ISLAMABAD: The Supreme Court on Friday settled a contractual dispute spanning more than two decades, holding that the Trading Corporation of Pakistan (TCP) was justified in forfeiting a performance guarantee after a trading company failed to deliver urea despite receiving multiple extensions.
Headed by Chief Justice of Pakistan (CJP) Yahya Afridi, a three-judge SC bench disposed of cross-appeals filed by TCP and M/s Abdullah Mezroei Metal Trading Company against a Nov 24, 2015 Sindh High Court (SHC) judgment arising from a 2005 contract for the import of 50,000 metric tonnes of urea.
The SC ruled that TCP’s forfeiture of the entire performance guarantee was justified and reasonable in the circumstances of the case. It also held that the trading company was not entitled to recover damages of $3.465 million, or any other amount, from TCP.
The court set aside the SHC judgments directing the refund of the performance guarantee, while upholding the rejection of the trading company’s claim for damages. As a result, the company’s appeal was dismissed.
The dispute originated after TCP invited tenders on Aug 18, 2005 for the supply of 50,000 metric tonnes of urea. The trading company’s bid of $225 per metric tonne was accepted on Aug 31, 2005, leading to the execution of the contract.
Under the agreement, the company was required to furnish a performance guarantee equal to three per cent of the contract value within seven days of acceptance. TCP, in turn, was obliged to open a letter of credit (LC) for the full contract value within 10 days of receiving the guarantee.
The contract required shipment in three consignments, within 15, 22 and 29 days of the opening of the LC and expressly stated that time was of the essence. It also provided that the performance guarantee could be forfeited if the supplier failed to deliver the goods within the stipulated period or breached any contractual term. The guarantee further stipulated that any extension of time granted by TCP would not absolve the supplier of liability.
Separately, even before its contract with TCP had been finalised, the trading company entered into a back-to-back arrangement with Gates Transfercenter International on Aug 27, 2005 to procure the urea.
Published in Dawn, July 4th, 2026
