ZCCM Investments Holdings Plc v Konkola Copper Mines Plc (In Provisional Liquidation) and Anor (2019/HP/0761) [2024] ZMHC 298 (28 June 2024)

\. Ill THE HIGH COURT FOR ZAMBIA AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) 2019/HP/0761 IN THE MATTER OF: Konkola Copper Mine PLC (In Provisional Liquidation) AND IN THE MATTER OF BETWEEN: The Corporate Insolvency Act No 9 of 2017 of the Laws of Zambia --;(•c?Ul.>LIC C .., • . - \l,u\l l.,.l_.h ... ,j r . Df ......._ 1 .. T ' . ~.,; ..... ? .. 1 ,/, ... ZCCM INVESTMENTS HOLDINGS PLf?_• c ; ;·~.::L-::_·~ ETITIONER , /. AND KONKOLA COPPER MINES PLC(in ProvisionalrLicfuidatzori) · 8 _JUN 202~ l 11 _\ \ \ , [fJ I T RESPONDENT / ,p ·O ·, •• , . q VEDANTA RESOURCES HOLDING LIMITED')XSE:_<y.,1]::~2ND RESPONDENT AND 676 OTHERS Before Honourable Mr. Justice C. Kafunda in Chambers on the 28th day of June, 2024 For the 1s t Respondent: Mr D. Tembo with Mr G. Daka - A. B & Davids Legal Practitioners For the 2 nd Respondent: Mr D. M Chakoleka & Mr M Nalishuwa of Mulenga : Mr G. Chipoya-In House Counsel for the 1s t Respondent For the Affected Creditor (CEC ): Mr M. Mwenye S. C with Mr E. B. Kaluba of Mundashi Legal Practitioners Mwenye & Mwitwa Advocates RULING CASES REFERRED TO; 1. Re NFU Development Trust Limited (1973) l ALL 135 R-1 Scanned with CamScanner 2. Posnet Zambia Limited v Western Union (z} Limited (6(Jth) and the other 93 Creditors of Postnet Zambia 2016/HPC/0337 3. Re Noble Group Limited (2018} EW HC 3092 4. UDL Argos Engineering and Heavy Industries Company Limited & 7 Others v Li Oi & Others [2001] 3 HKLRD 634 5. Sovereign Life Assurance Co (In Liquidation} v Dodd {1892} 2 QG 6. The Bank of Scotland NV v TT International (2012} 2 SLR (at 133) 7. Telewest Communications Plc {2004] EWHC 924 (Ch) 8. Phillip Mutantika and Mulyata Sheal v Kenneth Chipungu SCZ Judgement No 13 of 2014. 9. Re TT International Limited9 [2010] SGHC 177 1 O. Royal Bank of Scotland v TT International Limited and Another Appeal No (2012} SGCA 9 11. Re Horizon Knowledge Solutions pte Ltd [2004] SGHC 270 12. Re T & N No 3 of 2006 EWHC at 1447 13Re Hawk Insurance [2001] 2 BCLC 480 14Re BAIC [2006] 1 BLBC 665 15Re Sovereign Marine & General Insurance {2007] 1 BLBC 228 16Re Oak Pits Colliery Co Ltd (1882} 21 Ch D 322 17Wah Yuen Electrical Engineering pte Ltd v Singapore Cables Manufacturers Pte Ltd [2003] SLR (R} 629 18 Hindustan Lever & Anr v State of Maharashtra & Anr Appeal (Civil} 8232 of 1996 of 1 gth November, 2003 STATUTE REFERRED TO; 1. Corporate Insolvency Act No 9 of 2017 2. Companies Act No 10 of2017 3. Insolvency Rules of England 1986, SI 1986/1925 MATERIALS REFERRED TO 1. Charlesworth Company Law, seventeenth Edition 2. Halsbury's Laws of England Fifth Edition R-2 Scanned with CamScanner Introduction This is a ruling on the 1111 Rcspo11dc11t's uppllcutlu11 fo1• un order to npprovc und or sanction lhc scheme of urru11gc111cnt purHuunl lo Section 46 of the Corporate Insolvency Act No 9 of 2017 of tho Laws of Zambia ("the J\cl") and uhm pursuant lo lhc Ex Purtu Orde r appointing Provisional Liquidulor or 21 111 Muy, 2019. Below urc the provisions pursuant lo which the applict1lio11 for upprovol ond or sanction of lhc scheme of arrangement is filed; Sections 46(3), (4), (BJ and (12) of the Act provides that; "(3} A company, creditor or member of a company may apply to tho Court for an order that a meeting of the creditors or members or class of members, as the case may be, be convened and conducted to the consider the compromise or arrangement. (4) Where a compromise or arrangement is proposed between• a} a company and its creditors or any class of its creditors; or b) a company or its members or any class of its members; the court may, on the application referred to in subsection (3), or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors, class of creditors, members or class of members, as the case may be, to be convened and conducted to consider the comprise or arrangement. (BJ Where a meeting by extra ordinary resolution, agrees to a compromise or arrangement, the comprise or arrangement• Scanned with CamScanner a} shall be binding on all creditors or class of