In India’s Eastern Himalayan State of Sikkim, the indigenous Bhutia communities, Lachungpas and Lachenpas, successfully contested all proposed hydropower projects and have managed to sustain an anti-dam opposition in their home regions, Lachung and Lachen. In this paper, we discuss this remarkable, un-researched, effective collective action against hydropower development, examining how identity and territory influence collective action through production, creation and application of vernacular knowledge systems. The role of the Dzumsa, a prevailing traditional system of self-governance among the Lachungpas and Lachenpas, has been central in their collective resistance against large dams in Lachung and Lachen. Our findings show that contrary to popular imageries, the Dzumsa is neither an egalitarian nor a democratic institution—rather, it is an exercise of an “agonistic unity”. The Dzumsas operate as complex collectives, which serve to politicize identity, decision-making and place-based territoriality in their struggle against internal and external threats. Principles of a “vernacular statecraft” helped bringing the local communities together in imperfect unions to oppose modernist designs of hydropower development. However, while such vernacular institutions were able to construct a powerful local adversary to neoliberal agendas, they also pose high social, political and emotional risks to the few within the community, who chose not to align with the normative principles of the collective.