DHA Cogen Limited challenges single bench’s decision

Company had been taken to court for recovery of loan

KARACHI: There finally appears to be hope that the country’s first privately installed power generation and water desalination plant will resume operations, as its operator, DHA Cogen Limited, says it is trying to make the plant functional.

The plant is currently under litigation, as the bank that lent money years ago to DHA Cogen Limited has taken it to court for recovery of the loan.



In the latest development, DHA Cogen Limited has approached the Sindh High Court (SHC) against a decision by its single bench, which had dismissed the company’s applications for granting of leave to defend in the matter in which it had been ordered to pay Rs165 million to IGI Investment Bank.

IGI Investment Bank had filed a lawsuit demanding the return of the Rs165 million it lent to the company. The desalination plant was installed over 10 acres of land in Defence Housing Authority’s (DHA) Phase-VIII but it has yet to start full-fledged operations. Eventually, the banks that loaned money for its operations started demanding their investments back.

The plant had the capacity to produce 94 megawatts of energy and approximately 14 million litres of drinking water per day. It was considered to be a key component of the $600-million infrastructure project undertaken by DHA.

Upon completion, the project was supposed to cater to the water and power needs of approximately 800,000 people.

Unfortunately, the dispute over delays in initiating its commercial operations has taken the matter to court. One of the lenders, IGI Investment Bank, went to court in April, 2014, seeking the recovery of the Rs165 million through liquidation of the company’s assets.

The bank said that it provided financing of Rs150 million to DHA Cogen Limited to establish the plant. It said it had extended the short-term finance facility through an agreement dated November 28, 2007. DHA Cogen Limited committed a breach of the terms and conditions of the agreement when it initially failed to pay the amount of the finance facility, it added.

According to the bank, the defendant was served a legal notice on April 10, 2009, asking DHA Cogen to pay liabilities amounting to Rs174,145,233 within seven days but it failed to pay yet again.



The bank had also claimed that DHA Cogen Limited had initially failed to commence its commercial operations within the stipulated time. Once commenced, the operations were suspended between September 12, 2008, and February 22, 2009. The operations were suspended for the second time in May, 2010. According to the bank, the audited accounts of the defendant showed that its liabilities had exceeded the value of its assets. It can no longer do business in a commercially viable manner, the bank contended.

The court was pleaded to order DHA Cogen Limited to wind up its operations and appoint an official liquidator with all powers of administration of the defendant’s assets.

The bank also sought the appointment of a provisional manager, as it claimed that DHA Cogen Limited was likely to dispose of its assets, which would deplete the security credit in favour of the plaintiff and the other creditors. The defendant may attempt to manipulate its record, the plaintiff claimed.

On January 25 this year, the single SHC bench comprising Justice Muhammad Shafi Siddiqui announced its verdict in favour of IGI Bank to recover the claimed amount from DHA Cogen Limited.



However, DHA Cogen Limited also filed a lawsuit recently, stating that the SHC’s single bench had erred in its verdict while decreeing the suit in the bank’s favour. The division bench was, therefore, pleaded to set aside the single bench’s order.

On Wednesday, DHA Cogen Limited’s lawyer informed the two judges that they were not aware of the date of the proceedings, therefore the order for payment was passed.

Later, an application seeking condonation of time to seek leave to defend was filed, but the single bench dismissed the same, the lawyer added.

The lawyer added that the plaintiff was trying to resume functions of the plant with the help of other banks, but IGI Investment Bank was attempting to hamper these efforts.

Therefore, the court was pleaded to set aside the single bench’s order.

Advocate Arshad Warsi filed power of attorney on behalf of the Finance and Trade Centre Limited.

The bench wrote in its order that, “Nobody is in attendance for the respondent banks.”

“They are called absent. Hence, the service upon said respondents is hereby held good,” observed the judges, fixing the matter on December 15 for further hearing.

Published in The Express Tribune, November 24^th, 2016.