Salzgitter Handel GMBH v Sembule Steel Mills Limited (COMPANY CAUSE NO. 06 OF 2001) [2001] UGHC 129 (21 November 2001)

# THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## IN THE MATTER OF SEMBULE STEELMILLS LIMITED

#### AND

#### IN THE MATTER OF THE COMPANIES ACT CAP 85

#### COMPANY CAUSE NO. 06 OF 2001

# SALZGITTER HANDEL GMBH PETITIONER

#### AND

SEMBULE STEEL MILLS LIMITED RESPONDENT

#### . HJDGMENT/ORDER

This petition was brought by a Creditor ofthe Company for orders

- 1. That the company may be wound up by court under the provisions ofthe companies Act - **2.** Or that such order may be made in the premises as shall be just.

In the petition filed in this court on the 7lh May 2001 the Petitioner is described as a Germany based company that supplied to the company an assortment ofsteel billets, soft galvanised steel wire rods hot rolled steel wire rods in 1996 and 1997. By the supply agreement a delayed payment for the credit supplies would attract a 4 % above current rates ofinterest. The principal and interest owed to the petitioner by the company was put at US 1.059.133.02 as at 21 March 2001. The Petition further indicated the admission of the debt in September 1999 and that in spite of further demands to date the debt remains unsettled and the Petitioner has concluded that the Petitioner is insolvent and hence this petition. In support ofthe Petition Mr Armin Lutter a director ofthe Petitioner file an affidavit verifying the Petition on 9/5/2001. The Petition was subsequently served on 21/6/2001 advertised on the Monitor Newspaper of 29/6/2001 and in the Uganda gazzette of 6th July 2001 (Vol XCIV No 43) and on 21/8/2001 counsel for the Petitioner duly appeared before for

**1**

*16*

**So**

*10*

*I*

the Registrar. On 7th September 2001 M/s Eastern and Southern Africa Trade & Development Bank (PTA Bank) applied to court and was on 17/9/2001 granted leave to appear in the petition. Time was also extended to the company within which its affidavits in opposition could be filed on the same day.

Mr Sembuya C. C filed an affidavit on opposition to the petition on 28/8/2001. He essentially admitted the debt and the fact that the company had experienced financial salvage actions one of which involved the PTA Bank interventions in March and September 1999 notified to the Petitioner. The deponent also stated that the petitioner appeared unwilling to accept the rescue intervention by PTA Bank but to recover its debt outside of schemes by other creditors under the aegis of the PTA efforts.

According to the submissions by counsel for the petitioner the company ought to be wound up for failing to pay its debts such jurisdiction being found in section 222 (e) of the companies Act. He contended that the PTA action came after the commencement of these proceedings and consisted of a deferred offer to settle only 60% of the Petitioners money from 2003. He further credited that this was insufficient and having taken over all the companies debts in 1998 PTA Bank had also neglected the petitioners claim. He also rejected a claim that PTA Bank ever offered to purchase the Petitioners debt. Counsel demand that the petition was filed in lien of a normal suit to recover a debt and court could make an order and that effective order was on legitimate and the winding up order to be made. Counsel then prayed for court orders contending that the PTA opposition to the petition was baseless and unsubstantiated.

For the PTA Bank it was submitted that the company owed it US \$ 9 140 000 secured by mortgages and a debenture. As such the Bank as a secured creditor was entitled to realise its security even after commencement ofwinding up proceedings. It was further contended that PTA rescue package included an injection of a further \$ 1,1000,000 but for this petition that has made this untenable. In the circumstances the difficulty of securing payment ofthe debt through a winding up order in favour of the petitioner made the single object of the Petition futile counsel for PTA Bank cited the case of Mann vs Goldstem (1968) IWLR 1091 and Re: Hoima Ginners Limited (1964) EA 439 to the effect that the machinery of winding up should not be converted into an.......pg <sup>15</sup> for debt collection and counts should not accept its use as a pressure to pay In the premises the PTA Bank pleaded that it stood to lose colossal

*2o*

*25*

*35*

**I**

**I** I.

sums in an investment that could be turned around to benefit the company as well as its creditors. It prayed the petition to be dismissed with costs.

**/3s 7"**

*ID*

*13*

*3 <sup>o</sup>*

For the Respondent Company five grounds were argued namely that the petition was simply a debt collection strategy, in abuse ofthe court process made in bad faith, aimed at inflicting mortal damage to the company and its secured creditors, and that it was a

creditor. effort by the Petitioner in his position as an unsecured

Having read the documents in these proceedings and the submissions by all three counsel on the matter I am able to say that the Petitioner was entitled to petition for the winding up of the company as an unsecured creditor. Indeed most petitions would be almost always by unsecured creditors the secured ones relying on their security. He can do this whether or remote. I can also say that the Petitioner has proved that the company owes, it money and that it is unable to pay. All indications are that even PTA Bank is unable to bail out the company by repaying its debts up front. In the circumstances I must grant this petition as prayed and a winding up order in respect of Sembule Steel Mills is hereby made. The liquidator for the purpose shall be Mr Edwin. O. Tile accountant/auditor of J. W & Partners Amber House Kampala Road Kampala who is required to perform these duties in accordance with the Act.