creditors or on the members or class of members, as the case may be; and bJ shall be binding on the company if and when- i. ii. it has been approved by the order of the Court; and a copy of the order of the Court has been lodged with the Registrar. (12) Where an order is made approving the compromise or arrangement- aJ The company shall lodge a copy of the order with the Registrar within twenty-one days after making the order;" The back ground to this matter is that a Winding up Petition was filed into Court by the Petitioner on 21 st May, 2019, seeking, inter alia, that the 1st Respondent herein be wound up. The Petition was accompanied by an application for appointment of a Provisional Liquidator and by Ex Parte Order of 24th May, 2019, the Provisional Liquidator was appointed by the Court. Amongst the powers vested upon the Provisional Liquidator was power to; "make any compromises or arrangements with creditors" On 24th February, 2024, the Court granted an Ex Parte Order to convene meetings of creditors to consider a scheme of arrangement. It was also directed that the Chairperson's Report and the proposed Scheme of Arrangement be filed into Court, seven (7) days from the R-4 Scanned with CamSca11ner date of holding of the meetings. On 6 th June, 2024, the Scheme of Arrangement Chairperson's Report was filed into Court. On 13th June 2014, the 1st Respondent filed an application to approve and or sanction the Scheme of Arrangement. On 10th June, 2024, the Affected Creditor i.e Copperbelt Energy Corporation (CEC), filed into Court a Notice of Intention to Object to a Scheme of Arrangement. Affidavit Evidence The application to approve and or sanction Scheme of Arrangement was supported by an affidavit in support sworn by Celine Meena Nair, the Official Receiver of the Republic of Zambia and Provisional Liquidator of the 1st Respondent. She averred that on 21 at February, 2024, the Court ordered for meetings of creditors and other interested parties to be convened to consider a proposed Scheme of Arrangement. It was deposed that the Provisional Liquidator caused to be published in the Zambia Daily Mail, together with the order, a notice convening the 1 at Respondent's Scheme Creditors' Meetings dated 8th April, 2024 running in the Newspaper from 8 th to 10th April, 2024. There was further publication in the same Newspaper, an order R-5 Scanned with CamScanner varying the venue for the creditors' meetings from 21 st May,2024 to 24th May, 2024. That following the issuance of notices, Scheme Creditors' Meetings were held on 24th May, 2024, for the Class I Scheme Creditors and on 30th May, 2024 for Class II Scheme Creditors, at which meetings the proposed Scheme of Arrangement was discussed and approved as being reasonable with a 99.8% percent vote from the Scheme Creditors. That both Class I Scheme Creditors and Class II Scheme Creditors overwhelmingly supported and voted in favour of the Scheme of Arrangement by more than the statutory threshold of 75 percent by value of the Scheme Creditors in both classes. It was deposed that on 6th June, 2024 and in pursuance of the Order of Court, the Provisional Liquidator caused to be filed · the Chairperson's Report of the resolutions of the creditors' meetings convened to consider the Scheme of Arrangements. The scheme process further envisages that if the scheme is not sanctioned by the Court on or before 30th June, 2024, the terms of and obligations of the parties under or pursuant to the Scheme of Arrangement will lapse. R-6 Scanned with CamScanner It was deposed that the Explanatory Statement sets out the steps to be fulfilled in the scheme process in order to attain the restructuring effective date and make the scheme effective and implementable. That the approving and or sanctioning of the Scheme of Arrangement by the Court becomes imperative in the process of assisting with the attaining of the restructuring effective date as steps 1 to 3 in the Explanatory Statement have already been fulfilled. The rest of the steps will follow the event upon the order to approve and or sanction the Scheme of Arrangement being granted. Consequently, the Provisional Liquidator