Karnataka High Court
M/S Hassan Thermal Power Private ... vs The Power Company Of Karnataka Ltd ... on 6 November, 2025
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NC: 2025:KHC:44928
WP No. 19513 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF NOVEMBER, 2025
BEFORE
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
WRIT PETITION NO.19513 OF 2025 (GM-KEB)
BETWEEN:
M/S. HASSAN THERMAL POWER PRIVATE LIMITED,
PREVIOUSLY KNOWN AS EURO INDIA
POWER CANARA PVT. LTD.,
HAVING ITS ADMINISTRATIVE
O/AT: S-327, GREATER KAILASH-II
NEW DELHI-110 048.
REPRESENTED BY ITS DIRECTOR
SMT. NALINI VIJAY KUMAR,
W/O. VIJAY KUMAR
AGED ABOUT 68 YEARS,
A COMPANY REGISTERED UNDER
SECTION 21 OF COMPANIES ACT.
...PETITIONER
Digitally signed by (BY SRI RAMESH KUMAR NAROOLA, ADVOCATE FOR
MAHALAKSHMI B M
Location: HIGH SMT. DEEPA V., ADVOCATE)
COURT OF
KARNATAKA
AND:
1. THE POWER COMPANY OF KARNATAKA LTD. (PCKL)
CORPORATE OFFICE, KPTCL BUILDING,
KAVERI BHAVAN, 5TH FLOOR,
K.G. ROAD, BENGALURU-560 009.
REP. BY MANAGING DIRECTOR.
2. STATE OF KARNATAKA,
DEPARTMENT OF ENERGY,
O/AT: ROOM NO.236, 2ND FLOOR,
VIKASA SOUDHA,
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WP No. 19513 of 2025
HC-KAR
DR. B.R. AMBEDKAR STREET,
BENGALURU-560 001.
REP. BY ADDITIONAL CHIEF SECRETARY.
...RESPONDENTS
(BY SRI SRIRANGA S., SENIOR COUNSEL FOR
SMT. SUMANA NAGANAND, ADVOCATE FOR R-1;
SRI RAJ KUMAR M., AGA FOR R-2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO DIRECT
DIRECTING THE RESPONDENTS TO FORTHWITH REFUND THE
EARNEST MONEY DEPOSIT AMOUNTING TO `1,00,00,000/-
(RUPEES ONE CRORE ONLY) DEPOSITED BY THE PETITIONER,
ALONG WITH INTEREST AT THE RATE OF 12% PER ANNUM
FROM 12.04.2016 TILL THE DATE OF ACTUAL REFUND AND
EXEMPLARY COMPENSATION FOR UNJUSTIFIABLE, UNFAIR
AND UNREASONABLE RETENTION, VIDE ANNEXURE-B AND
ETC.
THIS PETITION COMING ON FOR ORDER, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MRS. JUSTICE K.S. HEMALEKHA
ORAL ORDER
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 `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 -3- NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR 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-
NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR
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 `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 -5- NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR 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 `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 `1,00,00,000/- in cash, in line with the mode adopted for similarly power projects. -6-
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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 `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 successor entities to the rights and obligations of the erstwhile KEB in respect of such projects.
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10. The petitioner continued to pursue the project in accordance with the approval granted, and a Power Purchase Agreement (PPA) was entered into between the petitioner and the Karnataka Power Transmission Corporation Ltd. (KPTCL) On 22.04.1999. It is the specific contention of the petitioner that the said PPA does not contain any clause relating either to the deposit, forfeiture or refund of the Earnest Money Deposit (EMD) of `1,00,00,000/- made on 28.11.1998 and hence, the aid amount stood outside the scope of PPA.
11. Subsequently, the petitioner's project faced several regulatory, administrative and environmental hurdles. The Government of Karnataka through various communications between 2006 and 2015, reviewed the feasibility and status of the project. It is asserted that throughout this period, the respondents continued to acknowledge the subsistence of EMD, as evidenced by communications dated 09.02.2007, 05.05.2015, -8- NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR 04.06.2016, and 07.04.2017, wherein the respondent- authority sought and confirmed details of the said deposit.
