BY SAM ALFAN.
TransCentury and its subsidiary East Africa Cables have won a reprieve after the High Court declined to lift an order blocking receiver managers appointed by Equity Bank from taking over the companies.
Justice Alfred Mabeya dismissed Equity Bank’s application to set aside the order issued in June and allow joint receivers George Weru and Muniu Thoithi to manage the tow companies over unpaid loans.
The judge dismissed Equity’s application saying it lacked merit.
The bank has argued that TransCentury and EAC obtained the order without disclosing material facts to the court.
“The existing “status quo” between the parties herein as at the date immediately prior to the appointment of Weru and Thoithi on 16th June 2023 be maintained in order to preserve the assets of the East African cables company,” ordered Judge Mabeya.
While opposing the Bank’s applications, the companies told the court that the setting aside of the said injunction orders or any variation as sought will cause irreparable damage, inconvenience and suffering.
Through lawyer Philip Nyachoti, the two companies said allowing the receiver managers to take over the firm’s will completely cripple its operations.
Nyachoti vehemently opposed the lender’s applications dismissing claims that they obtained the orders without disclosing all materials to the court.
Lawyer Nyachoti told the court that there will be total chaos, disorganization and complete disorder which may collapse East African Cables business completely, in the event that the interim Orders are discharged as prayed.
He submitted that the status quo prevailing at the moment should be maintained pending the hearing and determination of the case.
“We submit that the Plaintiff is a manufacturing company with operations in Kenya and Tanzania manufacturing and selling different types of electrical cables. The Plaintiff procures raw materials such as Copper and Aluminum which is used to produce the finished goods which are sold every day. Consequently, the operations of the Plaintiff would be greatly impaired by the orders sought by the Defendants,” submitted Nyachoti.
The company managing director Paul Mwangi told the court that the setting aside of the said injunction orders or any variation thereof as sought by the Defendants will cause irreparable damage, inconvenience and suffering to the company and also completely cripple its operations and that of its subsidiaries in over six countries.
Mwangi revealed that in January 2018, Equity Bank and the company signed a joint Facility Agreement in respect of which Equity took over a loan facility from third party. In negotiations leading to the signing of the Agreement, the 1st Defendant indicated that it would take over the loan facility amounting to Sh. 1,6 billion and advance working capital to the company to ensure the company had the capacity to trade and pay off the debt.
“Immediately after the signing of the Facility Agreement, Equity Bank charged properties belonging to the company, so as to fully secure the loan and the said securities are still in full force and effect in favour of the Bank and through Bank’s collateral agent in Tanzania, Equity Bank has charged Plot No. 31 and Plot No. 581 belonging to the company’s Subsidiary in Tanzania as further security for the said loan,”reveals Mwangi.
Lawyer Nyachoti further told the court that it is only fair and in the interest of justice and indeed in the interest of all the parties herein that the interim orders do remain in force pending the hearing and determination of the company application of 19th June 2023.
“Indeed, a discharge of the interim Orders at this juncture as prayed will occasion more harm than good to all the parties herein. A discharge of the orders will disrupt the entire operations and business arrangements of the Plaintiff now in place, such that it will not be possible for the Plaintiff to put the business back on track quickly in the event that it succeeds in its Application aforesaid. In essence, the disruption will not have assisted the Defendants in their quest to have the outstanding debt settled,” court heard.
Trans-century urged the court to dismiss Equity application adding that the lender have not made out a case at all to warrant the discharge of the interim Orders issued herein on 19th June 2023.
Equity Bank and their appointed administrators are simply unhappy and disgruntled with the said interim Orders which is expected anyway, hence the filing of the said applications. Most ost of the issues raised by the defendants are contested matters which cannot be determined summarily,” Nyachoti submitted.
“Whether the appointment of the George Weru and Muniu Thoithi is under the Insolvency Act 2015 or not is a legal issue to be determined at the hearing of the case herein. It cannot be determined summarily as suggested by the Defendants,” Nyachoti told the court.
Trans-century urged the court to dismiss the application adding that fully disclosed of all the relevant and available details in respect of the Rights Issue and is therefore not guilty of any non-disclosure or misrepresentation as stated by Equity.
Equity had filed an application seeking to set aside orders obtained by the company stopping take over of the management of the two firms.
