The Kathmandu District Court on Friday rejected the appeal of Spanish firm Constructora Sanjose, the contractor for the Tribhuvan International Airport (TIA) improvement project, seeking a prohibitory order against the termination of its contract.

Judge Rishikesh Wagle turned down the appeal filed on December 7, said Dhurba Upreti, spokesperson for the Kathmandu District Court.

The Civil Aviation Authority of Nepal (Caan), TIA Improvement Project Directorate and Japan Airport Consultants Inc, in association with GEOCE Consultants, were named as defendants.

Meanwhile, with regard to a separate writ filed by the Spanish firm, the Patan High Court on Thursday stayed Caan’s decision to seize an advance payment guarantee of Rs1.05 billion and a performance bond of Rs600 million deposited by the contractor. The High Court has summoned the two parties to a hearing scheduled for Monday.

Last Saturday, Caan said adios to the Spanish firm citing nonperformance by issuing a ‘notice of termination’. Caan is the executing agency for the Asian Development Bank (ADB) funded project.

The civil aviation regulatory body had seized the advance payment guarantee and the performance bond after the contractor failed to perform its obligations under the contract. Both bonds are commonly used in the construction industry as a means of insuring a client against the risk of a contractor failing to fulfill contractual obligations.

The Spanish company had been given two deadline extensions and a number of ‘notice to correct letters’, but it showed no interest in moving the project forward.

The $92-million air transport capacity enhancement project, which has been declared problematic, has the longest duration contract. Originally, the project was expected to be implemented in about 67 months following its launching in December 2010.

The project’s completion deadline was extended to 2015 and then to 2016, but after even that looked unachievable, the date was moved forward to 2018. As of now, the project has achieved only 17 percent physical progress.

The ADB has provided $80 million in loan and grant and the government has put up $12 million for the scheme.

Caan said it has decided to invite fresh tenders to resume the runway extension and terminal building works within one and a half months. The contractor has claimed Rs1.17 billion in compensation. However, Caan engineers have estimated that the compensation will come to Rs90-100 million if the agreement is terminated. After the completion of the project, TIA will be able to handle more than 5.85 million passengers annually and accommodate bigger aircraft.