THE Lusaka High Court has censured Konkola Copper Mines provisional liquidator Milingo Lungu for signing a consent order on behalf of Vedanta Resources Holdings limited and discontinued a matter against himself, Rephidim Mining and Technical Suppliers Limited, Mimbula Minerals and Moxico Resources Limited in a matter where they were sued by Vedanta and KCM for trespass.
Lungu discontinued the case after the Court granted an injunction to Vedanta Resources Holding Limited, the majority shareholder of KCM, restraining him from selling the company’s mining rights areas to Rephidim, Mimbula and Moxico Resources limited at a sum of US$20,000,000.
Justice Bonaventure Mbewe said the discontinuance of the suit should have been in relation to KCM as his lawyers do not act for Vedanta, which had the right to bring an action in its own name, including the rights to exercise its residual powers to challenge the winding up proceedings or the appointment of the provisional liquidator for KCM.
“I hereby set aside the notice of discontinuance in respect of the notice purporting to discontinue the whole action and restrict it to the discontinuance of the action by KCM only,” justice Mbewe said.
This is in a matter where KCM and Vedanta Resources Holdings limited sued Rephidim Mining and Technical Suppliers Limited, Mimbula Minerals and Moxico Resources Limited for trespassing on its mining rights areas.
KCM and Vedanta sought a declaration that the defendants have no authority to enter upon Lot 694/M and the remaining extent of Lot 564/M or the land in Nchanga Mine area without the prior consent of the plaintiffs.
KCM and Vedanta wanted an order setting aside the consent order dated September 10, 2019 under appeal number 74/2018.
KCM and Vedanta also sought an order of injunction restraining the three mining companies from enforcing the consent order in the said appeal until final determination of the matter and that the defendants be restrained from entering and remaining on Lot number 694/M Chingola Zambia.
When the matter came up for hearing, Vedanta lawyers Nchito and Nchito said that Maxwell Mainsa, an advocate employed by KCM, under the direction of Milingo Lungu, discontinued the actions brought by the directors of KCM.
State council Nchima Nchito argued that the appointment of Mainsa as the legal counsel for KCM as well as the purported notice of discontinuance of the proceedings he filed at the direction of Lungu were irregular and misconceived and an abuse of court process.
Nchito said Lungu cannot take over a lawsuit against himself and purport to discontinue it as it is a perversion of justice.
“The provisional liquidator Milingo Lungu, being the defendant in this matter cannot at the same time instruct counsel to discontinue a matter against himself. The directors of KCM who have sued in the name of the company have done so exercising their residual power to protect the company against the wrongful acts of the provisional liquidator, ” Nchito said.
He said there was a boundary between the powers of the provisional liquidator and the residual powers of the directors of the company.
In opposition, Mainsa, an in-house counsel for KCM, argued that a party cannot be forced to proceed with a matter as the Corporate Insolvency Act no.9 of 2027 in section 107 provides for an aggrieved party with an avenue to challenge the exercise or the alleged abuse of powers of the provisional liquidator, which is not by commencing a fresh action.
Mainsa said the matter was properly discontinued by him as in-house counsel and the court cannot force KCM to proceed.
“If indeed the directors are aggrieved as purported, they should clearly come before court in a proper manner disclosing themselves and not to use the name of KCM in vain,” said Mainsa.
Lawyer representing Rephidim mining, Mimbula and Mexico argued that directors and shareholders of a company in liquidation have no right to proceed in the name of a company after it has had a winding-up petition filed and a provisional liquidator appointed.
The defendant’s advocate argued that a company that is in liquidation only proceeds to and is only sued in the name of the liquidator and not in its corporate name because the body corporate and the legal persona of that company ceases, as section 331 of the Companies Act no.10 of 2017 provides circumstances under which an action can be brought by a director or an entitled person through a derivative action.
Justice Mbewe said Mainsa’s acting, under the instructions of Lungu, was charged with the authority and has powers over the commencement, conduct, continuance or discontinuance of court cases by or against KCM.
He said the correct forum for Vedanta to challenge Lungu’s decision to sell its mining rights area was to take it under the current liquidation proceedings before justice Anessie Banda-Bobo.
Justice Mbewe said section 332 of the Companies Act no.10 of 2017 does not confer the right to commence a derivative action on minority shareholders in a liquidation.
“I do not agree with the defendants’ submissions that Vedanta should have brought a derivative action under section 331 and should have obtained prior leave of the court to do so. Vedanta has desposed that it is the majority shareholder in KCM and therefore section 331 would still not be available to it to be used to bring a derivative action,” justice Mbewe said.
He ruled that the questioning and challenging of the exercise of the provisional liquidator’s powers in signing the consent order with other defendants ought to be before the court that ordered the appointment of Lungu and not to be commenced as a separate action.
“I hereby hold that this action is incompetently before me and must fail for the reasons stated above. I hereby dismiss this action and discharge the injunction granted to the plaintiffs. I condemn Vedanta with costs of the action,” said justice Mbewe. “Leave to appeal is denied. Having dismissed this action for being incompetently before me, I find that it will be otiose for me to rule on the remaining applications that I heard herein. I award costs to the respondents to be agreed or taxed in default of agreement.”