DHA desalination plant yet to start working as legal battle continues

Investment bank had won lawsuit demanding plant authorities to pay back Rs165m

KARACHI:

The fate of the country's first-ever privately installed power generation and water desalination plant hangs in limbo, as the Defence Housing Authority (DHA) and the money-lending bank continue to fight over its assets instead of making it operational.

In the latest development, DHA Cogen Limited has challenged the Sindh High Court's decision in favour of IGI Investment Bank, which had filed a lawsuit demanding back Rs165 million it lent to the plant.



The desalination plant was installed over 10 acres in 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 every 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. By linking the power plant with a thermal desalination facility, almost 85% of the energy contained in the natural gas was to be utilised.

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 recovery of Rs165 million through liquidation.

The bank said that it had provided finance of Rs150 million to DHA Cogen Limited to establish the plant. It said it had extended the short-term finance facility in terms of an agreement dated November 28, 2007. DHA Cogen Limited committed breach of the terms and conditions, as 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 had initially failed to commence its commercial operations within the stipulated time frame. 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 court was pleaded to order DHA Cogen to wind up its operations and appoint an official liquidator with all powers of administration of the defendant's assets.

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

On January 25 this year, the single SHC bench headed by Justice Muhammad Shafi Siddiqui announced its verdict in favour of the IGI Bank to recover the claimed amount from DHA Cogen Plant. But recently, DHA Cogen also filed a lawsuit, 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.

After the initial hearing, the SHC bench issued notices to the defendants to file their comments by a date to be notified by the office later.

Published in The Express Tribune, April 2^nd,  2016.