12. However, by Government Order dated No.EN 14 PPC 2011 dated 11.04.2016, the Government of Karnataka withdrew its approval granted to the Power Purchase Agreement (PPA) entered into with the petitioner, thereby terminating the project. The petitioner contends that upon such withdrawal, the respondents ceased to have any lawful authority to retain the said Earnest Money Deposit (EMD) and the same became immediately refundable.
13. Despite repeated representations, including letters dated 21.02.2025, 26.03.2025 and legal notice dated 17.04.2025, the petitioner's request for refund of the EMD was not acceded to. The petitioner has, therefore, been left with no option but to approach this Court seeking issuance of writ of mandamus directing the respondents to refund the EMD of `1,00,00,000/- along with interest at -9- NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR the rate of 12% per annum from 12.04.2016 being the date of withdrawal of the BDA approval.
14. Heard Sri Ramesh Kumar Naroola, learned counsel for Smt. Deepa .V, learned counsel appearing for the petitioner, Sri Sriranga .S, learned senior counsel for Smt. Sumana Naganand, learned counsel for respondent No.1 and Sri Raj Kumar .M, learned counsel for respondent No.2.
Contention of the petitioner:
15. Learned counsel appearing for the petitioner submits that i. The Earnest Money Deposit (EMD) of `1,00,00,000/- (Rupees One Crore) deposited on 28.11.1998 was made pursuant to the direction issued by the Government of Karnataka and the Karnataka Electricity Board (K.E.B.) to establish the petitioner's bonafides and readiness to undertake the power project.
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR The said deposit was duly acknowledged and accepted by the competent authority.
ii. It is contended that the subsequent Power Purchase Agreement (PPA) executed on 22.04.1999 between the petitioner and the Karnataka Power Transmission Corporation Ltd. (KPTCL) does not contain any reference to the said EMD, nor does it stipulates any terms of forfeiture or adjustment. Hence, the EMD is independent of the contractual framework of the PPA, and its refund is governed purely by principles of fairness, integrity and fiduciary obligation.
iii. It is contended that the withdrawal of approval of the BDA by the Government order dated 11.04.2016 resulted in the automatic cessation of the project, and consequently, the respondents ceased to have any authority to retain the said deposit. The continued retention of the EMD amounts to arbitrary deprivation of property in violative of Article 300A of the Constitution of
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR India and also amounts to unjust enrichment by the Public Authority.
iv. The petitioner asserts that the present petition is within limitation and that the claim constitutes a continuous cause of action under Section 22 of the Limitation Act, 1963 ('Limitation Act' for short), as every day of retention of the petitioner's deposits amounts to a fresh breach of legal duty.
v. In any event, it is submitted that the petitioner has bonafidely pursued remedies before various forums including arbitration, appellate and regulatory bodies and therefore, the period spent before such forum is liable to be excluded under Section 14 of the Limitation Act.
vi. With regard to the objections on the maintainability and alternate remedy, it is contended that the present dispute does not fall within the purview of Section 86 (1) (f) the Electricity Act, 2003 ('Electricity Act' for short) as it does not pertain to tariff fixation, generation or licensing issues, but rather to the refund of
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR a deposit wrongly retained by a State instrumentality. It is submitted that the Karnataka Electricity Regulatory Commission (KERC) has no jurisdiction to adjudicate such a claim, as it involves constitutional and judiciary questions under Articles 14 and 300A of the Constitution.
vii. Learned counsel relies upon the principles enunciated in the case of Whirlpool Corporation Vs. Registrar of Trademarks1 (Whirlpool Corporation) and M/s. Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer-cum-Assessing Authority and others2 (Godrej Sara Lee) to submit that the availability of an alternative remedy is not an absolute bar to exercise the jurisdiction under Article 226 of Constitution, particularly when the State's action is arbitrary, without jurisdiction or in violation of the fundamental Constitutional rights.
