Dubai firm sues CPC over tar deal going sour

By S.S. Selvanayagam

One of the leading Dubai corporate companies is suing against the Ceylon Petroleum Corporation (CPC) for the allegedly fraudulent encashment of its Performance Bond to the tune of US$ 100,000.

The dispute is now before the Arbitration Tribunal comprising the arbitrators Thilak Marapana PC (Chairman), Rtd. Justice K.Balapatabendi and Ronald Perera.

In a statement of defence, the Defendant the CPD has denied the claim of the Claimant the Prime Tankers LLC of Dubai which is the registered supplier of the CPC where it submitted its offer for the tender supply of bitumen (tar – a black, sticky substance from petroleum used for making roads).

Farman Cassim and Charaka Jayaratne are appearing for the Claimant Prime Tankers LLC while Deputy Solicitor General Sanjay Rajaratnam and Senior State Counsel Vikum de Abrew are appearing for the CPC.

The Claimant states it was a registered supplier of the Respondents CPC which made an invitation to tender the supply of Bitumen for a period of three months and six months commencing from 1 May 2008 and that the CPC accepted its tender.

It further states it established a Performance Bond of US$ 100,000 for the supply of bitumen by converting the existing bid bond through its bank, National Bank Ras-Al-Kaimah.

It said the CPC accepted the said Performance Bond and aggrieved that the CPC without establishing a Letter of Credit for the Claimant to begin the supply, sent a fax stating, inter alia, that the Claimant had not made supplies to it and the CPC will cancel the said tenders awarded to it.

The Claimant alleges the CPC was acting with mala fide to frustrate to tender awarded to it fraudulently.

It complains that the CPC had delayed the opening of the Letter of Credit until the near expiry of the Performance Bond stating that it was facing difficulties in opening Letters of Credit in US$ through the Claimant’s Bank and thereby it fraudulently encashed the Performance Bond.

The Claimant Prime Tankers LLC is seeking an order from the Tribunal directing the CPC to pay it US$ 100,000 together with interest thereon as well as the costs of arbitration.