will vacate office, the Company will be taken out of liquidation, the winding up process will terminate, the board of the Company will be re-instated, the escrow account will be funded for the creditor settlement support, community support and the once off employee bonus amount. It was deposed that approving and or sanctioning the Scheme of Arrangement as approved by the Scheme Creditors will be in the best interest of all stakeholders as the company will be resuscitated as a going concern and will be able to pass the benefit of that status to the creditors, employees, the Government and other stakeholders. R-7 Scanned with CamScanner On 10th June, 2024, the Affected Creditor (CEC) filed a Notice of Intention to Object to the proposed Creditors' Scheme of Arrangement. The Notice proclaimed that the Affected Creditor was affected by the extraordinary resolutions passed at the creditors' meeting held on 30th May, 2024 and that the objection was based on the following grounds; 1. That the classes of creditors created for the purposes of voting were not constituted in accordance with the law. 11. Contrary to the provisions of Section 47(1) of the Act, the Respondent did not disclose the interests of the creditors who also have shareholding in the 1st Respondent company and the benefits that these creditors are to derive from the scheme in so as the said benefits are different from the creditors; m. Although the Affected Creditor was represented at the creditor's meeting and had submitted its claim form before the voting instruction deadline, the Affected Creditor was not allowed to participate in the voting and did not vote. The Affected Creditor prayed that; R-8 Scanned with CamScanner a. The meeting of Class II Creditors which was held on 30th May, 2024 and the resultant vote be declared null and void for not having complied with the law. b. That the l st Respondent be directed to disband Class II of the creditors under the proposed scheme and create different creditors' classes in line with the creditors' varying rights and interests. c. The 1st Respondent be directed to convene a new creditors' meeting for the reconstituted classes to reconsider the scheme. d. The Affected Creditor be accorded an opportunity to vote at a meeting to be reconvened. e. That the 1st Respondent be directed to disclose the interests of all its related entities who are also creditors and how they would benefit from the scheme in a way different from other creditors. f. The 1st Respondent be directed to make available for verification by all creditors a list of its creditors, the amount owed to each creditor, and the basis and/or proof of the 1st Respondent's indebtedness to each creditor. The Affected Creditor filed an affidavit in support of the Notice of Intention to Object to the proposed Creditors' Scheme of R-9 Scanned with CamScanner Arrangement deposed to by Mutale Isaac Mukuka. He stated that the Affected Creditor is one of the 1st Respondent's creditors under the proposed Scheme of Arrangement. It was deposed that on 31 st March, 2000, the Affected Creditor entered into Power Supply Agreements (PSA's) with the 1st Respondent for the supply of electricity on agreed terms in return for payment but that the PSAs expired on 31 st May, 2020. That on 18th July, 2019, the Affected Creditor and the 1st Respondent entered into a Supplemental Power Supply Agreement where the parties agreed on payment of outstanding debt and supply of power during the provisional liquidation period. According to the terms of the Supplemental Power Supply Agreement, the 1st Respondent was to pay in full, invoices issued by the Affected Creditor and debt contracted by the 1st Respondent for the electricity supplied during the period of provisional liquidation and that the debt outstanding as at the date of appointment of the Provisional Liquidator was a preferential debt. That the 1st Respondent is indebted to the Affected Creditor for the services supplied to the 1st Respondent during the time it has been R-10 Scanned with CamScanner under provisional liquidation and therefore the debt is a liquidation cost and is preferential in line with the