Patan High Court stays government order against firms importing urea

AICL told not to implement its decision to cancel contracts of two firms until September 16


Patan High Court has stayed Agriculture Inputs Company Limited’s decision to seize the collateral of Shailung Construction Company and Honico Multiple Pvt Ltd for failing to supply urea consignment on time.

The order was passed by a single bench of Judge Ramesh Prasad Rajbhandari in response to writ petitions filed by the two companies.

AICL had decided to seize collateral worth almost Rs 5 crore deposited by Shailung Construction Company and initiate the process of blacklisting the company for failing to supply urea consignment on time.

The court also issued a show cause notice to AICL asking it to submit written replies within 15 days. It told AICL not to implement its decision to cancel contracts of Shailung Construction Company and Honico Multiple Private Company until September 16 when the court, after hearing arguments from both sides of the case, will decide whether or not an interim order should be issued against AICL’s decision.

Shailung had stated that the fertiliser consignment was delayed due to the coronavirus pandemic and frequent changes made to the contractual clauses by the government’s nodal agency.

Shailung, which had won one of the two tenders (the second one was won by Honiko Multiple), stated that the government’s accusation that it was negligent in fulfilling its responsibility was wrong.

According to Shailung, one of the major reasons behind the delay in fertiliser import is that the initial agreement mentioned that the government would pay 90 per cent of the total payment mentioned in the letter of credit (LC) when fertilisers arrived at Kolkata port and the remaining 10 per cent when the goods were delivered to godowns. “However, the agreement was later changed and the government said it would pay the total amount only when the fertilisers were delivered to the government appointed parties.

Along with the contract, LC documents were also amended time and again, resulting in several technical complications,” the company had stated yesterday.

Shailung Construction’s lawyer Senior Advocate Tulasi Bhatta argued before the court that his client moved the court as AICL took arbitrary decision to seize the client’s collateral without giving his client a chance to be heard. He said AICL did not honour the contractual obligation of trying to find amicable settlement of the dispute within 30 days. “The contract states that the two parties can go for arbitration if they fail to reach amicable settlement within 30 days. As far as performance bond is concerned, the contract signed between my client and AICL states that arbitration would not apply and this was the reason my client challenged AICL’s decision to seize my client’s collateral,” Bhatta said.

He said the Cabinet had decided to give six months to contractors who had to follow Public Procurement Act provisions, but had not been able to supply goods due to the COVID-19 pandemic. “Nineteen justices of the Supreme Court had issued an order stating that the nationwide lockdown period would be considered zero period for those who failed to meet deadline and keeping in mind the government’s decision to give six months to contractors and SC’s new deadline rules, my client had not exceeded the deadline to supply the goods promised in the contract,” Bhatta argued.

He said AICL amended the LC third time on August 8.

“My client had until September 22 to meet the contractual obligation, but the government company cancelled the contract much before that date.”

A version of this article appears in e-paper on September 15, 2020, of The Himalayan Times.