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| Kathmandu, Wednesday January 29, 2003 Magh 15, 2059. |
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DTT refuses to pay
compensation, but says ready for negotiation
Post Report
KATHMANDU, Jan 28 : In its first official
response to the compensation claim of Nepal Rastra Bank (NRB), the Delloitte Touche
Tomatsu (DTT) has refused to pay the compensation demanded by the NRB for the financial
loss incurred from unilateral breach of agreement by the DTT.
According to a highly placed government source,
despite the refusal, the DTT, in a letter sent to the central bank last week, has urged
the NRB to initiate negotiations to find out an amicable solution of the problem.
Despite the readiness of the DTT to negotiate
for amicable solution, dispute regarding the venue of the negotiation is not settled yet.
According to the official, the NRB has been maintaining its stand that as per the final
agreement, Kathmandu should be the venue for the negotiation, whereas the DTT has refused
to come here citing fragile law and order situation of the country.
However, the source said that the meeting of the
Board of Directors of the NRB would make necessary decisions on ending the impasse and
sketch strategy that the NRB would adopt during its upcoming negotiation. He said that the
negotiation would begin within a month and it would probably be the last bid to find an
amicable solution to the problem.
Earlier, on the first week of January, the NRB
had sent a letter to the DTT claiming around Rs 500 million compensation from the DTT for
the financial loss incurred from unilateral breach of the management take-over contract of
Rastriya Banijya Bank (RBB) by the DTT.
The DTT, which had signed a contract with NRB in
January last year to take over management control of RBB, unilaterally breached it six
months ago on the grounds of weak security condition of the country. The NRB has claimed
that the action led to huge losses due to DTT’s initial delay and eventual
cancellation of the management take-over contract.
The NRB in its claim had earlier asked the DTT
to either compensate the contract value signed between the NRB and DTT or substitution
value that the NRB has to bear while constituting a new management team for the RBB.
Earlier in October, as per the provision on
dispute settlement contained in the agreement, the DTT had asked the NRB to send its
delegation to Bangkok for amicable settlement of the problem. But the NRB rejected the
proposal since the final agreement clearly stated that Nepal would be the venue for
negotiations, if any dispute arose.
As per the agreement, both the parties are first
required to initiate negotiation for amicable solution to the dispute. If that fails, then
both parties will go for arbitration. Either party can go to court, if the arbitration
settlement fails to satisfy them.
The government had to bear a huge financial loss
due to unilateral cancellation of the agreement. According to a report, the RBB alone had
to bear a loss of around Rs 10 million a day due to the unnecessary delay in the process.
The breach of trust of the DTT also played a crucial role in weakening the financial
condition of the bank due to which the non-performing assets climbed to 48 per cent.
Apart from the direct financial losses, the
delayed management hand-over process also slowed Nepal’s entry into International
Monetary Fund-sponsored Poverty Reduction and Growth Facility (PRGF). With the entry into
the PRGF, Nepal would get Rs 20 million of annual aid to be used in launching anti-poverty
programmes and other reform processes for next three years.
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