NTDC fails to recover Rs714m from Iranian firm

Published July 25, 2021
The NTDC had terminated the contract with the Iranian firm due to persistent delays on the part of the Iranian contractor. The project was eventually completed by another contractor. — Dawn/File
The NTDC had terminated the contract with the Iranian firm due to persistent delays on the part of the Iranian contractor. The project was eventually completed by another contractor. — Dawn/File

LAHORE: The National Transmission and Dispatch Company (NTDC) has failed to recover Rs714 million from an Iranian firm despite the award announced by the Paris-based International Chamber of Commerce (ICC) in April last year, Dawn learnt on Saturday.

“A severe lack of on-time decision making, politics, appointment of a permanent MD, resignation of competent officers and other administrative issues are the major reasons behind the long delay in resolving various matters including recovery of Rs714m claims the NTDC had made before the ICC in a case filed by the Iranian firm against the company,” an official source told Dawn.

The NTDC had in May 2020 served a notice on the firm for the payment of about Rs714m along with interest under the decision announced on April 24, 2020, in the wake of an international commercial arbitration initiated by the Iranian company in 2017 before a tribunal constituted under the ICC’s rules.

The dispute arose out of a contract executed in February 2011 between the Iranian company and the NTDC for the design, supply, installation, testing, and commissioning of 500kV Guddu-Multan third circuit at Rahim Yar Khan substation. The NTDC terminated the contract due to persistent delays on the part of the Iranian contractor. The project was eventually completed by another contractor.

Dispute over termination of contract over delay in commissioning of 500kV Rahim Yar Khan substation

On this, the Iranian firm initiated the arbitration in early 2017 claiming an amount of about Rs180m ($1.1m) on account of unpaid invoices and damages. The NTDC, apart from defending the claims, filed its own counterclaims on the basis of the Iranian company’s delays, the costs incurred to complete the project by another contractor, and claims related to liquidated damages, mobilisation advances, customs duties and demurrage.

On the NTDC’s counterclaims, the tribunal declared that company had validly terminated the contract as the contractor was responsible for the delay in the project. Accordingly, it directed the Iranian firm to pay the NTDC Rs714m in different heads. The NTDC was also declared entitled to the recover interest (with effect from July 6, 2018) at the rate of 7.925 per cent per year for the Pakistani rupee portion of the damages awarded in its favour.

“The day to day management situation in NTDC is getting worse, annoying the competent and hardworking officer. A couple of months ago, the NTDC’s Chief Financial Officer resigned, followed by Chief Legal Officer who also left over a month ago. Moreover, around six senior officers have submitted a leave prior to retirement,” the official, requesting anonymity claimed.

He said that though the work related to Iranian firm’s assets tracing was completed and the NTDC Board – after a long time – finally approved filing of the case in the respective local court for implementation of the ICC’s decision, the company has so far failed to move ahead in this regard due to lack of interest allegedly on the part of NTDC managing directors.

When contacted, the sitting NTDC MD Muhammad Ayub was found unaware about the situation. “I don’t know about such a huge claim the company has to recover from the Iranian firm. But I will check about this on Monday. However, as far as I know, such claims are recovered by the Central Power Purchase Agency General,” he explained.

He admitted that delays in the constitution of the NTDC Board, resignation/retirement of officers, lack of decision-making etc might be the reasons behind the delay in following up of the case under-discussion.

Published in Dawn, July 25th, 2021

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