Himachal Pradesh High Court sets aside order directing State to refund over ₹280 crore to Adani

The Himachal Pradesh High Court recently set aside a single-judge order directing the State government to refund an amount of ₹280 crore to Adani Power Limited in a matter related to two hydro-electric projects [The State Of Himachal Pradesh vs M/S Adani Power Limited]..The division bench of Justice Vivek Singh Thakur and Justice Bipin Chander Negi said that since Brakel Corporation, which had been the highest bidder for the projects, had won the award due to misrepresentation and suppression, it or anyone on its behalf could not have claimed the refund.“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 Court said, while setting aside the order..In 2006, Brakel Corporation had won the bid for implementation of the power projects but it failed to deposit the up-front premium in time. Brakel later paid the amount with interest on investment from Adani Power after it transferred 49 percent equity to the company.However, the issues between Brakel and the government continued even after that. Reliance Infrastructure, which had offered to match the bid of Brakel, also joined the fight against government’s decision to not cancel allotment made in favour of Brakel.The High Court in 2009 ruled that Brakel could not have changed the membership of the consortium without prior government approval. It also held Brakel had obtained the award on the basis of misrepresentation and suppression of material.However, after continuous litigation over the issue, the State in 2015 decided to refund the upfront premium to Brakel Corporation without interest but after payment of upfront premium by Reliance Infrastructure. In 2016, Reliance also expressed its inability to proceed with the projects..Since the issues continued with the execution of the project, the State in 2017 decided to withdraw its decision of 2015 to refund the amount to Brakel. Adani challenged the decision before the High Court which allowed its plea in 2015. The State challenged it in appeal.The Court examined the record and found that after the 2009 ruling, the allotment to Brakel itself stood cancelled and thus the upfront premium was liable to be forfeited as the State had suffered huge financial loss. “The opinion of the Law Department that the State cannot retain up-front premium from two bidders was not valid as in the case at hand the allotment of project in question was cancelled on 3.11.2009 and the pre-implementation agreement signed with Brakel on 9.4.2009 was rescinded due to mis- representation and suppression of material facts by Brakel. Other than the aforesaid, the decision to refund the up-front premium to Adani without interest had not attained finality as RIL had backed of from implementing the project in question and up-front premium was not realized from RIL,” it said..The Court further opined that since agreement was entered between the State and Adani, the latter could not have claimed refund.“A bonafide investor who should have done a due diligence is expected to be aware of the ground realities. In the case at hand Adani should have been aware of the litigation in which the project at hand was embroiled,” it addedIn this backdrop, the Court set aside the single-judge’s decision and allowed 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 with advocates Ajeet Pal Singh Jaswal, Vedhant Ranta and Malav represented the Adani Power..[Read Judgment]