HA NOI (VNS)— SeABank's refusal to make a payment of VND150 billion (US$7.2 million) for corporate bonds that it guaranteed when Vinaconex-Viettel Finance Joint Stock Co (VVF) bought them from property developer Vina Megastar Group (VMG) is pushing the two businesses to the verge of a legal dispute.
On October 19, 2011, VMG issued bonds worth VND150 billion to VVF under a letter of guarantee issued by the former deputy general director of SeABank, Nguyen Thi Huong Giang - who was later dismissed from April 28, 2012.
According to VVF, these bonds were due but VMG has yet to make either the principal or interest payment to VVF, so the group asked SeABank to perform its obligation as guarantor but the lender refused to make the payment.
In a press release, SeABank said the letter of guarantee is "not in compliance with the law", adding that Giang's underwritting for the bond issue was beyond her jurisdiction. She was only authorised to guarantee for contracts of no more than VND30 billion ($1.4 million), while any deals valued at over VND70 billion ($3.3 million) must be approved by the board of directors.
The bank also said Giang did not follow the bank's procedures in issuing a letter of guarantee and the contract lacked a number and consequently was not recorded in its management database. SeABank also claimed to have not received the guarantee fee.
During the time Giang was SeABank's deputy general director cum director of the Hai Ba Trung branch, she signed letters of guarantee for other companies which were also against the law, the bank said. It added that such violations were her personal liability and the bank would not be responsible to fulfil the obligations arising from the illegal contracts made by her.
However, Pham Thanh Son, laywer of VVF, said in a press release that the guarantee contract was lawful and the entire investment process "is transparent and the actual investment money was made through an account at SeABank".
Son also said the bank's regulation of limiting authorisation to its executives to sign a letter of guarantee was not included in the content of the contract and VVF only concerned the legal status of SeABank in the deal rather than the individual liability of any bank's executives.
However, Son said VVF did not intend to "declare war" with SeABank and the two sides were negotiating to find a peaceful solution.
According to laywer Truong Thanh Duc from the Ha Noi Bar Association, if the case was brought to the court, the court would refer to many laws and regulations in order to issue a verdict. As many regulations in this area are unclear, it is difficult to say who would win.
Duc told the publication Dau tu chung khoan (Securities Investment) that there have been a few recent cases where banks have placed responsibility on individuals to avoid being liable for payment guarantees.
According to many observers, whether it is right or wrong, this dispute will negatively affect the bank's reputation. In addition, this case also shows instability in the credit risk management of commercial banks. — VNS