The Sunday News
Thulani Ndlovu Business Correspondent
TROUBLED Bulawayo-based textile company Merlin has noted an appeal to the Supreme Court of Appeal to overturn a High Court ruling that discharged the company from provisional judicial management leaving it prone to litigation by various creditors.The noting of appeal to the SCA, suspends the ruling of the High Court until a new ruling by the higher court is done.
“Take notice that the appellant hereby notes an appeal against the entire judgment of the High Court of Zimbabwe sitting at Bulawayo in case number HC 2353/11,” said Dr Cecil Madondo, the provisional judicial manager of Merlin through his Notice of Appeal.
He added that the High Court ruling failed to appreciate the fact that the functions of the provisional judicial manager were limited and were more of caretaker role, governed by Section 303 of the Companies Act.
“In this regard the court failed to appreciate that it was not possible for the Appellant who was acting in the position of provisional judicial manager to attract investors before he was confirmed as the final judicial manager of the company,” said Dr Madondo.
“The learned Judge of the High Court erred and misdirected himself on a point of law in failing to appreciate the object behind the provisions of Section 306 (m) of the Companies Act and the types of relief that the court is empowered to grant.
“Consequently, the High Court discharged the provisional order of judicial management and left the company exposed to execution of judgments and litigation at the instance of the company’s various creditors. The company could have been placed under liquidation if the court was satisfied that there were no good prospects of turning around its fortunes.”
Dr Madondo of Tudor House consultants added that the High Court failed to take cognisance of the provisions of Section 57 and 58 of the Insolvency Act as read together with Section 220 of the Companies Act, in respect of proving of claims by creditors.
“Consequently the learned Judge went on to accept Old Mutual’s claim notwithstanding that Old Mutual had not followed the proper procedure for bringing its claim. There is now a risk that Old Mutual might execute against the company’s property to the disadvantage of other creditors who have followed due process in submitting their claims,” he said.
Dr Madondo told the court that there were good prospects of the entity becoming a successful concern if the provisional judicial management order was confirmed.
He petitioned the SCA to substitute the High Court order as follows: “The application for a final order of judicial management is hereby granted with costs.”
The cancellation of provisional judicial management was necessitated by an application brought by Old Mutual Life Assurance (Old Mutual).
Old Mutual which is owed more than $1 million sought the discharge of the provisional judicial management order on the basis that judicial management could not change the fortunes of Merlin.
Merlin owes its creditors more than $4 million and needs $14 million to fully recapitalise its operations.
When Merlin fell on hard times Zimbabwe Textile Workers Union, the umbrella body representing the interests of the workers in the textile industry approached the court and applied for and obtained, a provisional order placing Merlin under provisional judicial management on 8 December 2011.
Merlin used to be one of the biggest textile companies in the country and at full capacity was processing up to 120 tonnes of lint per month.
