GUPTA FIRMS RESCUE
Swiss shell company Charles King launches legal bid for Optimum
The business rescue practitioner working to stabilise and sell Gupta-owned mines and operations is facing the 44th legal bid for 2018 to scupper its efforts, this time from Swiss shell company Charles King.
One of the assets in question is the Optimum Coal mine and terminal, which was central to former public protector Thuli Madonsela’s state of capture report. It detailed how, under the tumultuous tenure of former president Jacob Zuma, Eskom officials forced the sale of Optimum by Glencore and then helped the politically connected Gupta family to buy it.
Business rescue, a provision of the Companies Act, aims to rehabilitate financially distressed companies. The three companies under Tegeta Exploration and Resources — Optimum Coal Mine, Optimum Coal Terminal and Koornfontein Mines — were forced into rescue after banks refused to provide them with banking accounts.
The commission of inquiry into state capture this week heard how bank executives were pressured by former mineral resources minister Mosebenzi Zwane to reopen the Gupta-linked accounts.
Since its appointment in February, the practitioner has faced a barrage of legal action, many from Gupta affiliates, although none were successful.
Abu Dhabi company subsidiary
Charles King, registered in Switzerland and a subsidiary of an Abu Dhabi company, was created for the sole purpose of buying the three companies from Tegeta. In court documents it said it had entered into a sale agreement with Tegeta in August 2017, reported to be worth R2.97bn at the time.
But after the rescue practitioner took over, a dispute arose over a required deposit and whether it had been duly paid. The sale was cancelled, but in terms of the agreement, the matter must go to arbitration.
Charles King requested the high court in Pretoria to interdict any attempt to sell the assets to a third party. The rescue practitioner has called for prospective buyers to come forward.
In the founding affidavit, Charles King director Amin al-Zarooni said the sales agreement required it to deposit R66.7m to Tegeta before October 22 2017. It had paid the money in September, but because of currency fluctuations, there had been a shortfall of R2.3m when it reflected in Tegeta’s State Bank of India account. "For reasons unknown to me, the second payment was rejected by the said bank," Zarooni said.
Tegeta’s then directors had verbally agreed to waive certain terms of the agreement and allow the balance to be settled upon transfer of the shareholdings, he said.
Zarooni said the rescue practitioner had no right to cancel the sale and in fact should have helped Charles King to fulfil certain conditions, such as seeking the mineral resources’ minister’s approval to transfer the mining rights. Instead, he said, the rescue practitioner had "actively disparaged" Charles King to the minister, Gwede Mantashe, who went on to describe it as "a shadowy Switzerland-registered company", and "a front for the now notorious Gupta brothers".
Mantashe also publicly stated he would refuse any application to transfer rights in the sale of Tegeta to Charles King. As such, Zarooni said he was advised that where a party intentionally prevented the fulfilment of a condition precedent, the condition is at law deemed to be fulfilled.
In responding documents, rescue practitioner Kurt Knoop said Charles King’s application is "fatally flawed" because it presented no evidence that the rescue practitioner had influenced the minister, and failed to explain why it did not fulfil this condition and six others, such as obtaining approvals from the competition authorities and power utility Eskom.
Knoop argued the matter was not urgent because the dispute had been waged since April. He also said Charles King has not shown it had a reasonable prospect of success in arbitration.
The claims of a verbal agreement over the short payment were "bald and unsubstantiated and are based on inadmissible hearsay evidence", Knoop said.
Judgment was reserved.