LAHORE, June 14: The Lahore High Court chief justice on Friday expressed concern over a US $104 million contract (now terminated) of 75 locomotives awarded to a Chinese firm by the Pakistan government.
Chief Justice Umar Ata Bandial was hearing a petition of the Dongfang Electric International Corporation which challenged the termination of the contract by the government. The company had given the contract for the supply of the locomotives to the Pakistan Railways in December 2008 and the government later terminated it on May 16, 2013.
During the course of hearing, the chief justice observed that prima facie the grievance of the government against the petitioner company was the supply of 69 diesel locomotives rendering “inferior performance” under an old contract signed in 2001.
The CJ remarked that awarding second contract to the petitioner for 75 locomotives when the earlier contract of 2001 for the same locomotives had rendered poor results was tantamount to inviting the government to squander its resources.
Earlier, petitioner’s counsel Sameer Khosa submitted that the chief executive of the company had authorised Mr Sun Zhenping, present in court, to amend the bank guarantee in the amount of US $15.77 million in favour of the Pakistan government which was valid till June 30, 2014.
He offered that the bank guarantee “shall be encashable on the orders of the court or of any authority appointed by the court for the just and fair resolution of the dispute between the petitioner and the government.”
He sought interim order to restrain the government from demanding encashment of the said bank guarantee.
The chief justice observed that the assurance given by the petitioner’s counsel needed to be implemented apart from demonstrating on record the bona fides of the petitioner to establish its credibility for faithful and satisfactory contractual compliance.
“Notwithstanding the maintenance contract that the petitioner entered with the federal government on Sept 28, 2009, the latter’s complaint still persists and there is no material on record to vindicate the petitioner in respect of that allegation,” the CJ remarked.
Justice Bandial further observed that the petitioner’s complaint that the Pakistan government had not established its letter of credit under the contract of 2008 could not be faulted unless it was shown that past performance of the petitioner was satisfactory and compliant with contractual and industrial standards. It was necessary first to enforce the threshold for the relief of stay against encashment of performance guarantee, the CJ added.
He also observed that apart from the petitioner securing advance payment of US $15.77 million through an unconditional escrow deposit or bank guarantee encashable according to determination of the dispute between the parties by the court or authority appointed by it, there also ought to be specific material on record to evidence faithful performance by the petitioner according to contractual and industry standards in respect of the supply of locomotives already made by it to the federal government.
The chief justice adjourned further hearing till June 17 and asked the petitioner company to show material establishing the foregoing elements for relief.