LAHORE: The Lahore High Court (LHC) has dismissed an appeal filed by a Chinese power company against a decision of the National Transmission and Dispatch Company (NTDC) regarding non-entertainment of its bid.

The NTDC had floated a tender for procurement of plant, design, supply, installation, testing and commissioning of 500/220/132-kilovolt Lahore north sub-station and extension at 500/220/132kV Nokhar sub-station in May this year.

Chinese firm SepcoIII Electric Constructions Company Ltd participated in the tender by submitting its letter of bid along with its financial statement, a letter of credit promise issued by the Agricultural Bank of China (ABC) and security in the form of a guarantee issued by Deutsche Bank in favour of the NTDC.

During the evaluation process, the NTDC asked the appellant/company to furnish an unconditional credit line, as the letter of credit was conditional. The ABC was not willing to amend its letter of credit and the appellant furnished the document issued by Industrial and Commercial Bank of China Limited (ICBCL), which later annulled its letter.

Due to withdrawal of the letters of credit, the NTDC assumed that the appellant withdrew its bid and consequently proceeded to write a letter to Deutsche Bank seeking encashment of the bid guarantee, which was declined.

Aggrieved by the demand of the NTDC and actions of the respondents, the Chinese company filed a writ petition in the high court. A single bench dismissed the same and the firm filed an appeal before a division bench.

The counsel for the appellant argued that in view of settled principles of law, executive discretion must be exercised in a fair and transparent manner on the basis of a cogent reason and rationale supporting the same, and the impugned actions were based on an arbitrary exercise of the executive authority.

He said the NTDC treated the annulment of the financial commitments by the two independent financial institutions as withdrawal of the bid by the appellant, which was against the express provisions of tender.

However, the LHC division bench in its written order observed that during the arguments, on a query about the appellant’s preparedness to furnish a third letter of credit from a bank, the counsel gave a vague reply and expressed no intent of the appellant to furnish a fresh, unconditional document.

The bench noted that the appellant without raising any objection to the NTDC’s demand to furnish an unconditional letter of credit submitted a second document from another bank. The respondents firmly disclosed that after the annulment of the second letter by the bank concerned and the appellant’s intentional failure to submit a third unconditional letter, the appellant was, prime facie, not interested in performing its obligations and honouring its commitments as per the requirements of bid documents, the bench said.

The appellant company withdrew its bid and only filed the writ petition as well as instant appeal to seek protection from the encashment of the bank guarantee, said the verdict authored by Justice Masud Abid Naqvi.

The bench also observed: “Violation of a contract or failure to abide by the terms and conditions mentioned therein or to honour obligations arising out of an agreement cannot be decided in exercise of constitutional jurisdiction.”

It further remarked that the superior courts should not involve themselves in investigations of disputed question of fact that necessitated taking of evidence. This could more appropriately be done in the ordinary civil procedure for litigation by a suit, it added.

Dismissing the appeal, the bench observed that the case law referred by the counsel for the appellant was not applicable in the case.

Justice Shahid Bilal Hassan was the other member of the division bench.

Published in Dawn, December 15th, 2021