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The Supreme Court on Monday issued notice to the Himachal Pradesh government on a petition filed by Adani Power Limited seeking a refund of Rs 280 crore from the state in connection with two hydropower projects in Kinnaur district.
This comes after Adani Power moved the top court against a Himachal Pradesh High Court verdict by a two-judge bench that overturned an earlier verdict by a single-judge bench of the high court. On July 18, the Himachal high court ruled against the decision to return the amount of Rs 280 crore to Adani Power.
A bench of Justices M M Sundresh and Aravind Kumar issued notice to the Himachal government seeking its response to the petition filed by Adani Power.
What Is Hydro-Electric Projects Dispute Between Himachal Govt And Adani Power?
The case stems from the two hydro-electric projects in Kinnaur districts: Jangi Thopan and Thopan Powari of 480 MW each.
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In October, 2005 the Himachal government published an advertisement to invite bids for two new hydropower projects. In November 2005, the bid documents were issued. Brakel Corporation emerged the highest bidder followed by Reliance Infrastructure Limited (RIL).
In December, 2006, a letter of intent was issued by the Himachal government in favour of Brakel Corporation and directed the firm to sign the pre-implementation agreement and deposit the upfront premium.
However, Brakel failed to make its payments on time and take any steps to implement the projects. Later, Brakel transfered 49 per cent equity to Adani Power and the upfront premium was paid by Adani to the Himachal Government for the project.
Why Is Adani Power Seeking Refund?
After Brakel failed to deposit the upfront premium, the Himachal government issued a show-cause notice to Brakel. At that time Brakel’s subsidiary deposited Rs 173.43 crore. However, Reliance (the second highest bidder), vehemently opposed this deposit contending that Brakel had failed to deposit the upfront premium within the stipulated time.
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This sum was paid by Adani Power to Brakel Kinnaur Pvt. Ltd., a subsidiary of Brakel.
Ultimately, the project was shelved and in July, 2008, the Himachal cabinet issued a second show-cause notice to Brakel for misrepresentation of facts and sought forfeiture of the upfront money, citing losses incurred by the State. Adani Power, then sought to recover the upfront premium deposited with Brakel.
Adani Power argued that the state government was also to be blamed for failing to recognise Brakel Corporation’s misrepresentation and procedural violations. Adani Power has sought the refund with interest.
What The High Court Said?
The Himachal High Court pronounced its verdict against the refund of over Rs 280 crore to Adani Power while observing that the financial arrangements made between Brakel Corporation and Adani Power were not approved by the Himachal government, which were in violation of the tender conditions and the Hydro Power Policy. The high court found that this financial arrangement lacked the required prior approval from the Himachal government, as mandated by the tender rules and Hydro Power Policy.
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“Since the amount in question was deposited after legal proceedings had been initiated in Court, therefore, investment, if any, made during the pendency of legal proceedings was at their own risk and peril, therefore, Brakel could not claim any equity in its favour,” the high court ruled.
The high court said that Brakel sought release of the up-front premium to Adani, when Brakel itself was not entitled for a refund.
“Brakel nor anyone on its behalf could have claimed a refund. As was sought to be done by Brakel in the case at hand vide communication dated 24.8.2013 addressed to the Government of Himachal Pradesh whereby Brakel had sought release of the up-front premium in the case at hand to Adani. In other words, in the given facts and circumstances, Brakel itself was not entitled for a refund, therefore, it was not competent to transfer any right to Adani to recover from the State,” the high court noted in its verdict.
The high court further justified State’s decision to forfeit the amount due to the significant financial losses incurred from Brakel’s misrepresentation and delays.
Adani Power has moved the Supreme Court against this high court order.
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