Opinion regarding closing of the file of Bank Guarantee No. BND-GNTEE/01/001/53405 dated 03.01.2001 for US $ 705,698, counter Guaranteed by Canara Bank, New Delhi vide No. 0179 FOG 04 2000 dated 23.12.2000

Dated: ……..

 Mr. X

Senior Executive Vice President

Bank Asia Limited

Corporate Office

Tea Board Bhaban, 1st Floor

111-113 Motijheel C/A

Dhaka-1000

Dear Sir

Re: Opinion regarding closing of the file of Bank Guarantee No. BND-GNTEE/01/001/53405 dated 03.01.2001 for US $ 705,698, counter Guaranteed by Canara Bank, New Delhi vide No. 0179 FOG 04 2000 dated 23.12.2000

We refer to your letter vide No.BA/CO/Legal-gntee/02/08/08 dated February 06, 2008 on the above subject.

From the facts it appears that a Performance Bank Guarantee being No. BNSD-GNTEE/01/001/53405 dated 03.01.2001 for US $ 705,698.00 (the “Bank Guarantee”) was issued by Bank of Nova Scotia (predecessor of Bank Asia Limited) in favour of M/s. Z-Daqing Joint Venture (“Z-Daqing”) guaranteeing the performance supply contract by Saw Pipes Limited (“Saw Pipes”). The Bank Guarantee was issued against Counter Guarantee No. 0179 FOG 04 2000 dated 23.12.2000. Subsequently Z-Daqing invoked the Bank Guarantee and lodged claim with Bank Asia Limited (“Bank Asia”). Saw Pipes Limited (“Saw Pipes”) filed a Suit in the High Court of Delhi with an injunction application whereupon the Delhi High Court passed an ad-interim injunction order restraining Z Daqing from encashing the Bank Guarantee and the Canara Bank from making payment under the Bank Guarantee. Thereafter, The Delhi High Court passed an exparte Decree and Judgement and granting permanent injunction in favour of the Saw Pipes and against Z Daqing restraining it from seeking the remittance of the amount of the Bank Guarantee. Being persistently pressurised by Z Daqing to make the payment under the Bank Guarantee, Bank Asia being added as a party to the above Suit took steps in the Delhi High Court to vacate the injunction. Bank Asia appointed M/s. Tiku & Tiku (“Tiku & Tiku”), a reputed law firm from Delhi as their counsel. Tiku and Tiku filed an application on behalf of Bank Asia for setting aside the said exparte Decree and Judgement. Later on, Z Daqing vide their letter dated 07.09.2005 informed Bank Asia that they took a conscious decision to release the Bank Guarantee and requested Bank Asia to instruct their counsel Tiku and Tiku to move an application for withdrawing the application for setting aside the exparte Decre and Judgement. Bank Asia claimed the legal costs of taka US $ 24,000.00 with up-to-date interest from Z Daqing vide letter 18.09.2005. Thereafter, Bank Asia served a legal notice dated 30.04.2006 upon Z Daqing and a Reminder Legal Notice dated 10.07.2007 for the legal costs. Finally, Z Daqing vide letter dated 27.09.2007 sent a cheque of taka 7,93,048.00 to Bank Asia being 50% of the total cost as full and final settlement of the subject matter. Bank Asia accepted the cheque as full and final settlement of the subject matter.

In these circumstances, you require our legal opinion regarding whether you can close the file on the matter since you haven’t yet received the original guarantee.

OUR OPINION:

From the facts we understand that there have been amicable settlement between Bank Asia and Z Daqing in that Z Daqing already paid taka 7,93,048.00 being 50% of the total legal costs incurred by Bank Asia for appointing Tiku and Tiku, a reputed law firm from Delhi for pursuing the legal steps in the Delhi High Court, regarded as full and final settlement of the subject matter. But since the Bank Guarantee is still in possession of the Z Daqing, it is likely that Sunnit Daqing may raise the claim of the amount mentioned in Bank Guarantee. In the circumstances, our suggestion to Bank Asia would be to make a claim to Z Daqing to return the original Bank Guarantee and to forward a certified copy of the Board Resolution passed by Z Daqing in terms of which it had taken a conscious decision to release the Bank Guarantee. After having the original Bank Guarantee and the certified copy of the said Board Resolution, Bank Asia may close the file on above subject-matter.

If you have any further inquiries please do not hesitate to contact us.

Thanking you.

Yours Sincerely,

For: The Lawyers & Jurists

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