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High Court dismisses Vedanta application to stay KCM liquidation, refer parties to arbitration

THE Lusaka High Court has dismissed an application by Vedanta Resources Holding limited to stay winding up proceedings of Konkola Copper Mines and refer parties to arbitration.

High Court judge Annessie Banda-BoBo ruled that the matter was not a proper case to refer parties to arbitration.

This is in a matter where ZCCM-IH has petitioned KCM for liquidation seeking an order that it be wound up for engaging in tax evasion.

On July 29, Vedanta Vedanta had asked the court to stay proceedings and refer parties to arbitration pursuant to section 10 of the Arbitration Act.

The issues for determination are whether there was a dispute between the parties and whether the matter should be stayed and referred to arbitration.

When the matter came up for hearing in chambers, KCM through its lead counsel Bonaventure Mutale [appointed by provisional liquidator Milingo Lungu] opposed Vedanta’s application to refer the parties to arbitration and asked the court to dismiss the application with costs as the disputed issues were not arbitrable.

Mutale argued that the contributor (Vedanta) was not a party to the proceedings and could not move the court under section 10 of the Arbitration Act.

“The corporate insolvency Act has granted this court a jurisdiction of winding up companies. We submit that there is no dispute and pray for a dismissal of this application,” Mutale said.

However, Vedanta, through its lawyer Mulenga Mundashi prayed that the court sustains its application, arguing that the contributor was a party to the shareholders’ agreement.

Mundashi said ZCCM argued that there was no dispute because there was an admission of insolvency.

He said there had been an alleged admission by the acting counsel of the mining firm, which was made under the directive of Lungu appointed by the petitioner.

“Our client is a party to these proceedings. I therefore pray that this court sustains our application,” said Mundashi.

In her ruling dated August 7, justice Banda-BoBo said that Mainsa’s affidavit must not be relied upon in the determination of the application to stay proceedings and refer parties to arbitration.

She said the liquidation proceedings were governed by statute and the court had exclusive jurisdiction to oversee such a process, the ultimate aim of which was founded in public policy considerations such as the protection of the interests of third parties.

The court said among such third parties were creditors of a company which was sought to be wound up.

Justice Banda-BoBo said that where third party rights were involved in liquidation proceedings, the private agreement between the shareholders and a company to submit their dispute to arbitration was displaced and rendered inappropriate.

She said creditors of a company were alien to an arbitration agreement between the company and other entities.

An Arbitration clause is wholly inoperative against creditors and other third parties whose claims were subject of winding up proceedings, she said.

“In this case before me, the record indicates that notices of intention have been filed by creditors who wish to be heard on the winding up petition. They stand in the same shoes as the contributor (Vedanta) or any other person who has given notice to be heard on petition,” she said.

“To stay the proceedings before me and give way to arbitration would be to leave the respondent’s (KCM) creditors who have indicated their interest in the proceedings without a remedy. This wholly defeats the objectives of the Corporate Insolvency Act.”

Judge Banda-BoBo ruled that assuming that there were no third party interests involved in the proceedings, she was not satisfied that the contributor was procedurally in a position to make an application before her.

“To allow a stay of the proceedings at the instance of the contributor, an entity not sued by the petitioner, would be contrary to the express wishes of the parties themselves. This is not a proper case to refer parties to Arbitration. The application to stay the proceedings before this court and refer parties to arbitration is hereby dismissed,” Ruled the court.

Justice Banda-BoBo ordered parties to bear their own costs and granted Vedanta leave to appeal.

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