Chinese District Court Ordered Chinese Construction Bank To Pay Over Rs.1.5 Billion To HBL And BoK

Chinese District Court Ordered Chinese Construction Bank To Pay Over Rs.1.5 Billion To HBL And BoK

Nov. 6, 2020, 4:01 p.m.

Zhengzhou Intermediate People's District Court decided a case in the favor of Bank of Kathmandu (BoK) and Himalayan Bank Ltd (HBL) and ordered China Construction Bank (CCB) to pay the amount of over Rs.1.5 billion covered by Advance Payment Guarantee (APG) and Performance Guarantee (PG) to two Nepali Banks.

HBL had issued $6.665 million as PG, while BoK had issued $ 6.2 million and 1.40 million Euros as APG 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.

Earlier, Zhengzhou Intermediate People's District Court took the decision in favor of China Railway 15 Bureau Group.

Both the banks filed an appeal in Henan Province High Court. Following the hearing, the Chinese High Court reversed the Zhengzhou Intermediate People's District Court decision and remanded the case to Zhengzhou Intermediate People's Court on 19 July 2019.

While singing a contract with Melamchi Drinking Water Project, China Railway Bureau was required to give Performance Guarantee (PG) and Advance Payment Guarantee (APG). Thus, China Railway request China Construction Bank to issue a counter-guarantee to HBL and BoK Performance Guarantee (PG).

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Under this request, the Himalayan Bank issued a performance guarantee and Bank of Kathmandu issued APG to Melamchi Advance Payment Guarantee (APG) to Melamchi Project.

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

After termination of the contract with the Chinn Railway Bureau, Melamchi Drinking Water Project demanded fro performance bank guarantee from the Himalayan Bank and an Advance payment guarantee amount from BOK.

BOK and HBL filed a case against Melamchi in 2012 and got a stayed order from Patan High court. Patan High court dismissed the stay order in 2012 and Melamchi got payment in the amount of 1.5 billion from both BOK and HBL

As both the bank demanded the money from China Railway Bureau-15, the Bureau-15 filed a case in Zhengzhou Intermediate People's Court in October 2012 and got a stay order against China Construction Bank, BOK and HBL Bank.

Nepal’s two leading banks have started the legal course against Chinese Construction Company in the Chinese Court. Although Nepali banks lost the case in the district, they were able to reverse it through appeal court.

In Henan Appeal court, BOK and HBL sought legal help from Dr. Gandhi Pandit, senior advocate, and Shailendra Dahal, Senior Advocate to work with Chinese lawyers. In high Court, Dr. Pandit and Dahal assisted Chinese lawyers and appeared in Chinese High count in Feb 2019.

Ashoke SJB Rana, chief executive officer of Himalayan Bank, said the decision of the Chinese court is a positive step towards settlement. “We hope that we will receive the counter-guarantee amount soon.”

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CEO HBL Ashoke SJB Rana

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.”

This is the second major international achievement of senior advocate Gandhi Pandit who also went to Italy to take part in a petition filed by Nepal Investment Bank Ltd against the Italian contractor Cooperativa Muratori & Cementisti di Ravenna.

Italian court ordered the Italian contractor Cooperativa Muratori & Cementisti di Ravenna to refund the money of NIBL. “I am happy to say that we are successful in our case in China. It was a major test case for Nepali lawyers to go to China and see the court proceedings and assist Chinese lawyers.”

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Senior Advocate Dr. Gandhi Pandit

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