Online Reporter
Fidelis Munyoro-Chief Court Writer
THE High Court has struck off an application by Makeh Enterprises (Pvt) Ltd, which sought to challenge Stuart Pumps Engineering (Pvt) Ltd’s decision to commence voluntary corporate rescue proceedings.
The decision, handed down by Justice Christopher Dube-Banda in Bulawayo, rested on procedural non-compliance, effectively ending the matter without delving into its substantive merits.
The dispute originated from a lease agreement between the two companies, under which Stuart Pumps accrued rental arrears totalling $184,000.
Makeh Enterprises, a creditor, objected to Stuart Pumps’ board resolution to initiate corporate rescue proceedings, arguing that the company was neither financially distressed nor capable of being restored to financial health.
However, Justice Dube-Banda dismissed the application on the grounds of procedural defects.
Central to the ruling was Makeh Enterprises’ failure to comply with Section 123(3)(b) of the Insolvency Act, which mandates notifying all affected persons—shareholders and creditors—of an objection to corporate rescue proceedings through registered mail, fax, email, or personal delivery.
Justice Dube-Banda emphasised that this requirement is peremptory, noting, “Failure to adhere to peremptory provisions renders an application fatally defective.”
Counsel for Stuart Pumps argued that Makeh Enterprises’ failure to notify affected persons rendered the application invalid, citing Supreme Court precedents that stress the importance of ensuring all stakeholders are afforded an opportunity to respond.
Justice Dube-Banda agreed, stating that the applicant’s claim of ignorance regarding the identities of affected persons was unconvincing, given the long-standing relationship between the parties and the availability of information from the Registrar of Companies.
The court also rejected Makeh Enterprises’ argument that Stuart Pumps was a dormant or shelf company and therefore not subject to the procedural requirements of the Act.
Justice Dube-Banda noted that the company’s status as a lessee and its history of litigation with the applicant evidenced its active operations and legal obligations.
“Corporate rescue proceedings have far-reaching consequences on creditors, shareholders, and society at large. Therefore, it is critical that the procedures laid down be followed to the letter,” Justice Dube-Banda remarked.
With the procedural flaw deemed dispositive, the court did not consider other points raised by the respondent. The application was struck off the roll with costs awarded against Makeh Enterprises.
