ZCCM Investments Holdings Plc v Konkola Copper Mines Plc (In Provisional Liquidation), Vedanta Resources Holdings Limited and 676 Ors (2019/HP/0761) (2 December 2024) – ZambiaLII

IN THE HIGH COURT FOR ZAMBIA 2019/HP/0761 AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) IN THE MATIER OF: Konkola Copper Mine PLC (In Provisional Liquidation) AND IN THE MATIER OF: The Corporate Insolvpncy,··7\c'C No-9 of 2017 BETWEEN: PETITIONER AND KONKOLA COPPER MINES PLC(in Provisional Liquidation) 1 RESPONDENT ST VEDANTA RESOURCES HOLDING LIMITED RESPONDENT 2ND AND 676 OTHERS BEFORE THE HONORABLE MR. JUSTICE C. KAFUNDA IN CHAMBERS ON THE 2ND DAY OF DECEMBER, 2024 For the ]st Respondent: Mr. D.M. Chakoleka of Mulenga Mundashi Legal Practitioners For the Affected Creditor: Mr. E. Mwitwa with Mr E.B. Kaluba of Mwenye & Mwitwa Advocates RULING CASES REFERRED TO; 1. LC and DK Limited (In Receivership) and Another v Lovemore Chikuni Chinyama CAZ/08/409/2020 2. The Creditors of Maamba Collieries Limited v Maamba Collieries Limited Appeal No 48/2009 R-1 3. Sonny Paul Mulenga and Others v Investrust Merchant Bank Limited (1999} ZR 101 SC J, LC 4. Sata v Chanda Chiimba III & Others (2011) VOL 2 (HC} STATUTE REFERRED TO; 1. Rules of the Supreme Court of England (Whitebook} 1999 Edition 2. Court of Appeal Rules, Statutory Instrument No 65 of 2016 3. High Court Act Chapter 27 of the Laws of Zambia 4. Corporate Insolvency Act No 9 of 2017 This is a ruling in respect of the Affected Creditor's (Copperbelt Energy Corporation Plc) application for an enforcement order. The application is made pursuant Order 45 Rule of the Rules of the Supreme Court of England 1965, (White book) 1999 Edition ("RSC") which provides as follows; "(l) Notwithstanding that a Judge or order requiring a person to do an act specifies time within which the act is to be done, the Court shall without prejudice to Order 3 Rule 5, have power to make an order requiring the act to be done within another time, being such time after service of that order or such other time, as maybe specified therein. (2) Where notwithstanding Order 42, Rule 2(1) or by reason of Order 42, Rule 2(2) a judgment or order requiring a person to do an act does not specify a time within which the act is to be done, the Court shall have power subsequently to R-2 make an order requiring the act to be done within such time after service of that order, or such other time, as may be specified there.'' The background to this application is that on 28th June, 2024, the Court delivered a Ruling approving or sanctioning the scheme of arrangements ("the scheme") as proposed by the 1s t Respondent. The 2nd Respondent subsequently paid the sum of US$ 225,000, 000.00 to the 1st Respondent as creditors' settlement support funds for onward disbursement to the scheme creditors in line with the explanatory statement as directed by the Court. The Affected Creditor, having objected to the application for approval or sanctioning of the scheme, lodged an appeal against the aforementioned before the Court of Appeal. In support of the application, the Affected Creditor filed an affidavit in support sworn by the Mutale Isaac Mukuka, the Chief Financial Officer for the Affected Creditor. It was deposed that the explanatory statement provides that Class 2 Creditors will be paid on a prorata basis from the remaining balance of the creditor's settlement support funds after the 1st Respondent has paid scheme expenses and all Class 1 Creditors. R-3 It was further deposed that the 1st Respondent had indicated that, after settling scheme expenses and paying Class 1 Creditors, it was going to pay 40% of the admitted debt to each of the Class 2 Creditors. That the 1st Respondent owes the Affected Creditor, who is classified as a Class 2 Creditor, the sum of US$29,609,678.63. It was attested that the 1st Respondent has now started paying Class 2 Creditors 40%1 of their admitted debt but has refused to pay the Affected Creditor because of the appeal which is currently pending before the Court of Appeal against the Ruling of 28th June, 2024. The deponent stated that the aforementioned Ruling has not been stayed and therefore remains in force and full operation until otherwise altered by the Court Appeal. That the pending appeal does not in any way affect the Affected Creditor's rights to be paid the first instalment under the scheme. It was contended that the 1st Respondent has no justification for refusing to comply with the Ruling of the Court, having received funds from the 2th Respondent for onward payment to creditors. R-4 The 1st Respondent filed an affidavit in opposition to the 2nd Respondent's application wherein it was deposed that the scheme was sanctioned as stated in the explanatory statement which incorporates the Deed of Release and Waiver, by which, the Affected Creditor or any creditor covenants not to sue on matters of the scheme. It was further deposed that