Adani Power moves Supreme Court for ₹280 crore refund from Himachal Pradesh government

Adani Power Ltd has approached the Supreme Court seeking a refund of ₹280 crore from the Himachal Pradesh government in connection with the high-stakes 969-megawatt Jangi Thopan Power Project in Kinnaur district.

A Supreme Court bench comprising Justices M.M. Sundresh and Aravind Kumar is expected to hear Adani Power’s plea on Monday. 

The company is challenging a recent Himachal Pradesh High Court order that overturned a single-bench decision to refund the ₹280 crore premium related to the hydropower project.

On 18 July, the high court division bench, comprising Justices Vivek Singh Thakur and Bipin Chandra Negi, had set aside Adani Power’s refund claim following a challenge filed by the Himachal Pradesh government. This provided relief to the financially strained state government led by Chief Minister Sukhvinder Singh Sukhu.

How Adani Power got involved

The dispute began in 2005 when Himachal Pradesh invited global bids for two hydropower projects—Jangi Thopan and Thopan Powari, of 480 MW each. Brakel Corporation NV emerged as the highest bidder. 

Reliance Infrastructure Ltd offered to match the Netherlands company’s bid after Brakel failed to deposit the upfront premium, leading to a protracted legal battle. 

The state government issued a show-cause notice to Brakel, prompting the company’s subsidiary to deposit ₹173.43 crore. 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 Corp., had received ₹173.43 crore from the Adani Group to cover the upfront premium for the hydroelectric projects.

On 7 July, 2008 the Himachal Pradesh Cabinet issued another 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 the cancellation of the project allotment to Brakel and forfeiture of the upfront premium.

In a ministerial meeting on 4 September, 2015, the state law department advised that the state could not retain upfront premium money from two different parties for the same project, suggesting that a refund to Adani Power Ltd was necessary.

Adani Power, which was not initially part of the bidding process, sought to recover the upfront 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 Corp. for the two hydro projects in Kinnaur.

Adani Power 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. 

No lawful relationship

The High Court’s division bench ruled that since the amount in question was deposited after legal proceedings had commenced, any investment made during the legal proceedings was at the risk of the investor. Therefore, Brakel could not reclaim equity in its favour.

The division bench, while staying the earlier single-bench order, stated that Adani Power’s financial arrangement with Brakel lacked the required approval from the state government.

It also 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 necessary legal and procedural approvals, it added.

The court also highlighted that Adani Power attempted to join the consortium in a non-transparent manner, rather than through the legally acceptable process. It concluded that no lawful relationship existed between Adani and the state, and since Adani’s investment was made during ongoing litigation, it could not claim restitution or compensation from the state.

Ultimately, the High Court overturned the previous judgment, upheld the Himachal Pradesh government’s appeal, rejected Adani Power’s refund claim, and affirmed the forfeiture of the upfront premium.