Coal is seen being transported along a conveyor belt. The Pretoria high court has ruled the R3.7bn coal supply agreement for Majuba power station between Eskom and Tegeta is invalid and unlawful. Picture: ROBERT TSHABALALA
Coal is seen being transported along a conveyor belt. The Pretoria high court has ruled the R3.7bn coal supply agreement for Majuba power station between Eskom and Tegeta is invalid and unlawful. Picture: ROBERT TSHABALALA

The Pretoria high court has declared a coal supply contract between Eskom and the Gupta family’s Tegeta Exploration and Resources unlawful and opened the way for the Special Investigating Unit (SIU) to lodge a prosecution regarding the matter.

In the judgment, handed down on Thursday, the court ruled that the R3.7bn coal supply agreement for Majuba power station signed between the utility and Tegeta on March 10 2015 is invalid and unlawful.

The case was brought against Eskom and Tegeta by the SIU, the state’s forensic investigation and litigation agency, which is probing a number of lucrative coal supply contracts awarded to the Gupta-owned company.

Minister of justice & correctional services Ronald Lamola welcomed on Friday the judgment as progress in the fight against maladministration that “often lays the basis for corruption to thrive at a great expense to the fiscus and ultimately service delivery, and we are encouraged when efforts to recover resources of the people of SA are intensified and yield results”.

The court also ruled that the SIU can institute legal proceedings against Tegeta, despite the company being in business rescue.

Business rescue is a type of bankruptcy protection provided for by the Companies Act as an alternative to liquidation. Tegeta’s four companies — Optimum Coal Mine, Koornfontein Mines, Optimum Coal Terminal and Shiva Uranium — were placed in business rescue two years ago when SA banks cut off their facilities and they became unable to transact.

In terms of the Companies Act, no legal proceeding or enforcement action can be taken against a company during business rescue proceedings, except in a few circumstances, one of which is “with leave of the court in and in accordance with any terms the court considers suitable”.

SIU spokesperson Kaizer Kganyago said the declaratory order gives the unit the right to prosecute; it may not necessarily do so. This is yet to be determined as the unit is still investigating this contract and a number of other coal supply contracts.

Louis Klopper, one of Tegeta’s business rescue practitioners, said the rescue team has been co-operating with the SIU and the judgment does not affect the business rescue process, which is continuing.

The SIU sought no costs order and none was made.

steynl@businesslive.co.za