Nepal | August 10, 2020

Chinese court orders review of earlier decision

HBL, BoK optimistic to receive counter guarantee money in Melamchi project case

Umesh Poudel
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Kathmandu, July 29

A Chinese high court has decided to review the earlier district court decision made on the case of counter guarantee money filed by Himalayan Bank Ltd (HBL) and Bank of Kathmandu (BoK) against China Construction Bank, in the Melamchi Drinking Water Project.

On Sunday, Henan Province’s People’s High Court ordered the review of the February 15 decision of district-level Zhengzhou Intermediate Court in favour of China Construction Bank (CCB).

The Zhengzhou Intermediate Court had decided in favour of the Chinese contractor in the lawsuit filed against China Railway 15 Bureau, citing violation of underlying contract between China Railway and Melamchi project.

Ashoke SJB Rana, chief executive officer of Himalayan Bank, said the decision of the Chinese high court to review the case is a positive step. “We are optimistic about receiving the counter guarantee amount soon.”

He further said the high court has said that the case of CCB and Nepali banks is different than those related to local banks and contractors and stated that the decision made earlier by the district court was erroneous and needed to be reviewed.

“However, we will know the entire details only after we receive translated version of the full text,” said Rana.

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 project contractor, China Railway 15 Bureau Group.

Rana further said, as per the international law and practice, the guarantee provided to both Nepali banks by CCB is an independent and unconditional obligation. We were supposed to receive the money back from China as per the international law and practice.

Before appointing the Italian contractor Cooperativa Muratori & Cementisti di Ravenna, the China Railway 15 Bureau Group had been contracted to build a 27-kilometre-long tunnel for the Melamchi project.

The agreement between Melamchi project and China Railway 15 Bureau Group was cancelled after the Chinese contractor demanded more funds than mentioned in the bid document to complete the work after missing the completion deadline.

A version of this article appears in print on July 30, 2019 of The Himalayan Times.

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