TaxTMI 
TaxTMI 
2024 (7) TMI 989
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....tween 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 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 ....
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....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, 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, i....
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....guish the case of 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 variet....
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.... 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 investment in West Bengal and a sourc....
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....al 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 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 incenti....
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....y 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. 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 p....
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..... 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. 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 ca....
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....x 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 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 en....
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....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 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 parti....
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....ection (1) of Section 36, an arbitral award can be enforced in accordance with the 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 adde....
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....e 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 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 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 provis....
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.... 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 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 ....
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....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, 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 conce....
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....rties, 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 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 Co....
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....on 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, 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 ....
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....t 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, 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 connec....
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....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....
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.... 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 the Government of West Bengal. Clause 1 (B) (c) of the Schedule-5 of the Share Purchase Agreement become operational in th....