Nepal Investment Bank Limited has won its legal battle against Cooperativa Muratori e Cementisti di Ravenna (CMC), the former Italian contractor hired by the Tanahu Hydropower Company, allowing the bank to recover Rs1.6 billion from the company.

“A three-member panel of judges on Tuesday ruled in favour of Nepal Investment Bank,” said Gandhi Pandit, founding partner at the law firm Gandhi and Associates, which represented the Nepali bank.

After Tanahu Hydro terminated its contract with the Italian company in February last year for failing to start work on the project, the hydropower company, which is owned by Nepal Electricity Authority, had seized the bank guarantee provided by the Nepal Investment Bank.

The Investment Bank in turn had sought the amount from an Italian bank—Intesa Sanpaolo—which had provided a counter guarantee for CMC. The Italian company had filed a case in March last year at the initial court in Bologna, asking for an injunction against the release of the bank guarantee. The initial court had issued an order in favour of CMC, which it continued in its second order.

Nepal Investment Bank had appealed to a higher Bologna court in November last year. Tuesday’s ruling will allow the bank to not only recover around Rs1.6 billion but also receive an additional 30,000 euros as compensation from CMC, said Pandit.

Tanahu Hydro had awarded a contract to CMC to prepare detailed designs and headwork on the project in October 2018. Nepal Investment Bank had provided a bank guarantee for the Italian company after receiving a counter guarantee from Intesa San Paolo, the Italian bank. Tahahun terminated the contract after the Italian company failed to start work.

“The verdict of the Italian court gives confidence to Nepali banks when it comes to issues of international bank guarantees,” said Pandit.