The Supreme Court on Monday declined to entertain an appeal by the West Bengal government against an arbitral award favoring Essex Development Investments (Mauritius) Limited, thereby upholding a decision that requires the state to honor promised tax incentives amounting to approximately Rs 2,063 crore. Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar reiterated the July 12 order of the Calcutta High Court, which had refused to stay the arbitral award.
The dispute originated from an agreement wherein Essex purchased shares in Haldia Petrochemicals Ltd (HPL) from the West Bengal government, under conditions that included certain tax incentives. However, the state ceased these payments following the introduction of the GST regime on July 1, 2017, despite the share purchase agreement (SPA) stipulating that these incentives should continue.
During the proceedings, CJI Khanna emphasized the principle of legitimate expectations, noting that the state government could not renege on its commitments under the guise of a tax regime change. “The citizens cannot be taken for a ride. Here is a private company which pumped in money to purchase the shares based on the SPA and believing that you will give tax incentives,” he remarked.
The legal representation for Essex, led by senior advocate Mukul Rohatgi and advocates Arunabha Deb and Ruby Singh Ahuja of Karanjawala & Co., argued successfully that the state’s cessation of incentive payments breached the SPA. The unanimous arbitral decision on September 18, 2023, directed the West Bengal government and the West Bengal Industrial Development Corporation Limited (WBIDC) to continue the payments as agreed upon, which cumulatively amount to Rs 3,285.47 crore or until the expiry of the period for which the incentives were to be paid.
The arbitral award, while challenged by the state government, was found to be consistent with the contractual obligations laid out in the SPA, which was executed in public interest to enable Essex, part of “The Chatterjee Group,” to take over management and control of HPL in an effort to revive the business.
