Dar es Salaam — The High Court has blocked proceedings for winding up of Dangote Cement Limited instituted by NSK Oil and Gas Limited pending determination of a Sh5.8 billion suit Standard Chartered Bank has filed against the two companies.
NSK, suppliers of oil products, lubricants, and liquefied petroleum gas (LPG) has filed at the commercial division of the High Court a petition for the winding up of the cement producer over inability to settle a Sh5.8 billion debt.
The petition prompted Dangote to file an application at the same court in which it sought orders to halt the move pending determination of the case Standard Chartered has filed against them over an unsettled Sh5.8 billion overdraft facility.
Dangote then asked the court to halt the winding up proceedings including publication of the petition for winding up, arguing that the petition was premature and was filed in bad faith.
The company further argued that publication of the petition for its winding up would cause them irreparable reputational damage.
The dispute arose from an agreement Dangote entered with NSK Oil in May 2018 for the later to supply the former with fuel.
To facilitate smooth supply of the fuel, NSK Oil secure and obtained an overdraft to a limit of Sh11.1 billion from Standard Chartered Bank as a working capital.
As a security for the loan, NSK Oil assigned its debt in the performance of the agreement to the bank by a notice of assignment signed by both parties in the deal.
However, things did not go well between the bank, on one side, and Dangote and NSK Oil, on the other. Dangote allegedly failed to pay some money as agreed, forcing Standard Chartered bank to sue them to recover Sh5.8 billion debt.
While the Standard Chartered suit was pending in the commercial court, NSK Oil filed a winding up petition against Dangote over inability to pay Sh5.8 billion.
Dangote reacted immediately by filing an application at the same court, pleading with the court to stop the winding up petition because it has a direct bearing to a case Standard Chartered had sued them.
“… this petition is intended to threaten the applicant (Dangote) and was filed with mala fide intended to embarrass, ridicule, and inflict irreparable reputational damage to the applicant. “Entertaining the winding up petition will be tantamount to turning this court into debt collection agent,” argued lawyer for Dangote,” argued Dangote through its lawyer.
NSK Oil strongly opposed the application, saying the case Standard Chartered had filed against them had no bearing with the winding up petition
In his recent decision, High Court Judge Stephen Magoiga said Dangote was justified to defend her interests by opposing the winding up process.
“I am of the strong considered opinion the this winding up petition has a strong bearing to the Commercial Case No. 7 of 2020 ( the case Standard Chartered Bank is suing Dangote and NSK Oil, hence, the call to restrain is justifiable,” said the judge.
Section 283 of the Companies Act, 2002 allows a company or creditor to apply for orders to stop winding up petition at any time before winding up order has been made.
“The winding up of a company amounts to legally killing and burying of the company and our parliament in its wisdom by incorporating the provision of section 283 of the Companies Act was meant to protect the process where the circumstances are so demanding. In this application, I find this is one of the fit cases for this court to exercise its discretion,” said the judge.