viii. He further relies upon the judgment of this Court in the case of Hassan Thermal Power Private 1 (1998) 8 SCC 1 2 AIR 2023 SCC 781
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR Limited Vs. Karnataka Industrial Areas Development Board and another3, wherein this Court directed refund of deposits made in similar circumstances with interest at the rate of 6% per annum, which order was affirmed by the Division Bench and by the Apex Court. It is submitted that the same principle applies to the present facts. Contention of the respondents:
16. Per contra, learned senior counsel appearing for respondent No.1-Power Company of Karnataka Ltd.
(P.C.K.L.) in support of statement of objections submits that:
i. The present petition is not maintainable either in law or on facts.
ii. The Electricity Act provides a specialized statutory mechanism for adjudication of disputes between licensing and the generating companies under Section 86 (1) (f) of the Electricity Act, vesting such jurisdiction in the Karnataka Electricity Regulatory Commission, (KERC). 3
W.P. No.20598/2022 D.D. 07.06.2024
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR Therefore, the petitioner being a generating company must approach the KERC for its claim and the invoking the writ petition under Article 226 of the Constitution is impermissible.
iii. He further points out that the petitioner itself has already approached the KERC by filing O.P. No.12/2025, seeking reference of its dispute to arbitration under Sections 86 (1) (f) read with Section 158 of the Electricity Act, and therefore, the petitioner cannot simultaneously maintain the present writ petition.
iv. Learned senior counsel raised a preliminary objection on the ground of delay and laches as well, asserting that the claim pertains to the events of 2016, whereas the writ petition has been filed only in 2025, after an inordinate delay of 09 years. It is contended that such stale claims cannot be entertained under writ jurisdiction, especially when no plausible explanation for delay has been explained.
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR v. Learned Senior Counsel relies on catena of judgments including State of Tamil Nadu Vs. Seshachalam4 (Seshachalam), Union of India Vs. M.K. Sarkar5 (M.K. Sarkar) and Union of India and others Vs. Chaman Rana6 (Chaman Rana) to contend that the delay and laches disentitled the petitioner from discretionary relief under Article 226.
vi. It is further submitted that EMD in question was in the nature of performance security, linked to the obligation of the petitioner under PPA, since the petitioner failed to execute or commission the project, the respondents were justified in retaining the deposit. It is contended that even assuming any liability exists, the same is barred by limitation and in any event, as the petitioner has already invoked the statutory mechanism under the Electricity Act, this Court ought to decline to exercise its extraordinary jurisdiction and direct the 4 (2007) 10 SCC 137 5 (2010) 2 SCC 59 6 (2018) 5 SCC 798
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR petitioner to pursue the proceedings before the Competent Regulatory Authority.
17. This Court has carefully considered the rival contentions urged by the learned counsel for the parties and on careful examination of the contentions, pleadings and the documents produced, the following points arise for consideration:
"i. Whether the present writ petition is maintainable in view of the alternative statutory remedy available under Section 86 (1) (f) of the Electricity Act before the Karnataka Electricity Regulatory Commission (KERC)?
ii. Whether the petitioner has established its entitlement to refund of the Earnest Money Deposit (EMD) of `1,00,00,000/- deposited on 28.11.1998?
iii. Whether the petition is affected by delay and laches?"
Point No.1:
18. It is an admitted fact that the petitioner is a generating company and that respondent No.1-Power
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR Company of Karnataka Ltd. (PCKL), is the successor-in- interest to the erstwhile Karnataka Electricity Board (KEB). The respondent specifically contends that the dispute falls within the jurisdiction of KERC under Section 86 (1) (f) of the Electricity Act, as it pertains to the power purchase agreement. This Court is unable to accept this contention for the following reasons:
i. The EMD of `1,00,00,000/- was deposited on 28.11.1998. Several months prior to the execution of the PPA dated 22.04.1999. The PPA does not contain any clause relating to the deposit or its forfeiture or refund.
