IN PARI DELICTO?

By Adv. Jatin Kumar

1. M/s Messiah Coal Transport Co. (“MCTC” or “Messiah”) is a company registered

under the laws of Republic of Bernabeu (“Bernabeu”), whose laws are pari mateia with
laws of India. Messiah’s business involves transportation of coal from mines to the siding,
from where the coal is transported further to power plants where this coal is required.
Messiah is involved in rendering this service to the private companies, as well as
government entities by duly participating in their tenders. Messiah is a small player in the
market having limited market share since its inception, and is registered as a Small
Enterprise under the relevant laws of Bernabeu.

2. Wembley Coalfields Limited (“WCL”) is a government company that is under

administrative control of Ministry of Coal, Government of Bernabeu. It has mining
operations spread over several states of the country, and thus it is a major source of
supplies of coal to the industries located in Western and Southern Bernabeu. A large
number of powerhouses, electricity boards along with cement, steel, chemical, fertilizer,
paper and brick industries are major consumers of its coal.

3. On 19/09/2007, WCL issued a Notice Inviting Tenders (“NIT”) for two sets of jobs,
first hiring of tippers for loading of coal from bunkers of “Camp Nou” UG Mine and its
transportation after weightment at Camp Nou weigh-bridge to EDC siding weigh-bridge
and unloading (for 5,20,000 MT), and second hiring of pay-loader and tippers for loading
of coal from bunkers of Camp Nou mine and unloading at ground stock and loading by
pay-loader into tippers for transportation to EDC siding (for 36,140 MT). This NIT was
pegged at an approximate value of USD 61,465,352. As per the terms of the NIT, the
interested bidders were required to furnish an Earnest Money Deposit (“EMD”) of USD
614,700/- for participating in the tender process.

4. MCTC participated in the tender, and owing to its competitive bid, MCTC’s bid
came to be accepted by WCL, which was communicated to MCTC, vide a Letter of
Acceptance (“LoA”). In pursuance to this transaction, MCTC submitted two FDRs (Fixed
Deposit Receipts) with WCL, the first one for USD 425,000, drawn on 07/11/2007 with
Bank of Bernabeu for 48 months, with the interest @ 8.5% per annum, whereas the

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second FDR was for USD 450,000, drawn on 13/09/2007 with Union Bank of SanSiro for
39 months, with the interest @ 9% per annum. At this point, it is pertinent to note that
WCL divided the work between three different contractors, including MCTC.

5. As per the terms of this LoA, the period of contract, for which MCTC would carry
out the required work, was of two years (24 months). The said LoA stipulated that MCTC
shall be required to furnish a Performance Security Deposit, which is further divided in
two parts. First, in the form of Performance Security, which was paid by MCTC at the
award of the said work, and second, Retention Money that was being recovered from
running bills that MCTC raised. The Performance Security, as per the terms of LoA, was
5% of the contract amount, i.e. USD 873,600/-. And the Retention Money was deducted
@5% from the running bills. However, the LoA stipulated that the total of Performance
Security and Retention Money could not exceed 10% of the contract amount, i.e. USD
1,747,200, as the value of the work, as per the quoted amount, was USD 17,471,999.66.

6. MCTC, subsequently on 26/09/2007, received the Work Order from WCL. As per
the terms of this Work Order, the Performance Security Deposit was to be refunded to
MCTC after the issuance of Completion Certificate, in respect to the work undertaken by
MCTC, by the Engineer-in-Charge. Further, the Retention Money was to be refunded on
the expiry of 6 months from the date of completion as certified by Engineer-in-Charge.

7. Consequently, WCL, entered into “Article of Agreement” dated 15/11/2007. As per

this Agreement, MCTC agreed to carryout work, as specified in the NIT, and WCL agreed
to pay the amount, as quoted by MCTC in its bid document.

8. MCTC began to carryout its designated work at the Camp Nou Mines from
28/08/2007. During the course of their contract, there were repeated instances of low
production of coal, because of which despite MCTC’s machinery deployed at the site, the
same could not be put to use. MCTC has Running Bills for this project, from 28/08/2007
to 27/12/2009. This, in turn, resulted in MCTC unable to transport the required the
quantity of coal, as originally stipulated in the work order. WCL, subsequently, approved
a provisional extension of the contract for four months. It meant that MCTC would
continue its work at the mines for another four months, over and above what the original
NIT stipulated, under same/original terms and conditions. However, even after the

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extension, WCL never augmented/increased its coal production at the mines, which
resulted in the non-completion of MCTC’s contractual target, despite having the logistical
and mechanical resources to do so. MCTC denied machinery or services at the mines,
and it is only because of WCL’s inability to produce/mine coal as per its own
anticipated/predicted quantities, MCTC could not reach its targets.

9. MCTC periodically and relentlessly approached the officials of WCL seeking the
amounts retained by WCL as Performance Security Deposit and other outstanding
amounts. However, their voices fell on deaf ears.

10. Per contra, WCL claims that there was no shortage of coal supply at the mines,
and in fact it was due to MCTC’s own logistical deficiencies, it could not meet its targets.
WCL claimed that one M/s Ronald Colliery Ltd. (“RCL”), which was jointly awarded the
same tender, duly complied with all of its contractual targets that were identical to
MCTC’s targets.

11. MCTC, in comparison to RCL, is a smaller player with a far smaller fleet of trucks
and tippers.

12. On 26/04/2018, WCL issued a letter to MCTC wherein it imposed a penalty of

USD 1,741,799.56, including the withheld amount for the work done by MCTC at the
mines.

13. Subsequent to the aforesaid communication, MCTC received the final bill, for the
period 16/12/2009 to 27/12/2009, wherein WCL deducted the entire amount of bill as
“adjusted penalty”.

14. The officials of WCL have been threatening MCTC of pecuniary consequences,
and is being told that the interest over the aforesaid amounts shall be recovered from its
existing and ongoing contracts with WCL.

15. MCTC, before approaching the competent court seeking appropriate reliefs, has
decided to try and settle the matter through mediation, which has been accepted by
WCL.