Himachal Pradesh High Court Denies ₹280 Crore Refund To Adani Power In Hydro-Electric Projects Dispute

The Himachal Pradesh High Court has set aside its previous order directing the State to refund over ₹280 crore to Adani Power Limited in a Hydro-Electric Projects Dispute concluding that the financial arrangements made by Brakel Corporation with Adani Power were not approved by the State, violating the tender conditions and the Hydro Power Policy.Overturning the previous order, the court also stated, "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 decision, delivered by the division bench of Justice Vivek Singh Thakur and Justice Bipin Chander Negi ruled that Adani Power's financial deal with Brakel Corporation did not have the required approval from the State Government and that Brakel's misrepresentation and procedural errors, along with Adani's knowledge of the ongoing legal issues, together nullified their right to compensation.The dispute originated in 2005 when the State of Himachal Pradesh issued a global invitation for bids to implement these hydroelectric projects. Brakel Corporation emerged as the highest bidder, followed by Reliance Infrastructure Limited (RIL), which offered to match Brakel's bid after Brakel failed to deposit the upfront premium, leading to a protracted legal battle.The Government had issued a show-cause notice to Brakel Corporation, prompting Brakel's subsidiary to deposit ₹173.43 crore. This payment was opposed by Reliance Infrastructure Limited (RIL), which argued that Brakel had failed to deposit the upfront premium within the stipulated time.It was later found that Brakel Kinnaur Pvt. Ltd., a subsidiary of Brakel Corporation had received ₹173.43 crore from the Adani Group to pay the upfront premium for the hydro-electric projectsHowever, the court remarked that this financial arrangement lacked the required prior approval from the State Government, as mandated by the tender documents and Hydro Power Policy. It was observed, "In the tendered document as well as Hydro Power Policy, it had been made clear that members of the Consortium could not be changed without prior approval."On July 7, 2008, the Cabinet issued another show-cause notice to Brakel for misrepresentation and sought forfeiture of the upfront money due to the loss caused to the State. This led to the cancellation of the project allotment to Brakel and forfeiture of the upfront premium.Adani Power, not part of the original bidding process, sought to recover the upfront premium deposited with Brakel. Adani Power Limited argued that the State played a significant role in the case by failing to recognize and rectify Brakel Corporation's misrepresentation and procedural violations.Adani also contended that the State's actions in retracting the refund decision and forfeiting the upfront premium were unjust, as the State had benefited from the deposit made by Adani to Brakel.The court rejected Adani Power Limited's claims about the State's role, stating that the State acted appropriately within legal and procedural boundaries. It highlighted that the State issued a show-cause notice to Brakel Corporation for non-compliance with tender conditions and conducted thorough investigations.The court further justified the State's decision to forfeit the upfront premium by noting, "The State's decision was warranted due to the significant financial losses incurred from Brakel's misrepresentation and delays."The court also highlighted that Adani Power, while investing in Brakel, should have been aware of the ongoing litigation and bid conditions. It stated, "Adani chose a surreptitious route to becoming a member of the consortium rather than the legally acceptable mode."Adani Power Limited also invoked Section 70 of the Contract Act, which addresses compensation for non-gratuitous acts, arguing that their financial contribution to Brakel Corporation benefited the State and thus deserved compensation. They also cited Section 65, which deals with restitution in cases where agreements become void. However, the court found these claims untenable. It held that no lawful relationship existed between Adani and the State, as Adani's involvement did not follow the required legal and procedural steps. The court emphasized that Adani's investment was made at their own risk during ongoing litigation, and therefore, Adani could not claim restitution or compensation from the State under these provisions.The court referred to the precedent set in AIR 1962 SC 779, which established that Section 70 prevents “unjust enrichment” and applies to both individuals and the State. However, in this case, the court found that the State did not unjustly enrich itself but rather suffered losses due to the actions of Brakel.The Law Department in its opinion expressed during a meeting of the Council of Ministers held on September 4, 2015, ...

Himachal Pradesh High Court Denies ₹280 Crore Refund To Adani Power In Hydro-Electric Projects Dispute

LIVELAW NEWS NETWORK

Tags