The EMD does not arise from the PPA and does not fall within the regulatory domain of KERC. Section 86(1) (f) of the Electricity Act reads thus:
"86. Functions of State Commission.-
(1) The State Commission shall discharge the following functions, namely:-
(a) x x x
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(f) adjudicate upon the disputes between the
licensees, and generating companies and to refer any dispute for arbitration"
ii. The petitioner's grievance is not about tariff determination, licensing or supply issues, but rather to refund of the earnest money held by a public utility in trust. Such a claim involves constitutional and fiduciary obligation under Articles 14 and 300A and therefore, falls within the domain of public law.
iii. The principle laid down by the Apex Court in the case of Whirlpool Corporation and Godrej Sara Lee, stated supra, makes it clear that the existence of an alternative remedy does not operate as an absolute bar to the exercise of jurisdiction under Article 226 of the Constitution, particularly when the impugned action is arbitrary, without jurisdiction, and violative of the fundamental or constitutional right. Since the issue involved here is the retention of the petitioner's property by a State instrumentality, the Court's writ jurisdiction is properly invoked. Accordingly, the objections regarding
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR the alternate remedy fails and the writ petition is held maintainable.
Point No.2:
19. It is not in dispute that the petitioner deposited an EMD of `1,00,00,000/- by demand draft dated 28.11.1998, which was duly acknowledged by the Karnataka Electricity Board (KEB). Subsequent correspondence from PCKL-respondent No.1 dated 09.02.2007, 05.05.2015, 14.06.2016 and 07.04.2017 confirms the subsistence of the deposit. No document is produced by the respondents for forfeiture or lawful adjustment of the said amount. When the Government of Karnataka by order dated 11.04.2016 withdrew its approval to the PPA, the very foundation for retention of the EMD ceased. The respondent's continued retention thereafter is without authority of law. Being the successor of the KEB and custodian of the deposit, respondent No.1- PCKL, bears the fiduciary duty to refund the same.
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20. The respondents' plea that EMD was a 'performance security' linked to the execution of the project cannot be accepted. No term for forfeiture has been shown, and the failure of project resulted due to withdrawal of the Government's approval, not from any breach by the petitioner. Retention of the amount therefore constitutes unjust enrichment and deprivation of the property in contravention of Article 300A of the Constitution. Hence, the petitioner is entitled to a refund of the EMD from respondent No.1-PCKL.
Point No.3:
21. The respondents contend that the claim is barred by delay, as withdrawal order was issued in 2016 while writ petition has been filed in 2025. This objection also cannot be sustained for the following reason:
i. The cause of action arose on 11.04.2016, when the Government withdrew the approval and the EMD became refundable.
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR ii. The respondents' correspondence of 2016 and 2017 expressly acknowledged the liability, which, under Section 18 of the Limitation Act, revives and extends limitation.
iii. The petitioner has been continuously pursuing remedies before the competent forum, High Court, Arbitral Tribunal, Arbitral Tribunal for electricity and KERC and thus, the time period spent before such forum is liable to be excluded under Section 14 of the Limitation Act.
iv. The wrongful retention of the EMD constitutes a continuing wrong under Section 22 of the Limitation Act, giving rise to a fresh cause of action each day until it is reckoned.
22. In view of these facts and in consonance with the settled principles of law, the petition is held to have been filed within a reasonable time and cannot be dismissed on the ground of delay and laches. Accordingly, point No.3 is also answered and this Court, for the foregoing reasons, pass the following:
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ORDER
i. The writ petition is allowed.
ii. The petitioner is entitled for refund of the Earnest
Money of `1,00,00,000/- (Rupees One Crore)
which was deposited on 28.11.1998 with the erstwhile Karnataka Electricity Board, whose obligations now rest in respondent No.1-Power Company of Karnataka Ltd. (P.C.K.L.) iii. Respondent No.1-Power Company of Karnataka Ltd. (P.C.K.L.), being the successor-in-interest and custodian of the said amount, is directed to refund the EMD of `1,00,00,000/- (Rupees One Crore) to the petitioner together with the interest @ 6% per annum from 12.04.2016, i.e., the date of withdrawal of the Government's approval to the Power Purchase Agreement until the date of actual payment.
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NC: 2025:KHC:44928 WP No. 19513 of 2025 HC-KAR iv. The above direction shall be complied within a period of three months from the date of receipt of the certified copy of this order.
v. In the event of non-compliance within the stipulated period, the petitioner is entitled for enhanced interest @ 9% per annum on the outstanding amount from the date of default until realization.
Sd/-
______________________ JUSTICE K.S. HEMALEKHA MBM List No.: 1 Sl No.: 21