New Delhi: Senior advocate Dushyant Dave on Friday alleged that two legal cases before the Supreme Court concerning the Adani Group were listed for hearings recently without following proper court procedure.
In his letter to Chief Justice Ranjan Gogoi, the lawyer noted that it was important that existing and pre-established rules be followed, because the benefit of favourable judgements to the Ahmedabad-based corporate house could run into “thousands of crores”.
In a statement, the Adani Group has referred to the letter as “misconceived and malicious statements” and noted that both matters were listed in a proper manner.
But what are these two cases? And which way did the Supreme Court decide? The Wire breaks it down.
Judgement 1: Power supply woes
The first is nearly a ten-year-old legal matter called M/s Adani Power (Mundra) Ltd. vs Gujarat Electricity Regulatory Commission and Ors.
The case revolves around a power supply contract that the Adani Group signed with the state-run Gujarat Urja Vikas Nigam (GUVNL) in 2007 and then terminated later in 2009-2010.
GUVNL is a holding company that houses a number of public sector companies that comprise the state’s generation, transmission and distribution network.
Adani Power says that its bid to supply power to GUVNL was based on an assurance given by another state-run entity, the Gujarat Mineral Development Corporation (GMDC), that it would supply 4 million tonnes of coal to the company. This coal, Adani Power says, was never supplied by the GMDC.
As a result, because a fuel supply agreement could not be worked out, Adani terminated the power purchase agreement (PPA) with GUVNL with effect from January 4, 2010.
GUVNL, however, appears to have not accepted this justification and sent a letter to Adani Power shortly thereafter, calling upon it to withdraw the termination notice. The company, in turn, refused and asserted that its termination of the PPA was valid.
GUVL then dragged Adani Power to the state electricity regulatory commission for adjudication. The commission, in its order dated August 2010, held that Adani’s termination was illegal and directed the company to supply power to GUVNL at the rate determined in the contract.
Adani then moved the Appellate Tribunal for Electricity, where its appeal was dismissed in September 2011. Consequently, the Supreme Court was moved in 2012.
On July 2, 2019, a three-judge bench of Justice Arun Mishra, Justice B.R. Gavai and Justice Surya Kant delivered a verdict firmly in favour of Adani Power, noting that the Appellate Tribunal had “erred both on facts and in law”.
“We are of the considered view that the appellant was entitled in law as well as on facts to invoke Article 3.4.2 of the PPA and terminate the agreement,” the judgement reads.
The apex court not only ruled that the termination was legally valid but that Adani Power would be entitled to seek “compensatory tariff” as it had continued to take the project to its “logical end” by supplying electricity to the procurer (GUVNL) in compliance with the orders passed by the state electricity regulatory commission and the Appellate Tribunal.
“The appellant must have incurred huge expenditure on the same [supplying electricity]. In order to do economic justice, on the principle of business efficacy, the appellant would be entitled for adjustment of cost of the project and would also be entitled to the interest on the expenditure incurred by it for completion of the project. The expenditure towards running of the project after obtaining the coal from the open market would also be required to be taken into consideration,” the bench noted in its order.
Judgement 2: Coal supply woes
The second case is called Parsa Kenta Collieries Ltd vs Rajasthan Rajya Vidyut Utpadan Nigam Ltd and pertains to a 2006 contract for coal block development, mining and transportation of coal in Rajasthan.
In October 2010, Adani Enterprises Ltd received a letter of intent from Rajasthan Rajya Vidyut Utpadan Nigam Ltd (RRVUNL), a state-run electricity generation company, for a coal mining and delivery agreement. Both parties entered into a joint venture – Parsa Kente Collieries Ltd – to give effect to this agreement.
While the contract said that the date of commencement was June 25, 2011, it appears that there was a delay of over 20 months in obtaining clearances and that the supply of coal from Parsa Kenta to RRVUNL only started in March 2013. While the new date of commencement was approved by mutual agreement, it appears both Adani Enterprises and RRVUNL had disagreements over four main issues (escalation price, fixed costs etc) that stemmed from the delay.
Both parties sought arbitration, in the form of a retired judge of the Rajasthan high court. According to the case facts, the arbitrator appears to have found in Adani’s favour for three out of the four counts. This award was then confirmed by the Commercial Court, Jaipur.
Feeling aggrieved, RRVUNL then approached the Rajasthan high court’s commercial appellate court/division bench at Jaipur, where it allowed the appeal and set aside the award passed by the arbitrator and confirmed by the Commercial Court, Jaipur.
Consequently, Adani then approached the Supreme Court for appeal. In May 2019, a two-judge bench comprising Justice Arun Mishra and Justice M.R. Shah found some merit in Adani’s appeal by setting aside parts of the Rajasthan high court order on one claim, but upholding with it regard to two other claims.
Adani Group’s response
When asked for comment, the Adani Group issued a statement noting that it “misconceived and malicious statements are being made against the Hon’ble Apex Court and our company” without “proper verification”.
A spokesperson noted:
“The letter of Mr Dave has come to our notice. It is unfortunate that misconceived and malicious statements against the Hon’able Apex court and our company are made without proper verification. The arbitration matter was in the list of vacation matters and came for hearing in normal course. It was as per the procedure prescribed for listing in vacation. It was prescribed that arbitration matters which require to be adjudicated expeditiously can be listed with consent of parties to the case- which was done. Mr Dave had in this matter himself appeared for us before Hon’ble Rajasthan high court. The power matter was listed pursuant to application for urgent hearing after due notice to the opposite side advocates. The insinuations made regarding the 4 matters of Adani group are wholly unwarranted.”