In an ongoing multimillion dollar legal battle, the Sindh High Court on Tuesday granted stay order in favour of HUBCO which had sought a restraining order against the encashment notice served by China Power Hub Generation Company.
The court order, issued in connection with an intra-court appeal, read that there was no default on the part of the appellants towards contractual obligation whereas the project had been completed in all respect.
During the proceedings, the counsel for HUBCO (Hub Power Company Limited) that the learned single-member bench was not justified in dismissing the application without assigning reasons through short order in spite of the fact that their client prima-facie had a good case.
It was also stated that the consortium (China Development Bank) did not issue the completion certificate of the project in spite of the fact that the power generation had started since 2010.
Moreover, profit to the tune of around $400 million was already been accrued and $350 million repayments have been made to the Chinese lenders.
The legal tussle had started right after an encashment notice worth $150 million was served by China Power Hub Generation Company (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.
Through the notice, CPHGC raised a technical objection regarding alleged non-fulfillment of one of the requirements – 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 it approached the National Bank of Pakistan (NBP) for further extension, the bank expressed its inability on account of restrictions in the State Bank of Pakistan (SBP) regulations.
Therefore, the appellants, who had already performed their part of an obligation as per the agreement and did not commit any default, were placed in a highly-disadvantageous position.
In its order, the SHC also mentions that 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 court 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 appeal while the issuance of the completion certificate of the project is within their domain.