The Calcutta High Court has recently restrained the West Bengal government from selling, transferring, or assigning any immovable properties within the Kolkata Municipal Corporation limits in connection with an arbitration award involving Haldia Petrochemicals Ltd.
The injunction was issued in response to an application by Essex Development Investments (Mauritius) Limited, which seeks to execute a portion of the award, claiming over ₹2,171.87 crore owed to HPL.
Justice Shampa Sarkar also barred the West Bengal Industrial Development Corporation Limited (WBIDC) from selling or transferring its office premises located at 23 Camac Street, Kolkata. The court ordered principal officers of the award debtors to submit affidavits detailing their assets within 2 weeks.
The interim order will remain in effect until February 28, 2025, with the next hearing scheduled for January 3, 2025.
Background of the Dispute
The arbitration dispute centers on tax incentives assured to Essex Development Investments as part of a share purchase agreement (SPA). Essex, part of The Chatterjee Group, acquired the West Bengal government’s shares in HPL on March 1, 2014, to revive the petrochemical company.
Under the SPA, the West Bengal government promised tax incentives, which were to continue even after the introduction of the GST regime on July 1, 2017, based on GST revenue accruing to the state.
Despite the agreement, the government halted incentive payments post-GST implementation, prompting Essex to initiate arbitration proceedings against the state and WBIDC. An arbitral tribunal later awarded Essex compensation, which the West Bengal government appealed unsuccessfully before the Supreme Court.
On November 11, 2023, the apex court declined to entertain the state’s appeal, upholding the award.
Court’s Directions
Justice Sarkar’s order aims to secure Essex’s claim by freezing the sale or transfer of government assets within KMC limits and WBIDC’s office premises. This move safeguards the assets until the arbitration award is executed or further court orders are passed.
The dispute highlights the complexities of contractual obligations in the context of shifting tax regimes and underscores the necessity for clarity in agreements involving public entities.
As the legal proceedings progress, the case will likely remain a focal point for corporate and governance stakeholders.
