VEDANTA Resources Holdings Limited has asked the Lusaka High Court to give directions regarding the extent of Konkola Copper Mines’ (KCM) provisional liquidator Milingo Lungu’s powers in light of the Court of Appeal’s decision to stay the winding-up proceedings involving KCM and refer the dispute to arbitration.
Vedanta also wants the High Court to give directions on whether the Provisional Liquidator has the power to restructure or reorganise KCM by splitting its operations between two separate entities, and whether the transfer of the mining company’s property without the approval of the Court is void pursuant to section 62 of the Corporate Insolvency Act.
It further wants directions on whether the powers granted to Milingo by the High Court extend to the Provisional Liquidator incorporating subsidiaries of KCM and whether the said Provisional Liquidator is able to exercise the powers granted by the Court over subsidiaries of KCM, among others.
This is a matter in which ZCCM-IH petitioned the Lusaka High Court on May 21, 2019, seeking an order that KCM should be wound up for engaging in tax evasion and being managed in a manner detrimental to its interest, among other allegations.
On the said date, High Court Judge Anesse Banda-Bobo granted an ex-parte order appointing Milingo Lungu as KCM Provisional Liquidator.
By virtue of the said ex-parte order, Milingo was granted powers to: carry on the business of KCM so far as was necessary for beneficial winding-up, make any compromises or arrangements with creditors, take possession, custody and control of all assets of KCM, bring or defend any action or other legal proceedings in the name and on behalf of KCM and dispose of assets by public tender or the most transparent manner under the circumstances, among others.
However, on November 20, last year, the Court of Appeal ordered a stay of the winding-up proceedings that ZCCM-IH has instituted against KCM in the High Court and referred the matter to arbitration as requested by Vedanta Resources Holdings Limited.
And last month, Lusaka High Court Judge Winnie Mwenda dismissed a case where three Vedanta Resources companies sued Milingo over plans to restructure and reorganise KCM into two separate subsidiary companies, namely KCM SmelterCo Limited and Konkola Mineral Resources Limited.
Judge Mwenda also discharged the ex-parte order of injunction granted to the three companies, restraining Milingo from undertaking any reorganisation of KCM or from transferring, disposing or selling of its assets.
But in an affidavit in support of summons for directions filed recently in the main winding-up petition before Judge Banda-Bobo, Deepak Kumar, a director and company secretary of Vedanta Resources Holdings Limited, stated that the ex-parte order appointing the Provisional Liquidator ordered that an inter-partes hearing regarding the appointment of the Provisional Liquidator was to take place on May 24, 2019.
He, however, stated that the record would show that there had been no inter-partes hearing in respect of Milingo’s appointment as provisional liquidator.
Kumar further stated that there were currently arbitration proceedings, which were ongoing in South Africa between ZCCM-IH and Vedanta Resources Holdings Limited.
He added that the Provisional Liquidator has continued to undertake activities that amount to conducting an actual winding up of KCM by stripping the mining company of its assets despite being fully aware of the judgement of the Court of Appeal and the stay of the winding up proceedings in which he was appointed.
“Further, it has now been announced to employees of KCM and widely reported in the media that the Provisional Liquidator intends to reorganise KCM by transferring its business and assets to two separate entities, firstly, KCM SmelterCo Limited and secondly, Konkola Minerals Resources Limited (KMRL). The intended reorganisation of KCM will involve the transfer of KCM’s entire business and assets (and its employees) to either SmelterCo or KMRL for purportedly no consideration, thereby, dissipating all the assets of KCM during the stay of the winding up petition as ordered by the Court of Appeal and during the pendency of the arbitration proceedings,” Kumar stated.
He stated that KMRL was incorporated on November 23, 2020, exactly three days after the decision of the Court of Appeal that determined that the winding-up proceedings before the High Court should be stayed and the dispute is referable to arbitration.
Kumar added that following his appointment by the High Court, the Provisional Liquidator had purportedly taken steps to control and manage SmelterCo, a separate legal entity from KCM.
He stated that he verily believed that if it was allowed to proceed, the effect of the reorganisation would be to hollow out KCM completely and move all of its assets into SmelterCo or KMRL for nil consideration and contrary to the original rationale of appointing the Provisional Liquidator.
Kumar further stated that the intended reorganisation of the business of KCM would more importantly mean that all the assets of KCM would no longer be under the supervision of this court as the assets would then be under either SmelterCo and KMRL’s management and control.
He stated that he was advised by Vedanta’s advocates on record that the Provisional Liquidator had no power to reorganise the business, assets and affairs of KCM in the manner proposed.
“I am seeking the indulgence of this honourable court to give directions as to the propriety of the actions being undertaken by the Provisional Liquidator who was appointed by this honourable court,” stated Kumar.