December 06, 2022 (MLN): In a major breakthrough, the Sindh High Court (SHC) has granted a stay order on the instant high court appeal filed by Hub Power Company Limited (HUBCO) seeking a restraining order against the encashment notice served by China Power Hub Generation Company (CPHGC).
HUBCO’s side argued that the learned Single Judge is not justified to dismiss the application without assigning reasons through short order in spite of the fact that the HUBCO has a prima-facie good case in their favor for grant of ad-interim relief.
“According to learned counsel for the appellants, there is no default on the part of the appellants towards contractual obligation between the parties, whereas, the project has been completed in all respect, however, on account of default on the part of consortium banks i.e., China Development Bank (Agent),” the court order read.
So far, the consortium has not issued the completion certificate of the project in spite of the fact that after completion of the project it has started producing electricity since 2010, whereas, the profits to the tune of about $400 million have already been accrued and $350mn repayments have been made to the Chinese lenders.
The legal battle started right after an encashment notice worth $150 million was served by CPHGC under the Standby Letter of Credit (SBLC), on the issuing bank provided by HUBCO. In response, HUBCO initiated legal proceedings against the encashment notice to safeguard the interests of its shareholders.
CPHGC served encashment notice by raising a technical objection regarding alleged non-fulfillment of one of the requirements i.e., the opening of the revolving account by the government of Pakistan, saying that the lenders will withdraw their investments if the guarantee is not extended as per terms of the agreement.
Earlier, HUBCO had extended the guarantee once at the instance of respondents, however, when HUBCO approached the National Bank of Pakistan (NBP) for further extension, the bank expressed its inability to extend the same on account of restrictions in the Regulation of the State Bank of Pakistan (SBP), therefore, the appellants, who were already performed their part of an obligation as per the agreement and have not committed any default, have been placed in a highly disadvantageous position.
Given this, there is a probability that in case the guarantee is allowed to encash an amount of Rs35 billion will be required to be paid by HUBCO, which will have a serious financial impact on the remaining power projects of the company.
keeping in view the facts as stated above, and in order to place both the parties at an equal level field to protect their rights, without causing any injury or placing any party in a disadvantageous position, the SHC deems it appropriate to hear the parties in detail in order to ascertain as to whether there has been any default on the part HUBCO.
The court also demanded to hear the instance of NBP as well as the consortium (China Development Bank), who have not been impleaded as a party either in the suit as well as in the instant High Court Appeal while the issuance of the completion certificate of the project is within their domain.
"Accordingly, issue notice to the respondent No.4 as well as consortium bank l.e. China Development (Agent) to be served through the first three modes for December 06, 2022, which reply/objections, if any, be filed with advance copy to the lost counsel for appellants," the order added.
As mentioned above, the hearing was supposed to be held on today however, it got rescheduled on December 09, 2022, and till the next date of the hearing, the status quo shall be maintained in respect of the Standby Letter of Credit.
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Posted on: 2022-12-06T12:49:37+05:00
