Oakbay offices in Sandton. Picture: SIPHIWE SIBEKO/REUTERS
Oakbay offices in Sandton. Picture: SIPHIWE SIBEKO/REUTERS

The Industrial Development Corporation’s (IDC’s) deal to take shares from the Gupta family’s company Oakbay Resources & Energy instead of cash repayments, cannot be cancelled because that arrangement was made outside of the formal loan restructuring agreement, the high court heard on Friday.

The IDC is asking the High Court in Johannesburg to
validate its cancellation of a loan restructuring agreement it
had entered into with the Guptas, and to order that R287.5m be repaid.

In 2010 the state-owned company loaned the Guptas R250m to acquire Shiva Uranium. In 2014 the IDC converted R250m more in interest payments into Oakbay shares when R37.5m was still owing on the capital amount.

Oakbay has since been delisted and an investigation
into share price manipulation is ongoing.

In court papers, the IDC said it was entitled to cancel the arrangement because Oakbay had breached clauses of the agreement, including one which required the company not to violate any applicable law.

Yet its controlling company, Oakbay Investments, had received proceeds from unlawful activity at its Estina dairy farm in the Free State. Oakbay Resources had also committed an offence in terms of the Financial Markets Act by artificially inflating its share price at the time of listing, the IDC argued.

Adv Christiaan Bester, who represented Oakbay, presented several exceptions to the IDC’s arguments.

The main one was that the bid to cancel the agreement to convert the debt into Oakbay shares would not result in the IDC getting its money back.

This was because, Bester said, the restructuring agreement never required the IDC to accept Oakbay shares in place of payment.

There was only a provision allowing the IDC to elect to convert debt into equity in the event of Shiva Uranium listing, he said. Instead, the arrangement to convert debt into Oakbay shares was "some species of agreement outside of the loan restructuring agreement", Bester said.

Cancelling the loan restructuring agreement would not affect the deal for the Oakbay shares, the R250m in interest was "off the table" and the IDC would only be owed R37.5m, he said.

Adv Geoff Budlender, who represented the IDC, said this was a "simple and straightforward" case, where money was borrowed and had to be paid back.

Budlender said the consequence of cancelling the loan restructuring was that the agreement fell away and the R287.5m, in terms of the original agreement, was due.

The exceptions were delay tactics because the defendants were anxious about having to plead and explain their behaviour, Budlender said.

Judgment was reserved.

steynl@businesslive.co.za