Government saved from MVR 75 million compensation in Kaashihulhudhoo case
After Sunny Farms sent a second letter about a third party living on the island, The ministry informed that the island has been leased out to the third party.
By
Aman Haleem
Civil Court has ruled that the government should not pay compensation for terminating an agreement made with an foreign company to lease the island of Kaashihulhudhoo in Gaafu Dhaalu for farming.
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Kaashihulhudhoo was leased to a company called Sunny Farms Private Limited on 28 October, 2013 for a period of 21 years
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Sunny Farms is registered in the country by a foreign company called Green Agro Ltd, registered in the British Virgin Islands
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The island has been assigned to carry out poultry farming, plantations, fertiliser processing and fisheries collaboration work
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Nearly seven years after being handed over, on 23 August, 2020, the Agriculture Ministry cancelled the contract and took over the island.
After the agriculture ministry cancelled the contract on the ground that the work was not going as per the work plan specified, the opposing Sunny Farms had appealed at the civil court seeking compensation for the losses suffered by the company.
In the case filed in the court, Sunny Farms pointed out:
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The island was under someone else at the time; even if the agreement was signed, the island was not handed over to Sunny Farms
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Written to the ministry twice about delay in handing over the island
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Work could not be started as people who were using the island would not disembark
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Even though the island had not been handed over, the rent was paid on time
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The people on the island sought compensation and a case was filed in Thinadhoo Court
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The case ended against Sunny Farms
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The Thinadhoo court ruled that even if there was a loss, the ministry was accountable
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The agreement was cancelled without issuing any notice.
Sunny Farms requested the court:
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Direct damages amounting to USD 321,009 (MVR 4.9 million)
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USD 4.5 million (MVR 69.8 million) for the lost opportunity cost
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Total of MVR 74.7 million to be collected as compensation
In its response to the plea that Sunny Farms should not be compensated, the Agriculture Ministry told the court that the contract was cancelled after it was served a notice as it did not start work within the stipulated time period as per the work plan. The ministry said:
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On 28 April, 2019, when a ministry team went to monitor the island, it was observed that work had not commenced
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On 1 August, 2019, a 30-day notice was given to start work and was instructed to complete the work within the time stipulated in the notice
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Sunny Farms did not respond to the notice, and the deal was scrapped an year later
The civil court had ruled on Wednesday that the agriculture ministry did not have to pay compensation in this case, saying the agreement was "annulled properly".
Judge Fayyaz Shatir, who ruled the case in the court, observed that while Sunny Farms claimed that the deal was terminated without issuing notices, documents show that the ministry had sent the notices.
According to the court verdict, sunny farms claimed that the work did not start because there were people on the island, but they had written to the ministry only twice expressing this concern. Since the second letter, Sunny Farms had not communicated with the ministry over the matter.
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The letter was sent by Sunny Farms on 25 May 2014
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The ministry responded that it was looking into the matter on 5 June 2014
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Sunny Farms sent the second letter on 30 December 2015
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The ministry informed that the island has been leased out to the third party living in the island - 1 February 2016
According to Sunny Farms, the issue has not been resolved till they approach the civil court seeking compensation.
Judge Fayyaz said that unless there was an attempt by the company to resolve the issue by using its rights under the agreement, it was not clear what the company had done in accordance with the procedures to be followed by laying down the reasons that hindered the work plan.
In islands that have been leased for long periods of time for agricultural purposes, there are more cases of non-work. Recently, the residents of Vaavu atoll have raised their concerns over the stalled work in one of their uninhabited islands leased to a company under similar circumstances.