by dragging the 1st Respondent to the Court of Appeal, the Affected Creditor is not in full compliance with the Ruling of the Court and therefore, cannot be allowed to benefit from the situation it created. It was deposed that the Affected Creditor is seeking to challenge being paid on the same terms as the other Class 2 Creditors and, therefore, seeks to be placed in it's own class. It was deposed that contrary to the assertion by the Affected Creditor, the 1st Respondent has not commenced payment of Class 2 Creditors and that the 1st Respondent shall issue a notice to Class 2 Creditors with respect to the delay of the anticipated payments, caused by the validation process that is still being undertaken. R-5 In reply, it was deposed that the Deed of Release and Waiver does not preclude a party who was not fully satisfied with the decision of the Court by which the scheme was sanctioned from appealing against the decision or any part thereof. It was further deposed that the appeal bcfo re the Court of Appeal does not seek to create another class of creditors but rather that the Affected Creditor seeks to vary the terms of payment under the scheme. That, according to the Ruling of the Court, the 1st Respondent is required to pay Class 2 Creditors within 15 days from the Restructuring Effective Debt, and in any event not later than 20th August, 2024. That, in any case, the claim by the 1st Respondent that it has not started paying Class 2 Creditors is an admission of failure by the 1st Respondent to comply with the Ruling of the Court. The deponent stated that on 11th November, 2024, the 1st Respondent, through it's Scheme Administrator, published a statement to the effect that the 1st Respondent had made first distributions under the scheme and is now about to commence the second distributions as soon as possible but within November, 2024. R6 That other creditors have confirmed being paid 35% of their admitted claims and are due to be paid an additional amount at the end of the month of November, 2024 after the process of reconciliation. In the Affected Creditor's skeleton arguments in support of the application, it was submitted that the application was brought pursuant to Order 45 Rule 6 of the RSC. That under the said rule, the Court has powers, after it has delivered it's judgment or order, to fix time within which an act under the judgment or order is to be done and to direct the people required to do that act, to do it within a specified time. The Affected Creditor seeks an order of the Court to direct the 1st Respondent to immediately comply with the Ruling of the Court. It was submitted that it is settled law that an appeal does not operate as a stay of execution of the judgment appealed against unless the Court directs so. Reliance was placed on Order 10 Rule 5 of the Court of Appeal Rules, Statutory Instrument No 65 of2016 which provides as follows; "An appeal shall not operate as a stay of execution or ofp roceedings under the judgment appealed against unless the High Court, quasi- Judicial body or Court so orders and no intermediate act or proceeding shall be invalidated, except so far as the Court below may direct." It was submitted that the foregoing position of the law was confirmed in the case of LC and DK Limited (In Receivership) and Another v Lovemore Chikuni Chinyama 1 • Further reliance was placed on Section 46(8) of the Corporate Insolvency Act No 9 of 2017, which provides that a scheme becomes binding on the company immediately it is registered at the Patents and Companies Registration Agency (PACRA) after being sanctioned by the Court. That in casu, the scheme has already been sanctioned by the Court, the 1st Respondent having lodged the same at PACRA and the report having been filed before this Court, the scheme is a binding document on the Affected Creditor and the 1st Respondent. The 1st Respondents filed skeleton arguments in opposition to the Affected Creditor's application. It was submitted that the explanatory statement sets out the framework on how creditors, including the Affected Creditor, are to R-8 be treated and contains various documents, including the Deed of Release and Waiver, which governs the treatment of scheme creditors including the Affected Creditor. It was submitted that pursuant to Clause 4 of the Deed of Release and Waiver, all scheme creditors, including the Affected Creditor, are precluded from commencing any action under the scheme and that the Affected Creditor is bound by the covenant not to sue as provided therein. It was submitted that, since an appeal is pending before the Court of Appeal, the Affected Creditor is obliged to wait for the outcome of the appeal before receiving payment, especially that the Affected Creditor is contending that it should not be treated as a Class 2 Creditor. The 1st Respondent contends that it is settled law that once the scheme is sanctioned, it binds all creditors, including