BOK and Himalayan Bank got back counter guarantee money from China

KATHMANDU: Bank of Kathmandu and Himalayan Bank got the amount of counter guarantee given for the contract of Melmachi Water Supply Project. After 10 years, Himalayan Bank and Bank of Kathmandu in China won the case and the lawyer fighting the case would get the money back.

Ahoke Rana, chief executive officer of Himalayan Bank confirm that both the banks has received amount of counter guarantee given for the Melamchi project.

The China Railway, which was entrusted with the tunneling work of the Melmachi water supply project, gave the company’s guarantee to the China Construction Bank of China, while its counter guarantee was given by the Himalayan Bank of Nepal and the Bank of Kathmandu.

The contract for Melmachi Water Supply Project was canceled due to non-completion of work by China Railway as per the contract. Melamchi water supply project took guarantee amount from Nepalese bank. However, after the Chinese bank China Construction Bank did not pay the dues for the counter guarantee, the two banks went into the legal process.

In 2009, a contract was signed between the Melmachi Water Project and China Railway, a Chinese construction company. However, the agreement was broken in 2012.

After the contract was terminated, the Melmachi Water Project took money from Himalayan and Bank of Kathmandu in the form of bank guarantee. However, after the Chinese bank company, which has the guarantee of the contractor company, failed to pay the amount on account of counter guarantees to both the banks, the banks went through the process of court.

Two years ago, both the banks had won the case. But the Chinese bank, which lost the case at that time, had to go to the High Court. However, now after winning the case of Nepali Bank in the High Court also, China Construction Bank has to return the money of both the banks.

Both the banks have given reports for refund in the Chinese court. Bank of Kathmandu will get back approximately 66.25 million Nepalese rupees and Himalayan Bank 70 million rupees after paying the counter guarantee amount of the mismatched water supply.

Nepali legal practitioner Dr. Gandhi Pandit said that two years ago he had won a case in China to get the amount of counter guarantee from the lower level. He said that Nepali Banks will get the money back as there is no place left to appeal the money after winning the case from the High Court.

Both these banks had given counter guarantee to the Chinese contractor who got the contract to work on the Melamchi project in Chait 2065 BS.

China Railway 15 Bureau brought a performance guarantee counter of the Melamchi water supply project from China Construction Bank Corporation. However, due to delays in the construction of the tunnel, the government terminated the contract with China Railway on 9 October 2016. After winning the case from the court, the Chinese company forfeited the guarantee in Dubai Bank on 1 June 2017.

A performance guarantee of 1.4 million euros and US$6.6 million (about Rs 84 million) from Bank of Kathmandu and a guarantee of $6.6 million (about Rs 66 million) from Himalayan Bank were seized. However, the China Construction Bank Corporation of China is yet to pay the amount for the counter guarantee to both the banks. The issue of payment of this guarantee has also been involved in various processes in China.

Following the forfeiture of the guarantee, China Railway 15 filed a case in China’s lower-level court, the Zhengzhou Intermediate People’s Court, stating that it had fraudulently paid. The lower court also stood in favor of the Chinese company.

Himalaya and the Bank of Kathmandu then filed an appeal against the lower-level decision in the Provincial People’s Court of Henan, China.