The Calcutta High Court has refused to grant an unconditional stay on a ₹765.78-crore arbitral award that Tata Motors had secured in a case linked to the automaker’s ill-fated small car factory in Singur.
The company was entitled to recover the sum, along with interest, from the West Bengal Industrial Development Corporation (WBIDC) as compensation for the sunk cost in the Singur factory that Tata had to leave in the face of violent opposition over land acquisition in 2008, in a major setback to Bengal’s industrialisation drive and its image as an investor-friendly state.
A three-member arbitral panel, presided over by former Supreme Court judge V.S. Sirpurkar, had passed the award in favour of Tata Motors on October 30, 2023.
WBIDC had since sought to resist enforcement of the award by alleging fraud, bias and impropriety against one of the arbitrators and contended that the arbitral award deserved to be stayed unconditionally under a proviso to Section 36(3) of the Arbitration and Conciliation Act, 1996.
On Thursday, Justice Aniruddha Roy not only refused to grant the stay, he also upheld the enforceability and sanctity of the arbitral process.
The HC directed that, for any stay of the arbitral award, WBIDC must secure the entire awarded amount, including principal and interest, by way of an undertaking to be given on affidavit by its managing director or chairman supported by board resolution within 8 weeks from date.
The affidavit will contain particulars of all unencumbered immovable property / properties along with copies of supportive title deeds / documents, the court directed, adding, that if such properties were insufficient, WBIDC would be required to furnish cash security for the balance amount and, if necessary, secure the entire award through cash deposit.
The court also said any deposited amount would be kept in an interest-bearing fixed deposit with the State Bank of India pending adjudication of the Section 34 challenge.
While Sudipto Sarkar and Siddhartha Mitra, instructed by Avijit Deb Partners, represented Tata Motors, Kishore Dutta, who was advocate-general of the state till earlier this week, represented WBIDC.
All eyes would now be on the next legal move of WBIDC under the new BJP government which stormed to power in Bengal, ending the 15-year rule of Trinamool Congress. Tata had left Singur in the face of the violent agitation led by Mamata Banerjee’s Trinamool, then in Opposition in the state.
After coming to power in 2011, the Trinamool government cancelled the lease of the 997-acre land earmarked for the factory and decided to return the land to the owners.
In 2016, the Supreme Court declared the land acquisition process illegal and void, after the Mamata Banerjee-led state government and WBIDC themselves submitted before the apex court that the acquisition was unsustainable in law.
The findings directly undermined the representations and assurances based on which the lease was granted to Tata Motors, resulting in the acquisition and all consequential actions being rendered a nullity.
Accordingly, Tata Motors had invoked the arbitration clause contained in the
lease deed and sought compensation from WBIDC for all costs incurred by it which it could not recover even after the removal of its equipment and materials from Singur.
With the Trinamool Congress government now unseated, the BJP government will have to take a call on whether it wants to carry on litigating with Tata Motors or find an amicable solution to the decade long impasse.