The High Court has dismissed an application by ferrochrome producer Zimbabwe Mining and Smelting Company (Zimasco) for a provisional order placing the company under judicial management after failing to service debts, which have ballooned to over $65 million.
In his founding affidavit filed at the High Court late December last year, Zimasco commercial director John Musekiwa said it was essential that the affairs of the company were without delay, placed under the control of a judicial manager since its indebtedness to banks and creditors had gradually increased from $38 million in 2009 to $65 million in 2015.
Musekiwa said following the loss of one of six furnaces due to a fire in 2006, the company’s productivity had been adversely affected and so had its financial position.
He said together with other directors, Li Jinqian, Li Cunxiang, Lu Xiangkun and Lin Chen, he had taken the view that the problems afflicting the smelting company were temporary and could be overcome if the company was placed under judicial management.
“There is a reasonable probability that the company, if placed under judicial management, will be able to properly pay its debts and turnaround its fortunes and it is also equitable that it be placed under judicial management.
“The company has been coming under increased pressure from its creditors, some of whom have instituted legal proceedings and obtained judgments.
“The company’s assets are, therefore, at the risk of being attached and sold into execution. There is a danger that, besides the bad publicity arising from the judgments, there is a real likelihood that an uncontrolled run of asset grabbing by creditors may take place,” he said in the application.
During hearing of the application a notice of opposition was later filed by creditors MBCA bank, Nedbank limited, Stanbic bank and Central Africa Building Society seeking that the matter be referred to the opposed roll and lender banks be entitled to amplify and supplement its papers.
But Zimasco argued that the respondents had no locus standi to either appear before the court or be heard since they were creditors and could only be properly before the court or be heard after services of the provisional order like every other interested partner, that is if the court granted an order.
High Court Judge Justice Tawanda Chitapi however ruled that the application was not properly before the court.
He said Zimasco filed the application unprocedurally and as a result breached some provisions of the Companies’ Act, thereby invalidating the application.
“In the result, I make the following order:
i) The purported notice of opposition filed by the four intervening banks seeking to be heard as the respondents is improperly before the court and is accordingly expunged from the record.
“ii) The four intervening banks have locus standi to oppose or be heard in opposition in the determination of the application by the applicant company for its placement under provisional judicial management. The intervener’s rights to oppose are only exercisable in terms of section 301 of the Companies Act,” he said.
“iii) The applicants’ application for a provisional judicial management order is hereby dismissed for non-compliance with section 299 of the Companies Act on the sequence of bringing such an application to court. — New Ziana