those who did not participate in the process, such as the Affected Creditor, provided that the scheme is fair and meets the statutory requirements. It was, thus, submitted that the Affected Creditor is bound by the sanctioned scheme in its entirety pursuant to Section 46(8) of the Corporate Insolvency Act. R-9 In support of the foregoing proposition, the 1st Respondent cited the case of The Creditors of Maamba Collieries Limited v Maamba Collieries Limited2 wherein it was held that; "These provisions are clear and ambiguous. We agree with the learned High Court Judge that, according to these provlsfons, if a meeting by extra ordinary resolution agree& to any compromise or arrangement, it shall be binding on all Creditors or Class of Creditors or on the members or class of members as the case may be. Further it shall be binding if and when it has been approved by a Court order and a copy of the Consent order has been lodged with the Registry." It was asserted that contrary to the Affected Creditor's contention that it is not seeking to set aside the scheme, the kernel of the appeal, if decided in favour of the Affected Creditor, would have the effect of setting aside the Court's Ruling as the Affected Creditor is essentially regurgitating arguments it advanced in opposing the sanctioned scheme. The Affected Creditor filed skeleton arguments 1n reply to the 1st Respondent's opposition. In reply to the position that. the pending appeal violates the terms of the scheme and therefore, the 1st Respondent is justified in not R-10 paying the Affected Creditor, it was submitted that pursuant to Clause 2. 1 of the Deed of Release and Waiver, the Affected Creditor does not fall anywhere near the parties protected under the Deed of Release and Waiver and that the contention that the appeal violates the terms of the deed is unfounded. It was further submitted that, assuming that the Affected Creditor acted in breach of the Deed of Release and Waiver by appealing, the recourse is for the 1st Respondent to raise an objection to the appeal which is currently pending before the Court of Appeal and not to use the appeal as a reason to disobey the Ruling of the Court. It was submitted that the Affected Creditor respects the Ruling of the Court in it's entirety and remains bound by the same and has the right to appeal against any part of the Ruling pursuant to the provisions of Order 10 Rule 3(2) of the Court of Appeal Rules. The matter came up for hearing on 21st November, 2024, learned counsel for the Affected Creditor relied on the affidavit in support and skeleton arguments of 28th October, 2024 as well as an affidavit in reply and the accompanying skeleton arguments dated 14th November, 2024. R-11 In opposing the application, learned counsel for the 1st Respondent relied on an affidavit in opposition and skeleton arguments of 7th November, 2024. In addition, it was submitted that the Ruling of the Court must be considered within the context of the scheme of arrangement and the explanatory note. The Court having approved the scheme of arrangement entails that the explanatory slalernenl was also equally approved. In reply, learned counsel for the Affected Creditor submitted that the application has not been brought for reasons that the 1st Respondent has breached the date for payment. The application has been brought because the 1st Respondent informed the Affected Creditor that it will not pay the Affected Creditor until the appeal is determined. Regarding the bar date, learned counsel submitted that the Ruling is very specific as to when payments are supposed to be made. That the 1st Respondent prepared all scheme documents and brought them to Court for approval and thus, dates came from the scheme documents and were not imposed on the 1st Respondent. Therefore, the 1st Respondent cannot turn around and say that it was not tenable to R-12 meet the deadlines under the scheme because there is now a Court directive to pay in accordance with scheme deadlines. That there is no order from the Court of Appeal by which payment to the Affected Creditor has been stayed. Thus, the Ruling of the Court ren1ai11.s valid and binding; on all parties. It was submitted that the question of, whether or not, the appeal would be rendered academic on account of the appeal by the Affected Creditors is a question for the Court of Appeal to answer and not this Court nor the 1st Respondent. I have considered the affidavit evidence, skeleton arguments as well as the oral submissions made on behalf of the parties. The Affected Creditor seeks an order to fix time within which the 1st Respondent should pay the sums under the scheme arising from the Ruling of the Court dated 28th June, 2024, approving the scheme. The application arises from a decision of the 1st Respondent refusing to pay the Affected Creditor on the ground that there is currently an appeal before the Court of Appeal against the