Indian government ordered to respond to claims energy firms conspired to siphon money from state and defraud consumers

Delhi’s high court has taken up a lawsuit calling for an investigation into allegations that Adani Group and other energy companies engaged in fraud that raised power prices for Indian consumers.

The court has ordered the Indian government and Directorate of Revenue Intelligence (DRI) to respond before 7 February to the lawsuit, which claims that several mining groups inflated coal and equipment prices to siphon money from India.

Among them is Adani, an Indian conglomerate preparing to build one of the world’s largest coal mines in Australia.

Pranav Sachdeva, a lawyer involved in proceedings, said the court’s orders indicated it had examined the public-interest lawsuit and found it “worthy of admission” and further examination.

India has a robust system of public-interest litigation that allows citizens or the court to raise issues and seek judicial intervention.

The lawsuit was filed in September. In August, a Guardian investigation revealed details of fraud allegations against Adani totalling nearly 15bn rupees (£174m/AU$305m).

According to Indian customs intelligence documents from 2014, the company was accused of inflating the cost of electricity equipment for two power projects in Maharashtra state using fraudulent invoices.

Adani has denied wrongdoing and was reportedly cleared of the allegations in October. It was cleared of another set of fraud claims totalling 39bn rupees in August.

Senior customs officials have ordered an appeal against the latter and will review the October decision.

The public-interest lawsuit is asking the high court to order a “thorough” investigation into over-invoicing allegations.

The writ alleges that Adani, the Indian conglomerate Essar, and several other companies inflated the price of power equipment and coal “in order to cheat the people and to siphon off funds from public companies”.

Subsidiaries of Essar and Adani are among 40 companies that have been accusedof using front organisations to increase the price of coal they mined from Indonesia. The total value of the alleged scam has been estimated at 290bn rupees.

If the allegations are true, the price inflation would have allowed the companies to move money from their Indian balance sheets into overseas accounts, where the funds would be harder to tax or account for. It would also have led to higher power prices for Indians.

Congress, India’s largest opposition party, has called for the supreme court to investigate allegations of invoice inflation against Adani.

There have been calls in Australia for Adani to be denied a $700m loan to build a railway link between the proposed coalmine and a port on the Queensland coast.

The loan has been blocked by the Queensland government, but Adani said on Tuesday that the project was still viable and it would “adjust to the constraints”.

The proposed mine has caused years of lawsuits and protests over its possible environmental impact.

Expanding the coal port to accommodate the mine would require dredging an estimated 1.1m cubic metres of spoil near the Great Barrier Reef marine park. Coal from the mine would also produce annual emissions roughly equivalent to those of Malaysia or Austria, according to a study.

Adani did not respond to requests for comment, but has previously said it observes the highest forms of corporate governance and the lawsuit was part of a “mindless, unsubstantiated witch-hunt”.

A spokesman for Essar has previously said it strongly and categorically denies the allegation.