BY SAM ALFAN.
The High Court has suspended the appointment of two receiver managers to administer Cape Holdings Limited, a company that was placed under administration by I &M Bank.
Justice Alfred Mabeya suspended the appointment Ponangipalli Venkata Rao and Swaroop Rao as joint administrators, pending hearing and determination of the suit filed by Senergy Industrial Credit Limited, which lays claim to Cape Holdings.
The court blocked the joint administrators from assuming office, pending the determination of the case.
“A temporary injunction is hereby issued restraining Ponangipalli Venkata Rao and Swaroop Rao from assuming office as joint administrators of Cape Holding Limited and from taking any other steps in furtherance of their appointment,” ordered Judge Mabeya.
Synergy Industrial Credit limited through Senior Counsel Ahmednasir Abdullahi submitted that the placement of the Company under Administration is very prejudicial to the rights and interests of the firm who is presently embroiled in litigation before various courts over the execution of its Decree issued on 25th March 2021.
“This Court has powers under Section 604 of the insolvency Act to remove an administrator from office if satisfied that circumstances exist that make it inappropriate for the administrator to continue in office,” Ahmednasir told the court.
He added that the matter is urgent and should be prioritized for hearing and disposal on the grounds Cape Holdings Ltd was placed under Administration for the second time by I&M Bank Limited on 29th February 2024 under Section 534 of the Insolvency Act.
“A precursor to such appointment is that the appointing creditor must be a holder of a qualifying floating charge. Section 536 of the Insolvency Act also provides that an Administrator cannot be appointed if the floating charge is not enforceable,” submitted Ahmednasir.
The firm contends that I&M Bank’s appointment of Rao and Swaroop as Joint Administrators of the Company on 26th February 2024 is irregular as the Debenture upon which such appointment is premised is unenforceable and does not meet the criterion of a “qualifying floating charge capable of giving rights to the Bank to appoint an Administrator in the manner that it did.
He said Cape Holdings Ltd, was first placed under Administration by I & M Bank on 12th October 2021 in under the guise of a Debenture dated 15th December 2020.
“This is the same Debenture under which the present Administration has been undertaken. The Debenture was for the sum USD 25.000.000) and was secured by, inter alia, a floating charge over all freehold and leasehold properties, all stocks bonds and securities, book and other debts revenues, uncalled capital and goodwill undertakings and all other assets and rights such as stock-in-trade, ” court heard.
The Debenture was categorical in the First Schedule that there is no immovable property, whether freehold or leasehold, that had been charged as security for purposes of this Debenture.
“When the Company was first placed under Administration, the firm as a creditor of the Company, filed an application under Section 560(1)(d) of the Insolvency Act seeking leave to institute execution proceedings against the Company on account of its Decree issued in High Court issued on 25th March 2021,” he added.
Justice Mabeya granted leave on 10th December 2021. In the matter of Cape Holdings Ltd for the firm to proceed with execution aforesaid. Indeed the firm proceeded to execute against the Company for the decretal sum of Sh. 4,497,776,260.35 by attaching the property known as L. R. No. 209/19436 (I.R 120877) otherwise known as the 14 Riverside.
Vide a Prohibitory Order issued on 5th January 2022 by the Deputy Registrar under the Provisions of Order, the execution against the Company in respect of the attached property L. R. No. 209/19436 was completed such that what is pending is the sale thereof which sale could not be conducted as directed by the High Court on account of stay of execution orders issued by the Court of Appeal on 1 April 2022 pending the hearing of the Appeal. The same is pending Judgement on 21 June 2024. 8.
The Bank, despite enjoying an order of stay and awaiting Judgement, as a result of the First Administration has now placed the Company under a Second Administration thereby using Two Administration processes to protect its interests to the detriment of the firm.
