The Himachal Pradesh High Court recently overturned a single-judge order directing the State government to refund ₹280 crore to Adani Power Limited in a matter concerning two hydro-electric projects [The State Of Himachal Pradesh vs M/S Adani Power Limited].
The division bench of Justice Vivek Singh Thakur and Justice Bipin Chander Negi ruled that since Brakel Corporation, the highest bidder for the projects, won the award through misrepresentation and suppression, neither Brakel nor anyone on its behalf could claim the refund.
“Brakel itself was not entitled to a refund, therefore, it was not competent to transfer any right to Adani to recover from the State,” the Court stated while overturning the order.
In 2006, Brakel Corporation won the bid for the power projects but failed to deposit the up-front premium on time. Brakel later paid the amount with interest, using investment from Adani Power after transferring 49 percent equity to the company.
However, issues between Brakel and the government persisted. Reliance Infrastructure, which had offered to match Brakel’s bid, also contested the government’s decision not to cancel Brakel’s allotment.
In 2009, the High Court ruled that Brakel could not change the consortium’s membership without prior government approval and that Brakel had obtained the award through misrepresentation and suppression of material facts.
After continued litigation, the State in 2015 decided to refund the upfront premium to Brakel Corporation without interest, conditional on Reliance Infrastructure paying the upfront premium. In 2016, Reliance expressed its inability to proceed with the projects.
As issues with the project execution continued, the State in 2017 withdrew its 2015 decision to refund Brakel. Adani challenged this decision before the High Court, which ruled in its favor in 2015. The State appealed this ruling.
The Court found that after the 2009 ruling, the allotment to Brakel was canceled, and thus the upfront premium was liable to be forfeited as the State had suffered significant financial loss.
“The opinion of the Law Department that the State cannot retain up-front premium from two bidders was not valid. In this case, the allotment of the project was canceled on November 3, 2009, and the pre-implementation agreement with Brakel was rescinded on April 9, 2009, due to misrepresentation and suppression of material facts by Brakel. The decision to refund the up-front premium to Adani without interest had not attained finality as RIL had backed out from implementing the project, and the up-front premium was not realized from RIL,” the Court said.
The Court further opined that since the agreement was between the State and Adani, Adani could not claim a refund.
“A bona fide investor who should have conducted due diligence is expected to be aware of the ground realities. In this case, Adani should have been aware of the litigation surrounding the project,” the Court added.
In this context, the Court set aside the single-judge’s decision and allowed the State’s appeal.
Advocate General Anup Rattan, Additional Advocates General Rakesh Dhaulta, Pranay Pratap Singh, and Deputy Advocate General Arsh Rattan represented the State.
Senior Advocates Vikram Nankani and Neeraj Gupta, along with advocates Ajeet Pal Singh Jaswal, Vedhant Ranta, and Malav, represented Adani Power.
