Karnataka High Court

M/S Hassan Thermal Power Private ... vs The Power Company Of Karnataka Ltd ... on 6 November, 2025

                                                  -1-
                                                              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,
                           -2-
                                     NC: 2025:KHC:44928
                                   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

NC: 2025:KHC:44928

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.

NC: 2025:KHC:44928

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

NC: 2025:KHC:44928

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.

NC: 2025:KHC:44928

HC-KAR

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.

NC: 2025:KHC:44928

HC-KAR

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,

NC: 2025:KHC:44928

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

NC: 2025:KHC:44928

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.

- 10 -

NC: 2025:KHC:44928

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

- 11 -

NC: 2025:KHC:44928

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

- 12 -

NC: 2025:KHC:44928

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

(1998) 8 SCC 1

AIR 2023 SCC 781

- 13 -

NC: 2025:KHC:44928

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).

W.P. No.20598/2022 D.D. 07.06.2024

- 14 -

NC: 2025:KHC:44928

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.

- 15 -

NC: 2025:KHC:44928

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

(2007) 10 SCC 137

(2010) 2 SCC 59

(2018) 5 SCC 798

- 16 -

NC: 2025:KHC:44928

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

- 17 -

NC: 2025:KHC:44928

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
                                 - 18 -
                                                  NC: 2025:KHC:44928



HC-KAR




     (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

- 19 -

NC: 2025:KHC:44928

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.

- 20 -

NC: 2025:KHC:44928

HC-KAR

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.

- 21 -

NC: 2025:KHC:44928

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:

- 22 -

                                               NC: 2025:KHC:44928



HC-KAR




                          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.