Calcutta High Court Temporarily Stays Arbitral Award In Tata Nano Singur Land Acquisition Dispute

The Calcutta High Court on Thursday (May 7) temporarily stayed for eight weeks the enforcement of a ₹765.78 crore arbitral award passed in favour of Tata Motors Ltd against the West Bengal Industrial Development Corporation Ltd (WBIDC) in the dispute over the acquisition of land in Singur for Tata's Nano factory.

An arbitral tribunal had, on October 30, 2023 directed WBIDC to pay Tata Motors ₹765.78 crore with interest at 11% per annum.

Justice Aniruddha Roy granted an unconditional interim stay on operation and enforcement of the award. The Court clarified that the stay would automatically stand vacated after eight weeks if WBIDC failed to either furnish an undertaking securing the award amount or deposit the directed cash security.

“There shall be an unconditional stay of the impugned award till eight weeks from date. Thereafter, if the undertaking is not filed before the Registrar, Original Side or the cash security is not deposited as the case may be, as directed herein, within the said period of eight weeks, the stay will automatically be vacated.”, it held.

The court directed WBIDC to furnish an undertaking through its Managing Director or Chairman, supported by a valid board resolution, securing the entire principal and interest amount payable under the award to the satisfaction of the Registrar, Original Side.

“After calculating the entire principal and interest amount under the impugned award as on today subject to the satisfaction of the Registrar, Original Side, the applicant/award-debtor is directed to furnish an undertaking by way of an affidavit through its managing director or chairman, as the case may be, with the supportive current board resolution in accordance with law.”

The dispute arose from the acquisition of land in Singur for Tata Motors' Nano car manufacturing plant. WBIDC had allotted land to Tata Motors in 2006 for setting up the unit in West Bengal. Tata Motors withdrew the project from Singur in 2008 following protests over land acquisition and shifted the plant to Gujarat.

The Supreme Court later declared the land acquisition illegal and ordered return of land to farmers. Disputes thereafter arose between Tata Motors and WBIDC over losses and investments linked to the abandoned project. The disputes were referred to arbitration before a three-member tribunal.

WBIDC challenged the award and sought an unconditional stay on its operation. It alleged bias against the presiding arbitrator. WBIDC claimed the arbitrator attended several Tata Motors or dealer-linked vehicle launch events during the arbitration proceedings without disclosures under Section 12 of the Arbitration and Conciliation Act.

The state argued that the conduct amounted to fraud. It contended this justified mandatory unconditional stay under Section 36(3) of the Act.

The Court rejected the contention. It held the allegations of bias and non-disclosure required detailed examination in the pending Section 34 proceedings. The Court further held WBIDC failed to establish a prima facie case of fraud within the meaning of the second proviso to Section 36(3) of the Act.

The Court also held that no exceptional circumstances existed to justify an unconditional stay of the award pending final adjudication of the Section 34 challenge.

“In view of the foregoing discussions and reasons, this Court holds that there is no prima facie case made out to arrive at a finding of fraud as alleged by the award-debtor within the meaning and scope of the Second proviso to sub-Section (3) to Section 36 of the Arbitration Act. This Court is also of the firm and considered view and holds that there is no exceptional case for which the impugned award can be stayed unconditionally.”

The Court also imposed costs of ₹50,000 on WBIDC payable to the West Bengal State Legal Services Authority.