The Supreme Court agreed on Monday to hear a plea by Adani Power Ltd seeking a refund of ₹280 crore from the Himachal Pradesh government in a case related to the 960-megawatt Jangi Thopan Power Project in Kinnaur district.
A bench of Justices M.M. Sundresh and Aravind Kumar issued a notice to the state government but declined to stay a recent order of the Himachal Pradesh High Court overturning a single-bench’s decision to refund the ₹280 crore premium associated with the hydropower project. The company has challenged the high court’s order.
The high court's division bench, including Justices Vivek Singh Thakur and Bipin Chandra Negi, set aside Adani Power's refund claim on July 18, after the state government challenged it. The ruling provided relief to the financially strained state government led by chief minister Sukhvinder Singh Sukhu.
The Himachal Pradesh government invited global bids in 2005 for two hydropower projects of 480 MW each—Jangi Thopan and Thopan Powari. Brakel Corporation NV emerged as the highest bidder. After Brakel failed to deposit the upfront premium, Reliance Infrastructure Ltd offered to match the Netherlands company’s bid.
The state government issued a show-cause notice to Brakel, prompting the company’s subsidiary to deposit ₹173.43 crore as the upfront premium in January 2008. Reliance Infra opposed this payment, arguing that Brakel had missed the deadline.
It was later revealed that Brakel Kinnaur Pvt Ltd, a subsidiary of Brakel, received ₹173.43 crore from the Adani Group to cover the upfront premium.
On 7 July 2008, the Himachal Pradesh cabinet issued a show-cause notice to Brakel for misrepresentation and sought forfeiture of the upfront money due to the loss incurred by the state. This led to cancellation of the project allotment to Brakel and forfeiture of the premium.
Adani Power sought to recover the premium deposited with Brakel by filing a writ petition in the Himachal Pradesh High Court in 2019. The company sought a refund of ₹280.06 crore, plus interest, citing payments made on behalf of Brakel for the projects.
The company argued that the state’s failure to address Brakel’s misrepresentation and procedural violations justified their claim for compensation. It invoked Section 70 of the Contract Act, which deals with compensation for non-gratuitous acts, and Section 65, which pertains to restitution when agreements become void.
The high court’s single-bench order in April 2022 initially favoured Adani Power, directing the Himachal Pradesh government to refund the amount.
The division bench, while staying the earlier single-bench order, stated that Adani Power’s financial arrangement with Brakel lacked approval from the state government. It noted that Brakel’s misrepresentation and procedural errors, combined with Adani’s awareness of ongoing legal issues, invalidated their right to compensation. Adani Power’s financial dealings with Brakel were conducted without the legal and procedural approvals, it added.
The court highlighted that Adani Power attempted to join the consortium in a non-transparent manner rather than through a legally acceptable process. It concluded that no lawful relationship existed between Adani and the state.
Ultimately, the high court overturned the previous judgement, upheld the Himachal Pradesh government’s appeal, rejected Adani Power’s refund claim, and affirmed the forfeiture of the upfront premium.
