Tetrad's judicial protection overturned by court

Tetrad's judicial protection overturned by court
Published: 05 October 2017
THE High Court has allowed a businessman owed more than $2 million by Tetrad Investment Bank (TIB) to institute legal proceedings to recover the debt, despite the financial institution being under judicial management.

Zimbabwean firms have used judicial management to escape debt repayments.

But judge president, Justice George Chiweshe, said property tycoon, Kenneth Sharpe, could proceed to sue Tetrad to recover money he was owed by the financial institution.

The judgement will allow Sharpe to proceed with a court application in which he is demanding $1,7 million lent to the bank in 2013, together with interest at 18 percent per year.

The bank failed to pay back the loan before it was placed under judicial management in February 2015.

Sharpe is demanding the repayment from Tetrad Investment Bank and its parent company, Tetrad Holdings as well as from Eugene Mlambo, the judicial manager.

Justice Chiweshe dismissed arguments by the lawyers for the three defendants that TIB could not be sued by virtue of it being under judicial management.

He said the law governing judicial management only stays existing litigations, but not future ones, unlike in the case where a company was winding up.

All new suits can only proceed with the permission of the court in cases where a company is winding up.

"I agree with the plaintiff that neither the wording of s 301 (c) of the Companies Act nor that of para 1 (f) of the provisional judicial management order granted in favour of the first defendant (TIB) apply to any litigation commenced after the company has been placed under provisional judicial management," Chiweshe said in a landmark ruling that could have a bearing on other firms that have escaped from their obligations under the cover of judicial management.

"The express words of the order are that 'all actions and applications and execution of all writs, summons and other processes against the applicant shall be stayed and not proceeded with without leave of this Court'. The wording of the order and indeed of s 301 (c) itself indicates that only existing actions and processes may be stayed," Chiweshe ruled.

Sharpe's litigation began in 2016, more than a year after TIB had gone under judicial management.

"It appears to me that the legislature intended the consequences of an order of judicial management to be different from the consequences of a winding up order, certainly in so far as protection from litigation is concerned. If it had been intended otherwise, the provisions of section 301 (judicial management) would have been couched in identical or similar language as the provisions of section 213 (winding up) and vice versa."

He said the court could not deliberately confuse the different provisions to mean the same when the lawmakers who crafted the two provisions meant them to be different.

"I disagree, for to do so would be to usurp the powers of the legislature where its intention has been positively, clearly and properly pronounced," said Chiweshe.

In April this year, the creditors and depositors of TIB agreed to take over the bank in a debt for equity swap and partial cash payment deal. TIB owes depositors and creditors a combined $67 372 926.

The bank has been under judicial management since 2015. In 2014, the Reserve Bank of Zimbabwe ordered the bank to stop accepting deposits after it failed to pay for deposits.
- fingaz
Tags: Tetrad,


Latest News

Latest Published Reports

Latest jobs