Melamchi board to seek NRB help to secure bank guarantee amount

KATHMANDU, JUN 09 -

Melamchi Water Supply Development Board (MWSDB) has decided to seek help of Nepal Rastra Bank (NRB) to secure bank guarantee amount that former tunnel work contractor China Railway 15 Bureau Group had pledged through China Construction Bank.

After the termination of the contract with the Chinese firm in September 2012, the project sought to confiscate the guarantee amount, but the firm filed a case against MWSDB in a Chinese court. As a result, the Chinese bank expressed its inability to release the guarantee amount without the court’s order.

Himalayan Bank Limited (HBL) and Bank of Kathmandu (BoK) had provided counter guarantee to the Chinese bank in the form of performance security of $6.62 million and guarantee for advance payment of $6.62 million and 1.4 million euros. The banks are also filing a court case to secure the release of the guarantee amount.

MWSDB Director General Krishna Prashad Acharya said an MWSDB board meeting on Thursday decided to send a letter to the Finance Ministry, asking the latter to seek the central bank’s help for securing the amount.

However, the Nepali banks are not satisfied with the board in regard to fighting the legal case against the Chinese firm. “The former contractor has made the board chief defendant, mentioned us as defendants. But the board has not been cooperative enough to produce necessary documents to win the case,” said Ashoke Rana, chief executive officer of Himalayan Bank.  “The Melamchi board looks neither interested to fight the legal case, nor is it cooperating with our lawyers,” he said.

Earlier, the Chinese Bank had promised to fight the court battle with the contractor seeking help from Nepali defendants. After failing to secure the guarantee amount, Nepali banks have also decided not to do any business with China Construction Bank and would adopt maximum caution when dealing with any Chinese bank.

Meanwhile, the board has been preparing to seek compensation from the two Nepali banks that gave counter guarantee to China Construction Bank. Acharya, however, said compensation would be sought after the bank guarantee has been released.

Source: The Kathmandu Post