## **R. O. Okumu** Wengi JUDGE 20/11/2001.

21/11/2001 Kanyemibwa for Petitioner Mukasa Sebugenyi for Respondent. Mr Muliira for PTA Bank. Mutegaya Court clerk. MrLizvi ChiefExecutive ofSembule

Judgment delivered in open court. Court:

**DEPUTY REGISTRAR 21/11/2001.**

**I**

**8**

**I !•**

**I**

**ij** *t*

**J**

g

**b .1**

**0**

**■S'**

$\lambda$ R

# IN THE HIGH COURT OF UGANDA AT KAMPALA

#### IN THE MATTER OF SEMBULE STEEL MILLS LIMITED $Q_0$ $\omega$ 310N

AND 🤉

$CO$

## IN THE MATTER OF THE COMPANIES ACT CAP.85 r. O. 2014. Dan. Conta

**COMPANY CAUSE NO.06 OF 2001**

SALZGITTER HANDEL GmbH .................................... PETITIONER **AND** SEMBULE STEEL MILLS LIMITED **RESPONDENT** $\mathcal{L} = \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal{L} \mathcal$

$\mathbb{I}$

## ORDER FOR WINDING UP BY COURT

Upon the petition of SALZGITTER HANDEL GmbH the creditor of the above named respondent company filed on the 7<sup>th</sup> day of May, 2001, preferred unto Court for hearing by HON. JUSTICE OKUMU WENGI and upon hearing Mr. John F. Kanyemibwa Counsel for Petitioner, Mr. Mukasa Sebugenyi counsel for the Respondent and Mr. Mulira 6 Junior counsel for the PTA bank, and upon reading the said Petition, an affidavit of the said petitioner filed on 9<sup>th</sup> May, 2001 verifying the said petition, an affidavit of the respondent in opposition of the said petition filed on 28<sup>th</sup> August, 2001, an affidavit in opposition of the said petition by Eastern & Southern Trade & Development Bank (PTA /O Bank) filed on 28<sup>th</sup> August, 2001, an affidavit in rejoinder by the Petitioner filed on 18<sup>th</sup> September, 2001, the Monitor Newspaper of the 29<sup>th</sup> day of June, 2001, the Uganda Gazette of the 6<sup>th</sup> day of July, 2001 each containing an advertisement of the said Petition this court doth order that the said company be wound up by this Court $15$ under the provisions of the Companies Act, and that Mr. Edwin O. Tile Accountant/Auditor of J. W. & Partners of Amber House Kampala Road, Kampala, be constituted in a liquidator of the affairs of the Company.

We Approve:

**-COUNSELFORTHERESPONDENT**

We Approve:

**i**

I **I**

**I**

**I**

**I COUN\* L FOR THE PTA BANK**


**NOTE: It will be the duty of such persons as are liable to make out or to concur in making out a statement of affairs as the liquidator may require to attend to the Liquidator at such time and place as the Liquidator may appoint and to give him all the information he may require.**

$\overrightarrow{r}$

#### THE REPUBLIC OF UGANDA

#### IN THE HIGH COURT OF UGANDA AT KAMPALA

#### IN THE MATTER OF SEMBULE STEELMILLS LTD.

#### $AND$

#### IN THE MATTER OF THE COMPANIES ACT, CAP.85

#### **COMPANIES CAUSE NO. 6 OF 2001**

#### SALZGITTER HANDEL GMBH

$|$ ::::::::PETITIONER

SEMBULE STEELMILLS LTD.

# **]:::::::RESPONDENT**

#### **ORDER**

$AND$

By consent of the parties, it is hereby ordered that Mr. Fulgence Mungereza of F. Mungereza & Co. Consultants, Plot 35 Yusuf Lule Road, P. O. Box 6565, Kampaia be appointed Liquidator of the company to act jointly with Mr. Edwin Otile of J. W. Partners, P. O. Box 3426, Kampala.

| <b>MULIRA & LUBULWA</b><br>U & LULE ADVOCATES,<br>SEBAI. | | |--------------------------------------------------------------|------| | ADVOCATES,<br>COUNSEL-FOR THE RESPONDENT | | | COUNSEL FOR PTA BANK | | | | | | | | | | | | KALENGE, BWANIKA, KIMULI | | | & CO. ADVOCATES. | | | COUNSEL FOR MR. EDWIN OTILE | | | | | | (Liquidator) | | | | | | | | | Given under my hand and seal of Court this.<br>dav of | 2001 | | | | | | | | | | | | | | <b>UDGE/REGISTRAR</b> | | | DRAWN & FILED BY: | | | <b>KALENGE, BWANIKA, KIMULI</b> | | | & CO. ADVOCATES. | | | PLOT 4. PILKINGTON ROAD, | | | 1 <sup>ST</sup> FLOOR, COLLINE HOUSE, | | | (MIDDLE TOWER). | | | P. O. BOX 8352. | |

$\mathbb{K} \mathbb{K} \mathbin{d\mathbb{K}}$

**KAMPALA**