aforementioned Ruling. R-13 The 1st Respondent's contention is that since an appeal is pending before the Court of Appeal, the Affected Creditor is obliged to wait for the outcome of the appeal before receiving payment, especially that the Affected Creditor is contending that it should not be treated as a Class 2 Creditor. The foregoing raises the issue of, whether or not, the 1st Respondent, in its second distribution to creditors, is justified not to pay the Affected Creditor's 1st instalment of the admitted debt, in view of the pending appeal against the Ruling of 28th June, 2024. It is settled law that an appeal does not automatically operate as a stay of the judgment or decision appealed against. The foregoing principle of law has been espoused in a plethora of authorities including the cases of Sonny Paul Mulenga and Others v Investrust Merchant Bank Limited3 and DK Limited (In Receivership) and Another v Lovemore Chikuni Chinyama supra and Sata v Chanda Chiimba III & Others4 . It is not in dispute that the Ruling of 28th June, 2024, approved or sanctioned the scheme and set out dates on which certain actions where to be taken by the 1st Respondent. Notwithstanding that the R-14 Applicant appealed against the said Ruling, it is a fact that none of the parties herein have applied for a stay of the Ruling of the Court. The implication of the foregoing is that the said Ruling is binding and still in force. Therefore, the Affected Creditor's right to be paid the instalment of the admitted debt under the scheme is not affected. li,t The Affected Creditor is entitled to enjoy the fruits of the Ruling of the Court. The 1st Respondent, however, conteneds that there is a covenant in the Deed of Release and Waiver not to sue or take out proceedings in respect of matters arising out of the scheme to which the Affected Creditor is bound. That proceeding to pay the Affected Creditor the admitted debt would render the appeal academic. Regard to the foregoing, while it maybe the case that the Deed of Release and Waiver precludes creditors bound by the scheme from suing, it is important to note that the subject appeal arises out of an objection to the application for approval of the scheme. The Affected Creditor is essentially exercising it's constitutional right to an appeal and thus the Court is of the view that an appeal as in issue, arising out of an R-15 objection to the approval of a scheme is not the kind of suit restricted by the Deed of Release and Waiver. In the strict sense, the appeal is an extension of the Affected Creditor's objection to the approval of the scheme but before the appellate platform of the Court of Appeal. The right to object to an application for the approval of a scheme is provided for by the law itself under Section 46 (10) of the Corporate Insolvency Act No. 9 of 2017 while the right to appeal is provided for and guaranteed under Article 131 of the Constitution of Zambia. For the foregoing reasons, I am fortified in my position that the restriction of suit by the Deed of Release and Waiver does not apply to an appeal arising from challenge to approval of a scheme because, in the first place, an affected creditor has a statutory right to object and a constitutional right to appeal. Hence no action of a restrictive or punitive nature can be made to bear on an affected creditor who chooses to exercises their statutory and constitutional rights. Thus, in the absence of a stay of the Ruling of the Court, the 1st Respondent cannot use the appeal by the Affected Creditor as justification to deny payment due to the Affected Creditor under the scheme. R-16 I note from exhibit MM4 dated 11th November, 2014 and contained in the affidavit in reply to the affidavit in opposition to the application, issued by the Scheme Administrator, that the same confirms that the bar date was 30th August, 2024. It also gives an assurance that the 1st Respondent will proceed with the second distribution within November, 2024. The bar date having passed and there being no extension of time within which the 1st Respondent is obliged to pay the admitted debt to Class 2 Creditors, I am of the view that the Affected Creditor is justified in seeking an order to fix time within which the 1st Respondent is to pay the Affected Creditor the 1st instalment of the admitted debt. In the premises, I find that this is a proper case in which to grant an order fixing time within which the 1st Respondent is to pay the Affected Creditor the 1st instalment of the admitted debt. I, therefore, grant the Affected Creditor an order fixing time within which the 1st Respondent should pay the Affected Creditor the 1st instalment of the admitted debt and I consequently order and direct that the said payment be made within 10 days of this Ruling. R-17 Costs are awarded to the Affected Creditor, to be borne by the 1st Respondent and the same to be taxed in defa DELIVERED THIS DA 2ND HI R-18