The Two Adani Group Cases Being Questioned By Dushyant Dave

Two cases involving the Adani Group were listed out of turn before the vacation bench of the Supreme Court of India, Senior Advocate and former Supreme Court Bar Association President Dushyant Dave alleged in a letter last week to the Chief Justice of India Ranjan Gogoi. The cases were heard, by a vacation bench headed by Justice Arun Mishra, “in complete contravention of the settled practice of the Supreme Court, as also its established Procedure,” Dave said. His letter also refers to two other Adani Group related cases decided by benches on which Justice Mishra sat.

The Adani Group said in a statement that the “insinuations made regarding the four matters of Adani Group are wholly unwarranted”.

The two cases that Dave highlighted in detail are described here below, based on the Supreme Court’s judgments.

Parsa Kente Collieries Vs Rajasthan Rajya Vidyut Utpadan Nigam

The first case which Dave in his letter refers to involves Parsa Kentea Collieries Ltd. in which one of the partners is Adani Enterprises Ltd. Parsa Kente is an Adani Group joint venture.

In 2008, Parsa Kente had entered into a contract with Rajasthan Vidyut Utpadan Nigam Ltd. to undertake mining and delivery of coal. As per the agreement, the supply of coal was to start from Jun. 25, 2011 but it began after a delay of 21 months.

Subsequently, disputes arose between the parties and arbitration, headed by a retired Rajasthan High Court judge, resulted in an award in favour of Parsa Kente. The arbitrator held that Parsa Kente was justified to supply coal at an escalated price instead of the prices agreed to for supply in 2011. This since the reasons for the delay - force majeure - were not in control of Parsa Kente. The arbitrator also held that Rajasthan Vidyut Utpadan Nigam had failed to accept the delivery of coal which led to losses for Parsa Kente and ordered payment of Rs 78 crore in favour of Parsa Kente.

The agreement between the two companies also provided for money to be deducted from the running bills of Parsa Kente to ensure implementation mine closure activities. Mine closure activities are measures which have to be undertaken to ensure the land is returned to its original form after the mining activity has ended. Exercising its right, Rajasthan Vidyut deducted this money from the escrow account. The arbitrator found no valid ground for such a move and ordered the money to be returned to Parsa Kente.

In February 2018, hearing the appeal against the award, the Rajasthan High Court set aside the arbitral award on grounds of it being against the public policy of India. The case then landed up in the Supreme Court where the first hearing took place in July 2018 in front of a bench headed by Justice Rohinton Nariman and Justice Indu Malhotra. A month later, the apex court agreed to hear the appeals against the high court judgement.

Next, on March 2019, registrar AK Goel passed an order to ‘’list the matter before the Hon’ble Court as per rules’’

The case then came up for hearing, while the court was on summer break, in front of a vacation bench headed by Justice Arun Mishra and Justice MR Shah on May 22 and the case was reserved for judgment on May 23.

During the hearing, Parsa Kente argued that the high court exceeded its jurisdiction since the Arbitration Act allows very limited scope for judicial review of arbitral awards and the case did not offer scope for interference by the court.

On May 27, the Supreme Court delivered its judgment and partially upheld Parsa Kente’s claim by allowing the supply of coal at an escalated price. But the apex court rejected Parsa Kente’s claims on fixed cost and deductions made in the escrow account.

The Supreme Court noted that the arbitrator cannot be questioned for concluding that the delay in commencement of supply of coal was done by mutual agreement and was a result of factors which were not in control of Parsa Tente. It agreed with the arbitrator’s conclusion that the agreement did not specify that the coal being supplied in 2013 would be done at the price agreed for the year 2011. The arbitrator’s wisdom in interpreting the contract cannot be called into question and the Rajasthan High Court exceeded its jurisdiction by setting aside the award on that ground, the Supreme Court said.

However, the apex court agreed with the high court judgment that there was no evidence to show that Parsa Kente had suffered losses as a result of Rajasthan Urja’s failure to accept the coal delivery. The court noted that the coal delivery accepted by Rajasthan Urja was in fact higher than the agreed quantity. The deduction of money from the escrow account was also held valid and thus the arbitrator’s ruling on that point was set aside. The top court partially upheld the arbitral award on one count while rejecting the damages granted for the remaining points of dispute.

Dave in his letter has alleged that the case was not ready to be heard, as evident from an earlier order of the Registrar of the court, but was listed, heard and disposed by a summer bench constituting Justices Arun Mishra and MR Shah. Dave alleged that other counsels appearing in the matter were not informed.

Adani Power Vs Gujarat Electricity Regulatory Commission

The second case mentioned by Dave in his letter to the Chief Justice of India is almost a decade old, relating to termination of the Power Purchase Agreement by Adani Power with Gujarat Urja Vikas Nigam Ltd.

Adani Power had agreed to supply 1,000 MW power to Gujarat Urja Vikas Nigam from its Chhattisgarh plant and a PPA was agreed upon by the two parties. The agreement was later modified to the effect that power would be supplied by Adani Power from the Mundra plant in Gujarat instead of Chhattisgarh.

But later, in 2009, Adani Power terminated the contract on grounds that it had failed to secure the required coal from Gujarat Mineral Development Corporation and this was the basis on which it had entered the contract. Adani Power contented that it regularly communicated with the Gujarat government to ensure coal is supplied by GMDC to the plant, but on failure of all the efforts, it had to terminate the contract.

Gujarat Urja Vikas Nigam then approached the Guajrat Electricity Regulatory Commission, which ruled in its favour and termed the termination illegal and asked Adani Power to continue supplying electricity to Gujarat Urja Vikas Nigam as per the PPA terms. The appellate tribunal upheld the ruling given by the GERC and the case came to the Supreme Court in 2012.

Adani Power also filed an application for interim relief in which it sought compensatory tariff for the supply of power made by it post the termination of the agreement. In 2015, a bench headed by Justice Chelameswar held that the option to pay compensatory tariff - while the appeal on termination of the agreement was pending in the Supreme Court - was the procurer’s prerogative and the court cannot pass such orders.

Post the hearing for interim relief, the appeal next came up for hearing in September 2016 and was adjourned for eight weeks. After another adjournment on Jan. 12, 2017, the case came up in February 2017 when the bench headed by Justice J Chelameswar passed orders to list the case for hearing after a week. However, since then, barring an in-chamber hearing on a procedural issue, the case did not come up for hearing until this summer when the vacation bench of Justices Arun Mishra, BR Gavai and Surya Kant took up the case for hearing on May 23, 2019. The bench passed orders to list the case next day and the judgment was reserved on May 24, 2019.

In its judgment, authored by Justice BR Gavai, the Supreme court held the termination of the agreement by Adani Power to be valid. It said that ‘’in the bid dated 2.01.2007 submitted by the appellant, it is clearly mentioned that the project is based on coal supply from the GMDC’’ and that Adani power was justified to terminate the contract. The court held that the Power Purchase Agreement will be considered to have been terminated from Jan. 4, 2010.

The court, however, did not rule on the Adani Power’s demand for compensatory tariff since it continued to supply power after termination of the agreement to abide by GERC’s ruling. GERC has been directed to decide on the question of compensatory tariff within three months keeping in mind the judgment of the Supreme Court.