The Calcutta High Court has refused to grant an unconditional stay on the Rs 765.78 crore arbitral award passed in favour of Tata Motors in its long-running dispute with the West Bengal Industrial Development Corporation (WBIDC) over the abandoned Singur Nano plant project.
The single-judge Bench of Justice Aniruddha Roy held that the allegations of bias raised by WBIDC against one of the arbitrators did not disclose any prima facie case of fraud or corruption warranting an unconditional stay under Section 36(3) of the Arbitration and Conciliation Act, 1996.
The Court directed WBIDC to secure the arbitral award amount within eight weeks either by furnishing details of unencumbered properties or by depositing cash security. It clarified that the arbitral award would remain stayed during this eight-week period to enable compliance with the direction. However, the Court stated that failure to furnish adequate security within the stipulated period would result in automatic vacation of the stay.
The High Court also dismissed WBIDC’s application seeking an unconditional stay of the award and imposed costs of Rs 50,000 payable to the West Bengal State Legal Services Authority.
The dispute arose from the Singur land acquisition project under which WBIDC had leased land to Tata Motors for the establishment of the Tata Nano manufacturing plant. The project was subsequently abandoned in 2008 following large-scale protests by farmers and political opposition led by the All India Trinamool Congress under the leadership of Mamata Banerjee. The Supreme Court later declared the land acquisition illegal and directed the restoration of land to the affected farmers.
In October 2023, a three-member arbitral tribunal awarded Rs 765.78 crore in compensation to Tata Motors for losses allegedly suffered due to the collapse of the Singur project. WBIDC subsequently challenged the arbitral award before the High Court and simultaneously sought an unconditional stay on its operation pending adjudication of the challenge proceedings.
WBIDC contended that the presiding arbitrator had participated in seven events connected with Tata Motors car launches, which allegedly demonstrated bias and compromised the neutrality of the arbitral proceedings. It was argued that such alleged bias amounted to fraud within the meaning of the second proviso to Section 36(3) of the Arbitration and Conciliation Act, which permits unconditional stay of an arbitral award where the award is induced or affected by fraud or corruption.
The High Court, however, rejected the contention and held that no material had been produced to establish any apparent bias, fraud or corruption affecting the arbitral award. The Court observed that judicial interference at the post-award stage requires existence of exceptional circumstances supported by cogent evidence and not mere inferences or speculative allegations.
The Bench further noted that the information relating to the alleged events was already available in the public domain and could reasonably be presumed to have been within WBIDC’s knowledge during the arbitral proceedings. Despite this, no objection had been raised before the arbitral tribunal prior to delivery of the award.
The Court also found that WBIDC had failed to place any conclusive material on record establishing that the disputed events had in fact been organised by Tata Motors or that the arbitrator’s participation compromised the integrity of the arbitral process.
Holding that no exceptional case had been made out for the grant of an unconditional stay, the Court directed the WBIDC Chairman or Managing Director to file an undertaking supported by a board resolution securing the entire award amount through unencumbered assets or cash deposit within eight weeks.
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