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2024 (7) TMI 989 - HC - GSTTax incentives - Prayer for an unconditional stay of operation of the Award - 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 - HELD THAT - 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. 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 - 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. 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 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as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded - the claim of the appellants on estoppel is without merit and deserves to be rejected. 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. Application disposed off.
Issues Involved:
1. Application for unconditional stay of Arbitral Award under Section 36(2) of the Arbitration and Conciliation Act, 1996. 2. Maintainability of Essex's claim for tax incentives post-GST regime. 3. Determination of whether the incentives were tax incentives or contractual obligations. 4. Allegations of fraud in the making of the Arbitral Award. 5. Application of legal precedents and principles regarding refund of tax and contractual obligations. Detailed Analysis: 1. Application for Unconditional Stay of Arbitral Award: The petitioners, Government of West Bengal and WBIDC, filed an application under Section 36(2) of the Arbitration and Conciliation Act, 1996, seeking an unconditional stay of the Arbitral Award dated 18th September, 2023. The petitioners argued that the award was affected by fraud and contrary to public policy, thus requiring an unconditional stay. 2. Maintainability of Essex's Claim for Tax Incentives Post-GST Regime: The Share Purchase Agreement (SPA) between the parties included a provision for tax incentives to HPL. Essex alleged that post-GST implementation, HPL did not receive the promised tax incentives, leading to the arbitration claim. The Arbitral Tribunal awarded Essex financial incentives/benefits amounting to Rs. 604,85,29,435/- for the period from 01.07.2017 to 31.05.2020 and Rs. 479,89,00,544/- for the period from 01.06.2020 to 31.03.2022, as per Clause 1(A)(c) of Schedule 5 of the SPA. 3. Determination of Whether the Incentives Were Tax Incentives or Contractual Obligations: The petitioners argued that the incentives were tax incentives and thus subject to statutory limitations under the GST regime and Supreme Court precedents. The Arbitral Tribunal, however, concluded that the incentives were contractual obligations agreed upon in the SPA, not tax incentives. The Tribunal held that the incentives were to be provided as financial benefits, irrespective of the tax regime changes. 4. Allegations of Fraud in the Making of the Arbitral Award: The petitioners contended that the award was affected by fraud, arguing that the Tribunal created a new case for Essex, disregarding the contract and legal principles. They relied on various legal precedents to support their claim. The respondent, Essex, argued that the award was based on the contractual obligations and the Tribunal's findings were not induced by fraud. The Court examined the submissions and found no evidence of fraud or corruption in the making of the award. 5. Application of Legal Precedents and Principles: The petitioners cited the Supreme Court case of Amrit Banaspati Co. Ltd. & Anr. vs. State of Punjab & Anr., arguing that any agreement for refund of tax is contrary to public policy and void under Section 23 of the Indian Contract Act, 1872. The Court distinguished this case, noting that the SPA's incentives were contractual obligations, not tax refunds. The Court also referred to judgments such as Ecopack India Paper Cup Private Limited vs. Sphere International and Pam Developments Private Limited vs. State of West Bengal, emphasizing the discretionary power of the Court under Section 36(3) of the Arbitration and Conciliation Act, 1996. Conclusion: The Court found that the petitioners had not made out a prima facie case for an unconditional stay of the Arbitral Award. The petitioners were directed to secure the entire awarded amount with the Registrar, Original Side, within six weeks. The award would be stayed upon securing the amount; otherwise, the award holder could enforce the award. The application for unconditional stay was thus rejected, and the case was disposed of accordingly.
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