Supreme Court Dismisses Writ Against GMR, Sets Deadline for Upper Karnali Hydel Project
Government Instructed Not to Extend Financial Close Time Further
The Supreme Court, led by Chief Justice Hari Krishna Karki, has ruled in favor of GMR company and the government by quashing the writ petition filed by Karnali residents. However, the court issued a directive order to the government, instructing it not to extend the financial close time for the 900-megawatt Upper Karnali Hydel project any further due to significant delays that have already occurred. The constitutional bench passed this order on May 7, and the full text of the ruling was released today.
The court emphasized that nearly a decade has passed since the agreement was signed between the two parties. Continuously extending the deadline for financial close would be contrary to the public's desire for rapid development, prosperity, and adherence to public policy. Moreover, the court directed the government to promptly fulfill its responsibility of acquiring land for the project in Achham district and ensure adequate compensation and employment opportunities for those who would be displaced. The court also stated that the government should utilize the funds generated from the Karnali project for the overall development of the residents in the Karnali watershed and the region's ecology.
The Supreme Court further clarified that the agreement between the government and GMR company is considered a contract and does not require ratification by a two-thirds majority of the Parliament, as it does not involve the distribution of Nepal's natural resources. The court distinguished between a river, which is a natural resource, and the energy produced from river water, which is not categorized as a natural resource. According to the court, any consumer goods produced from natural resources involving other elements cannot be considered natural resources themselves.
The court affirmed that the GMR Upper Karnali Hydro Power Company Limited, established in Nepal in accordance with Nepali law and compliance, does not require parliamentary ratification for the agreement since it is not considered a treaty. As the Upper Karnali hydel project is solely an energy project and not a multi-purpose project, it does not propose the division of Nepal's natural resources among the signatories. The court noted that the project's development agreement (PDA) replaced the original agreement signed on January 24, 2008.
Highlighting the prolonged delay in achieving financial close, the court expressed doubts regarding the authenticity of the signatory as nearly ten years have passed since the agreement's initial signing. However, the court clarified that the end of the financial close deadline does not automatically terminate the agreement. The court acknowledged that the government made amendments to the agreement, granting a third extension in accordance with the recommendations of the Bishwa Paudel-led committee, which complies with contract laws.
The petitioners had raised concerns that the project developer would disrupt the river's flow for 18 hours to generate hydro energy, potentially causing flooding in downstream human settlements when water is released into the river for only four hours each day. GMR stated that it sought an extension of the financial close deadline due to the government's failure to fulfill its contractual obligations resulting from the Gorkha earthquake and the border blockade, citing force majeure circumstances.
Previously, the Investment Board extended the time for financial close by one year on January 8, 2017. The company was granted a second extension on November 13, 2017, for one year. Subsequently, on July 15, 2022, the Council of Ministers approved a third extension of two years, amending the contract.
Other members of the constitutional bench include Justices Bishowambhar Prasad Shrestha, Ananda Mohan Bhattarai, Sapana Pradhan Malla, and Tanka Bahadur Moktan.
