EMD is independent of the PPA and must be refunded following governmental withdrawal of approval; its retention constitutes unjust enrichment under Article 300A.

ORDER :

K.S. HEMALEKHA, J.

The petitioner- M/s. Hassan Thermal Power Private Limited has approached this Court seeking a writ of mandamus directing respondent No.1-Power Company of Karnataka Ltd. (PCKL) to refund a sum of Rs. 1,00,00,000/- (Rupees One Crore) deposited by it as Earnest Money Deposit (EMD) on 28.11.1998, together with interest at 12% per annum from 12.04.2016, the date on which the Government of Karnataka withdrew its approval to the proposed Power Purchase Agreement (PPA).

Brief Facts:

2. The petitioner is a company duly incorporated under the provisions of the Companies Act, 1956. It was originally incorporated under the name M/s. Euro India Power Canara Private Ltd. and had its registered office at Bengaluru, with its administrative office situated at New Delhi.

3. The Government of Karnataka, represented by respondent No.2, by its order dated 05.03.1996, acting through the then Karnataka Electricity Board (KEB), the predecessor in contract to the present Karnataka Power Transmission Corporation Ltd., (KPTCL) granted permission to M/S. Euro Kapital A.G. (‘M/s. AG’ for short) to establish a Low Sulphur Heavy Stock (LSHS)-based barge-mounted-power plant of 1x150 MW capacity on the Mulki River near Mangaluru in Udupi District.

4. However, M/s. AG was subsequently declared bankrupt and became subject to legal proceedings, thereby jeopardizing the execution of the project. In the wake of these developments, respondent No.2 noted that two entities M/s. Euro India Power Canara Private Ltd. (the petitioner herein) and M/s. Euro India Energy Ltd. had raised rival claims to succeed to the rights conferred on M/s. A.G. in relation to the said project.

5. To ensure fairness and transparency, the Karnataka Electricity Board (KEB), in consultation with the Government, decided to afford both companies an equal opportunity to establish their respective entitlements. Consequently, by Government letter dated 31.10.1998, both companies were directed to deposit a sum of Rs. 10,00,00,000/- (Rupees Ten Crores) each by way of a demand draft drawn in favour of the Chairman, Karnataka Electricity Board (KEB) within 30 days from the date of said communication. It was categorically stated that the failure to comply with the said condition would render the concerned entity ineligible for further consideration of its claim.

6. In response, M/s. Euro India Energy Ltd., by its letter dated 21.09.1998, expressed its inability to furnish the required deposit within the stipulated period. In contrast, the petitioner-M/s. Euro India Power Canara Pvt. Ltd. by its letter dated 26.09.1998, submitted a bank guarantee for USD 2.38 million (approximately Rs. 10.11 crores), which was duly acknowledged by the Chairman of the Karnataka Electricity Board (KEB).

7. However, since the Government's directive dated 31.10.1998 specially required the deposit to be made by demand draft, the petitioner's compliance by furnishing a bank guarantee was taken up for further consideration. Subsequently, by letter dated 23.10.1998, the petitioner conveyed his willingness to deposit an additional amount of Rs. 1,00,00,000/- in cash, in line with the mode adopted for similarly power projects.

8. Pursuant to the petitioner's communication dated 23.10.1998, the Government of Karnataka, after considering the rival submissions, decided to recognize the petitioner's initiative and financial readiness to undertake the project, the petitioner thereafter deposited Rs. 1,00,00,000/- by demand draft dated 28.11.1998, which was accepted and acknowledged by the Karnataka Electricity Board (KEB).

9. Thereafter, by the Government Order dated 05.03.1999, the petitioner was formally permitted to proceed with the project, and concerned authorities were directed to take further steps to facilitate its implementation. Following the reorganization of the power sector, the Karnataka Power Transmission Corporation Ltd. (KPTCL), and subsequently, the Power Company of Karnataka Ltd. (PCKL), became the s