The winding-up proceedings that ZCCM Investments Holdings has instituted against Konkola Copper Mines (KCM) are expected to continue in the Lusaka High Court following the court’s refusal to stay proceedings and refer parties to arbitration.
Lusaka High Court Judge Anessie Banda-Bobo yesterday dismissed the application by Vedanta Resources Holdings Limited, saying it was not a proper case to refer the parties to arbitration.
She ruled that staying the proceedings at the instance of Vedanta would be contrary to the wishes of ZCCM-IH and KCM, who are the parties to the proceedings.
In this matter, ZCCM-IH has petitioned the Lusaka High Court, 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.
But Vedanta Resources Holdings, the majority shareholder of KCM, had applied for an order to stay proceedings and refer the parties to arbitration pursuant to section 10 of the Arbitration Act.
However, KCM through its lead counsel Bonaventure Mutale opposed Vedanta’s application saying Vedanta was not a party to the proceedings and could not move the court under section 10 of the Arbitration Act.
He submitted that Vedanta’s motion was misconceived and should be dismissed.
ZCCM-IH equally prayed that Vedanta’s application be dismissed.
Delivering a ruling yesterday, justice Banda-Bobo dismissed Vedanta’s application saying it was not a proper case to refer the parties to arbitration.
She stated that she was duty-bound to consider the third-party interests in deciding the fate of Vedanta’s application despite there being a dispute between parties to the Shareholders Agreement (SHA).
Justice Banda-Bobo observed that records indicated that creditors of KCM who wished to be heard on the winding-up petition had filed Notices of Intention.
“It is my understanding that where third party-rights are involved in liquidation proceedings, the private agreement between shareholders and a company to submit their dispute to arbitration is displaced and rendered inoperative. This is because there are other competing interests quite apart from the interests of the parties to an arbitration agreement, which interests can only be taken care of through the court process,” she stated.
“Secondly, creditors of a company are in every sense alien to an arbitration agreement between the company and other entities. An arbitration clause is not applicable to them. While creditors of KCM are not, strictly speaking, parties to these proceedings, their Notices of Intention to be heard on the petition are before me. To that extent, they stand in the same shoes as Vedanta or any other person who has given such notice.”
Justice Banda-Bobo observed that staying the proceedings and referring parties to arbitration would leave KCM’s creditors who had indicated their interest in the proceedings, without a remedy.
She added that it would also wholly defeat the objects of the Corporate Insolvency Act.
Justice Banda-Bobo further stated that staying the proceedings at the instance of Vedanta would be contrary to the wishes of ZCCM-IH and KCM, who were the parties to the proceedings.
“Even assuming that there were no third party interests involved in the proceedings before me, I am not satisfied that Vedanta is procedurally in a position to make the application before me. The parties before me namely ZCCM-IH and KCM are not averse to the proceedings. To allow a stay of these proceedings at the instance of Vedanta, an entity not sued by ZCCM-IH, would be contrary to the express wishes of the parties themselves,” she said.
Justice Banda-Bobo noted that the Court of Appeal strictly interpreted a ‘party to the proceedings’ as one who had been sued, adding that it did not extend to one who had merely joined proceedings for purposes of obtaining a stay of an action commenced against another.
She therefore dismissed Vedanta’s application and granted leave to appeal.
“The court reasoned that the provision was not meant to be used to force existing parties, who did not want to go to arbitration, to do so at the instance of a party joining proceedings. Based on the foregoing, I am of the view that this is not a proper case to refer the parties to arbitration. Therefore, the application to stay proceedings before this court and to refer the parties to arbitration is hereby dismissed. Each party to bear own costs,” ruled justice Banda-Bobo.