The Himachal Pradesh High Court overturned an order requiring the state to refund over Rs. 280 crore to Adani. In 2006, Brakel Corporation secured a bid to execute two power projects but failed to pay the up-front premium on time. Brakel eventually paid the amount with interest, using funds invested by Adani Power.
The Himachal Pradesh High Court recently annulled a single-judge ruling that mandated the State government to refund Rs. 280 crore to Adani Power Limited concerning two hydro-electric projects.
The division bench, comprising Justice Vivek Singh Thakur and Justice Bipin Chander Negi, determined that Brakel Corporation, the highest bidder for the projects, had secured the award through misrepresentation and suppression. Consequently, neither Brakel nor any party on its behalf had the right to claim the refund.
The Court stated,
“Brakel itself was not entitled to a refund; therefore, it was not competent to transfer any right to Adani to recover from the State,” effectively overturning the previous order.
In 2006, Brakel Corporation won the bid to implement power projects but failed to pay the up-front premium on time. Eventually, Brakel paid the amount with interest using funds from Adani Power after transferring 49 percent equity to the company.
Despite this, disputes between Brakel and the government persisted. Reliance Infrastructure, which 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 alter the consortium’s membership without government approval and had secured the award through misrepresentation and suppression of material facts.
After ongoing litigation, the State decided in 2015 to refund the upfront premium to Brakel Corporation without interest, contingent on Reliance Infrastructure paying the premium. However, in 2016, Reliance expressed its inability to continue with the projects.
Due to ongoing issues with the project’s execution, the State decided in 2017 to reverse its 2015 decision to refund the amount to Brakel. Adani challenged this decision in the High Court, which ruled in its favour in 2015. The State then appealed this ruling.
Upon review, the Court found that the 2009 decision had already cancelled Brakel’s allotment, making the upfront premium subject to forfeiture due to significant financial losses incurred by the State.
The Court noted that the Law Department‘s opinion that the State could not retain the upfront premium from two bidders invalid because the project’s allotment cancelled on November 3, 2009, and the pre-implementation agreement with Brakel, signed on April 9, 2009, rescinded due to Brakel’s misrepresentation and suppression of material facts.
Additionally, the decision to refund the upfront premium to Adani without interest was not final, as Reliance Infrastructure had withdrawn from the project, and the upfront premium was not realized from them.
The Court further stated that since no agreement was finalized between the State and Adani, Adani could not claim a refund.
The Court added,
“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 ongoing litigation involving the project,”
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Consequently, the Court overturned the single-judge’s decision and upheld 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.
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