Locomotives case: LHC seeks evidence of satisfactory performance from company

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Lahore High Court (LHC) Chief Justice Umar Ata Bandial on Friday adjourned hearing of a plea filed by a Chinese company against termination of a contract for purchase of 75 locomotives by the federal government and sought evidence of past faithful performance from the company.

The chief justice was hearing a petition filed by Dongfeng Electric International Corporation through its counsel Salman Akram Raja.

As proceedings started, the petitioner's counsel along with a company officer appeared before the court.

The counsel submitted that the CEO of the company had authorised the officer to amend the bank guarantee to the amount of $15.77 million in favour of the government which was valid till June 30, 2014.

He offered that the bank guarantee should be encashable on orders of the court or of any authority appointed by it for just and fair resolution of the dispute between the petitioner and the federal government.

He further sought an interim order restraining the government from demanding encashment of the said bank guarantee.

However, the court observed that the assurance given by the 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.

Prima facie, the grievance of the federal government against the petitioner is the supply of 69 diesel locomotives rendering “inferior performance” under the contract entered on November 8, 2001, the chief justice added.

There is no material on record to exonerate the petitioner in respect of that allegation, he added.

The court said the petitioner's complaint that the government had not established its letter of credit under the agreement dated December 31, 2008, cannot be faulted unless it is shown that past performance of the petitioner is satisfactory.

The plea that government should complete a second contract of $104 million for 75 locomotives when the 2001 contract for the same locomotives had rendered poor results is tantamount to inviting the government to squander its resources, the chief justice added.

He observed it was necessary first to enforce the threshold for the relief of stay against encashment of performance guarantee.

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 government, he added.

The chief justice adjourned further hearing till June  17 and sought material establishing the foregoing elements for relief.

The petitioner company through its plea assailed the government's decision of abandoning a contract for purchase of 75 locomotives which was awarded to it after the due bidding process.

Courtesy:  Pakistan Today

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