remo....
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....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 upon 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 pro....
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.... of Order 27 Rule 8-A CPC are to be applied, the same would only exempt the Government from furnishing security, whereas 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....
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....unless the circumstances of the case are such that, 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 ....
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....dering the materials placed before the Tribunal and the 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 fr....
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....x 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, 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....
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....t 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, 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 est....
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....ect 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, 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 th....
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....entives 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 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 Sta....