Receivables/payables dispute: KE seeks resolution on equity, fairness Shariah basis

ISLAMABAD: Karachi Electric (KE) has sought resolution of dispute on receivables/payables with government entities on the basis of equity, fairness and Shariah, sans contracts (GSA/PPA).

Well-informed sources told Business Recorder that KE, in its Terms of Reference (ToRs) has conveyed its agreement that there would be no reciprocity but at the same time, it has argued that since the Ministry of Finance has delayed payment of subsidy claims, it should now also pay a surcharge of Rs 80 billion along with the principal amount. It is not known whether or not the Ministry of Finance will accept this condition of the KE ToRs.

KE is also of the view that Karachi Water and Sewerage Board (KWSB) is responsible for delay in payment of Rs 32 billion, a surcharge of Rs 30 billion is also due on this principal amount. Both Federal Government/ Provincial Government are KWSB's guarantors.

"As a customer, surcharge is imposed only one time but KE is asking for compounding it. KE is still showing the previous amount," the sources argued, adding that KE wants that receivables/payables should offset each other.

KE, in its revised ToRs has also shown willingness on local arbitration rather than in London aimed at making things easy.

"The ToRs of KE are not as simple as the power utility is claiming,” said an official on condition of anonymity. The government team will present its viewpoint on KE's ToRs to the Prime Minister this week.

According to KE's proposed ToRs, each party agrees to withdraw any existing litigation and not conduct any further litigation, to the extent that such litigation relates to any amount that is part of the claims submitted before the Arbitrator.

The Parties permanently waive their right to bring any claim (additional claim) in respect of the matters mentioned in clause 1 other than the claims and the parties will be deemed to have forgone their right to recover any such additional claim.

The parties agree that any claims, or parts thereof, which are determined to be payable by KE, shall remain subject to adjustment, against and in light of, any structural changes made by GoP relating to the compensation for delayed payments by GoP and/or NEPRA through a surcharge and/or pass-through cost in KE's tariff.

The parties agree that all claims and matters mentioned in clause 1 will be heard and decided together with adjustments given and accommodations as referred to in clauses 2 and 3 in line with the principles of equity, fairness and Shariah and that for existing and / or past contracts and contractual obligations shall not be relevant for the purposes of the determination of any compensation for delayed payment and/or bind the parties and/or the Arbitrator in determining the claims submitted herein, and/or hold any persuasive or legal force in any manner whatsoever, including in respect of determining and calculating any amount of compensation.

According to the proposed ToRs, the Parties agree that Mr. Justice (name yet to be finalized) shall be the sole arbitrator and the venue for arbitration shall be Islamabad, Pakistan. The Parties also agree that the arbitration process conducted in terms of the agreement shall conclude within ninety days of the execution of this agreement. The governing law for the purposes of the arbitration shall be the law of Pakistan. The Parties agree that the amount determined by the Arbitrator (principal amount plus compensation) as owed by KE to any Government Party or Parties shall be set off and adjusted against the amount determined by the Arbitrator (principal amount and compensation) as owed by those or other Government Party or Parties to KE. Such adjustment shall be on the basis of the amounts that were due on the original due date.

Copyright Business Recorder, 2021