After an eight-year-long court battle, Himalayan Bank Ltd (HBL) and Bank of Kathmandu (BoK) may finally be able to retrieve more than Rs 1.50 billion from China Construction Bank (CCB) in the case of counter guarantee money for Melamchi Drinking Water Project.

“The Zhengzhou Intermediate Court has reverted its earlier decision and ruled in favour of HBL and BoK and ordered CCB to pay over Rs 1.50 billion covered by advance payment guarantee and performance guarantee to the Nepali banks,” informed Gandhi Pandit, senior advocate and lead lawyer for HBL and BoK in the case.

“The decision was taken on Thursday and communicated to us today,” he added.

The years-long legal fight, however, may not be over yet.

“There is still a chance they might appeal, but that would only be buying time because as per the international law and practice, the guarantee provided by CCB to both the Nepali banks is an independent and unconditional obligation,” said Ashoke SJB Rana, chief executive officer of HBL. “We should have a clearer picture early next week.”

It all started in 2008 when the China Railway 15 Bureau Group was contracted to build a 27-kilometre-long tunnel for the Melamchi project. HBL had issued $6.665 million as performance guarantee, while BoK had issued $6.2 million and 1.40 million euros as advance payment guarantee to Melamchi Water Development Board to provide the counter guarantee to CCB. The CCB was the guarantor for the China Railway 15 Bureau Group.

The row over the guarantee amount erupted after the Melamchi Water Supply Development Board terminated its contract with the Chinese contractor in September 2012 over poor performance in executing the project.

After scrapping the contract, the Melamchi board had sought payment of performance guarantee and advance payment guarantee from the two banks.

While HBL and BoK subsequently filed a case against Melamchi and got a stay order from Patan High Court, it dismissed the stay order later and Melamchi was able to get the guarantee amount to the tune of around Rs 1.50 billion from both the banks.

On the other hand, the Chinese contractor filed a fraud case against Melamchi at Zhengzhou Intermediate People’s Court, which prevented CCB from releasing the counter guarantee amount to the Nepali banks immediately.

HBL and BoK had filed a case against China Railway Bureau and CCB in 2014 in Zhengzhou Intermediate People’s Court. In 2017, the court gave a verdict in favour of the defendants, following which the two Nepali banks filed an appeal in High People’s Court (appellate court) of Henan Province.

The banks had then sought legal support of Pandit and another senior advocate, Shailedra Dahal, to work with their Chinese lawyer in the case. Last year, the high court ordered a review of the decision taken by the district-level Zhengzhou Intermediate Court, which changed its verdict in favour of the Nepali banks yesterday.

This is a second major international win of senior advocate Pandit, who had earlier argued a case for Nepal Investment Bank Ltd. The bank had won the legal battle in June to recoup Rs 2.044 billion against Italian firm Cooperativa Muratori e Cementisti di Ravenna (CMC) after the Italian high court ruled in its favour in a case involving CMC’s performance guarantee to Tanahu Hydropower Ltd.

A version of this article appears in print on November 07, 2020 of The Himalayan Times.

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