A division bench of Judges Bhim Bahadur Bohara and Shiva Raj Adhikari on Sunday annulled the petition filed by the bank stating that the counter guarantee provided was unconditional. The verdict has paved the way for the Nepal Rastra Bank to deduct the counter guarantee amount from the banks for MDWSP.
The banks had moved the court as the MDWSP requested Nepal Rastra Bank to get the guarantee amount.
The banks had issued counter guarantees to the international bank guarantee provided by the second largest Chinese bank, the China Construction Bank (CCB), but they became high and dry after MWSDB terminated its agreement with China Railway 15 Bureau Group Corporation, the contractor to dig a crucial 26.3-km tunnel for the Melamchi Water Supply Project.
HBL has to pay US$ 6.665 million while BOK US$ 6.2 million and 1.40 million Euros to MDWSP for providing the counter guarantee on behalf of CCB. CCB had stood guarantee for the China Railway 15 Bureau Group.
Following the termination, the Chinese contractor moved the Zhengzhou Intermediate People's Court in Henan, China to halt the CCB from paying MDWSP the guaranteed amount. As the Chinese court stayed the payment of the guaranteed amount, the CCB denied releasing guarantee provided against performance bond issued by the Melamchi project contractor.
The Nepali banks have been opposing the MDWSP's stand on counter guarantee payment from them saying that the project should fight a legal battle with the Chinese contractor.
Following several pleas of the domestic banks, the government had also begun diplomatic initiatives for reimbursement of the counter guarantee amount.
Finance Minister Ram Sharan Mahat, during his China visit in August last year had formally raised the issue of delay in reimbursement of the guarantee amount that the former tunnel work contractor had pledged through China Construction Bank during a meeting with his Chinese counterpart Lou Jiwei.
The agreement between MDWSP 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 delaying the work.
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