Calcutta High Court: A petition was filed by Essex Development Investments (Mauritius) Limited (award-holder) seeking the execution of an arbitral award amounting to ₹2171,87,68,877 against the award-debtors, Government of West Bengal (award-debtor 1) and WBIDC (award-debtor 2); the bench of Shampa Sarkar, J., while considering the prima facie case, balance of convenience and inconvenience and irreparable loss and injury, and the necessity to protect the subsisting award during the pendency of proceedings; passed interim injunctions for the award-debtors to refrain from transferring or creating third-party interests in their immovable properties and instructed their principal officers to file affidavits of assets, thereby protecting the award-holder’s claim while reserving the final determination of the execution’s maintainability for a later stage.
The case revolves around the execution of an arbitral award amounting to ₹21,71,87,68,877 obtained by the award-holder against the award-debtors. The award debtors’ plea for an unconditional stay on the award under Section 36(2) of Arbitration and Conciliation Act, 1996, was rejected by a Coordinate Bench of the Calcutta High Court.
The Coordinate Bench had directed the award-debtors to secure 50% of the awarded amount in cash by depositing it with the Registrar of the High Court and to secure the remaining 50% by furnishing a bank guarantee. This order was unsuccessfully challenged before the Supreme Court, as the Special Leave Petition filed by the award-debtors was dismissed.
The award-holder filed the instant execution case seeking interim orders, due to the award-debtors’ failure to secure partial deposit of the arbitral amount.
The award-debtors contested the maintainability of the execution petition, invoking Section 36(1) of the Arbitration and Conciliation Act, which makes the provisions of the Civil Procedure Code (CPC) applicable to the execution of arbitral awards. They argued that objections akin to those under Section 47 of the CPC could be raised at the stage of execution, asserting that the award was void and unenforceable due to being passed in alleged ignorance or violation of statutory provisions. Counsel for the award-debtors, argued that Section 54(9) of the West Bengal State Goods and Services Tax Act, 2017, prohibits the refund of GST despite any decree or order of a court or tribunal. It was submitted that the contractual obligations referenced in the award could not override statutory provisions, and the award was therefore a nullity. It was emphasized that objections to the enforceability of the award could be raised at the stage of execution and supported this contention with various judicial precedents.
On the other hand, Counsel for the award-holder countered that the objections raised by the award-debtors had already been considered and rejected during the proceedings under Section 36(2) of the 1996 Act and subsequently by the Supreme Court. It was argued that permitting such objections at the execution stage would undermine the finality of the arbitral award and dilute its binding nature. Reliance was placed on a decision of the Allahabad High Court, which held that Section 47 CPC objections cannot be entertained in execution proceedings for arbitral awards beyond procedural aspects.
Perusing the matter, the Court pointed out that the point as to whether objection as to executability of the award can be raised at the stage of execution and whether the execution case can be rejected on this ground, will be decided after exchange of affidavits.
It was noted that there was a subsisting award amounting to ₹2171 crores against the award debtors, which has to be protected during the pendency of the proceeding for enforcement. “Whether the parties can contract outside the law or not and whether the award is without jurisdiction, being in violation of law and a nullity, will be decided finally”.
The Court also took note that the award-debtors failed to secure 50% of the arbitral award as directed by Coordinate Bench of Calcutta High Court, hence it did not find any reason to stall the execution proceeding. It was pointed out that the Coordinate Bench’s order rejecting the award-debtor’s plea for an unconditional stay had attained finality following the dismissal of the award-debtors’ Special Leave Petition by the Supreme Court.
Hence, considering the prima facie case, balance of convenience and inconvenience and irreparable loss and injury, the Court injuncted award-debtor no.1 from creating any third-party interest by way of transfer, sale or assignment of any of its immovable properties within the limits of Kolkata Municipal Corporation. Similarly, award-debtor no.2 was also injuncted from transferring, selling, encumbering and alienating its property in Camac Street, Kolkata.
Additionally, the Court directed the principal officers of the award-debtors to file affidavits of assets within two weeks and serve advance copies to the award-holder.
The Court clarified that the interim orders have been passed without prejudice to the issue of maintainability of the execution petition, which would be decided after the exchange of affidavits. The matter was adjourned to 03-01-2025. with the interim injunctions remaining in effect until 28-02-2025.
[Essex Development Investments Mauritius Limited v. Government of West Bengal, 2024 SCC OnLine Cal 10347, decided on 22-11-2024]
Judgment by: Justice Shampa Sarkar
Advocates who appeared in this case:
Appearance: Mr. Ratnanko Banerji, Sr. Adv. Mr. Arunabha Deb, Adv. Mr. Deepan Kr. Sarkar, Adv. Ms. Ashika Daga, Adv. Mr. Raunak Das Sharma, Adv. Ms. Samparna Mukherjee, Advocates for the petitioner.
Mr. Kishore Dutta, Advocate General. Mr. Siddharth Sethi, Adv. Mr. Majoj Kumar Tiwari, Adv. Mr. Raghavendra Pratap Singh, Advocates for the respondents.
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