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regular-article-logo Friday, 22 November 2024

Setback for Bengal govt as Supreme Court denies special leave petition in dispute with TCG

A bench comprising Justice Sanjiv Khanna, the newly appointed chief justice of India, and Justice Sanjay Kumar declined to interfere with a July 12 order of the HC that had asked the state to deposit ₹2,063 crore in an equal mix of cash and bank guarantee (BG) to secure the arbitral award

Sambit Saha Calcutta Published 12.11.24, 11:15 AM
The Supreme Court.

The Supreme Court. File picture

The Supreme Court has dismissed a special leave petition filed by the Bengal government challenging a Calcutta High Court order that had refused to grant unconditional stay on the execution of an arbitral award in favour of a company under The Chatterjee Group (TCG) in a dispute involving unpaid incentives to Haldia Petrochemicals Ltd.

A bench comprising Justice Sanjiv Khanna, the newly appointed chief justice of India, and Justice Sanjay Kumar declined to interfere with a July 12 order of the HC that had asked the state to deposit 2,063 crore in an equal mix of cash and bank guarantee (BG) to secure the arbitral award.

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The Bengal government moved HC to set aside the award, passed on September 18, 2023, under Section 34 of the Arbitration and Reconciliation Act, 1996, which is pending adjudication.

Moreover, the state filed an application under section 36(2) of the Act, seeking interim stay of the arbitral award till the final disposal of the petition filed under Section 34. The July order was in connection with the Section 36(2) of the application.

Before the SC on Monday, the TCG firm Essex Development Investments (Mauritius) was led by Mukul Rohatgi and Ratnanko Banerji and aided by Arunabha Deb, while the state was represented by Gopal Subramanian and Kishore Datta, advocate-general of Bengal.

The dispute

The dispute stems from a tripartite agreement among HPL promoter TCG, HPL and WBIDC on September 11, 2014, whereby the private party bought 52 crore shares from WBIDC for 25.10 apiece.

A clause in the agreement stipulated that HPL would be able to avail 75 per cent of its unutilised incentives amounting to 3,285 crore over a period of 19 years starting from January 1, 2016. It further added that in the event the Goods and Service Tax (GST} was rolled out, the incentives would still be payable to the extent the tax accrued to the state government.

During the 18-month period between January 1, 2016 and June 30, 2017, HPL collected VAT from the sale of its products but did not deposit the levy to the state, adjusting the unutilised incentives as per SPA. The company collected 317 crore in that period.

After the GST was rolled out from July 1, 2017, HPL continued to collect the GST, which replaced VAT, and deposited it with authorities, expecting the tax that would accrue to the state in the form of SGST to be reimbursed. However, the company did not receive the reimbursement from the state.

Essex successfully made out the case that it was the onus of the state to return the state’s share collected and deposited to HPL. According to the TCG submission before HC, that amount accrued to HPL is 2,063 crore as on April 30, 2024.

Way forward

The option before the state could be two-fold: it may have to thrash out a settlement with TCG or deposit the entire sum with the registrar of the HC. The state can get a stay and proceed with section 34 application if it coughs up the money.

However, if the state neither pursues the Section 34 application nor deposits the money, the award holder will have the option to move ahead with the execution petition, seeking appointment of a receiver and attachment of assets and file contempt petition.

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