Court has power to supervise Milingo Lungu – Vedanta

VEDANTA Resources Holdings Limited says it is dangerous for ZCCM-IH and Milingo Lungu to suggest that the court does not have supervisory authority over him as the provisional liquidator of KCM because of an order staying proceedings.

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 and being managed in a manner detrimental to the interests of government, among other reasons.

Vedanta Resources Holdings Limited asked the Lusaka High Court to give guidance over the powers bestowed to Lungu.

Vedanta as the majority shareholder of KCM argued that the powers of the provisional liquidator in the ex-parte order of appointment do not include the disposal or substantially all of the business and assets of KCM for nil consideration.

In its summons for directions, Vedanta is seeking a determination on whether the provisional liquidator has the power to restructure or reorganise KCM by splitting its operations into two separate entities and transferring to those entities for nil consideration all of the business assets and employees of KCM.

It wants a determination on whether the transfer of KCM’s property without the approval of the court is void pursuant to Section 62 of the corporate insolvency Act and whether the powers granted to Lungu extend to the provisional liquidator incorporating subsidiaries of KCM and exercise the powers granted over the said subsidiaries.

In his skeleton arguments pertaining to notice of motion to raise preliminary issues, Lungu argued that court is destitute of the necessary jurisdiction to entertain or take cognisance of the summons for directions filed by Vedanta questioning his powers.

“The existence of the stay of the proceedings negatively affects the jurisdiction to hear the latest application by the contributor. The latest application by the contributor is incompetently before this court,” Lungu said.

And the government seeks to raise preliminary issue on whether the High Court has jurisdiction to hear and determine summons for directions when winding up proceedings have been stayed and dispute referred to arbitration by the Court of Appeals.

Other issues for determination are whether after the winding up proceedings were stayed and dispute referred to arbitration, it is open to the contributor to take further steps in the matter.

ZCCM-IH said the Court of Appeal stayed the winding up proceedings and referred the matter to arbitration without any reservation, therefore the High Court cannot proceed to hear and determine Vedanta’s summons for directions for want of jurisdiction.

It stated that Vedanta was abusing the court process, as the Court of Appeal did not leave the door open for it to make applications before the High Court questioning the powers of Lungu.

But according to the contributor’s combined skeleton arguments and list of authorities in opposition to the skeleton arguments and list of authorities in support of notices of motion to raise preliminary issues, Vedanta said the petitioner’s preliminary motion is incompetent as section 60(3) of the corporate insolvency Act does not provide for preliminary motions raised by the applicants.

It argued that based on the Court of Appeal’s judgment that the basis for the winding up of KCM are arbitrable disputes, the High Court on account of its supervisory role ought to give directions on what sort of activities the provisional liquidator of KCM can undertake while the winding up proceedings remain stayed.

Vedanta said its application is properly before court as the court has the power to give directions over the powers of Lungu at any stage before it concludes hearing the winding up petition.

“The directions being sought relate exclusively to the provisional liquidator and do not in any way amount to the prosecution of winding up proceedings,” Vedanta argued. “There are only two instances in which an application under Section 60 of the corporate insolvency Act cannot be made before court. The first instance in which an application for directions cannot be made is before the commencement of winding up proceedings and the second instance is after the conclusion of the winding up proceedings.”

Vedanta said its application does not by any stretch of imagination deal with the main proceedings before court.

It said the application for directions seeks the court’s guidance as to whether Lungu is procedurally entitled to reorganise a company which is the subject of winding up proceedings and an order for stay pending arbitration.

“There has been a change in circumstances. This change in circumstances has compelled the contributor as shareholder to bring the application for the court to supervise the order it granted in light of the recent actions of the provisional liquidator,” Vedanta said.

It added that the application for directions does not constitute an abuse of court process.

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