Supplemental Agreement by the parties. It was deposed that the Affected Creditor, despite being a preferential creditor, was placed in the same class as all other creditors to whom the 1st Respondent owes US$ 1 Million or more, thereby placing the Affected Creditor in the same class with ordinary creditors. On account of the said classification, the Affected Creditor's vote could not make any difference as the threshold for the ordinary creditors exceeded 75 percent for purposes of voting. It was indicated that the Affected Creditor was not allowed to participate in the voting, contrary to what was stated at page 49 of the Explanatory Statement despite having submitted the claim form on 23rd May, 2024. That HLB employees handling the voting told representatives of the Affected Creditor that the deadline for submitting claim and voting forms for purposes of voting was 20th May, 2024. It was deposed that among the Class II creditors were Vedanta Resources Holding Limited (Vedanta) and its subsidiaries, and R-11 Scanned with CamScanner vanous entities owned and controlled by the Government of the Republic of Zambia ("GRZ"). That the 1s t Respondent's shareholding is owned by Vedanta, ZCCM Investments Holdings Plc and the GRZ, therefore, Vedanta and its entities as well as other GRZ entities are not just creditors to the 1st Respondent, they are also shareholders and their interest in the scheme go beyond those of ordinary creditors. That declaration of affiliated entities' interests was not done. )'he deponent stated that the Scheme Administrator announced at the meeting that the debt owed by the 1st Respondent to the 2nd Respondent and its subsidiaries, ZCCM IH, ZESCO and other GRZ authorities formed 93% of the total debt KCM owed to Class II creditors. That the said debt has however not been explained in terms of specific amounts owed to each entity and the basis of the debt. Therefore, the contribution of those entities to the vote in order to attain the 75% statutory threshold is questionable. That despite having written to the Provisional Liquidator and the 1st Respondent over the Affected Creditor's dissatisfaction with the manner in which the scheme was conducted and with a view to reach R-12 Scanned with CamScanner a mutual compromise, there has been no response to the Affected Creditor. Submissions The 1st Respondent filed skeleton arguments in support of the application to approve and or sanction a scheme of arrangement, wherein it was stated that the application was brought pursuant to section 46(3),46(4)(a), 46(8)(a) and (b)(i)(ii) and 46(12){a) of the Act. It was argued that a scheme of arrangement, being a creature of statute, aims at giving relief to a business in financial distress and that it is within the purview of the Court to approve and or sanction the scheme. The prayer of the 1st Respondent is for the Scheme of Arrangement to be approved and or sanctioned and upon lodgment of the Order of the Court with the Registrar at the Patents and Companies Registration Agency (PACRA), the winding up proceedings herein shall terminate, the Company shall resume the status of being a going concern and the Company shall ensure that steps towards the payment of creditors are promptly undertaken as stipulated in the Explanatory Statement and scheme proposal. In this regard, all the R-13 Scanned with CamScanner participants in the scheme were willing to make and made mutual compromises as is shown in the Explanatory Statement. That the scheme should not be one which would be perceived to expropriate the rights of the members or creditors, because the scheme would fail. Reliance was placed on the matter of Re NFU Development Trust Limited1 , wherein Brightman J, stated that; "The scheme would not be sanctioned because the terms of the scheme where such that it did not qualify as a compromise or arrangement between the company and its members within s 206 of the 1948 Act. The words com.promise and arrangement implied some element of accommodation on each side and were not apt to describe the total surrender of the rights on one side. Since the rights of the members were being expropriated without any compensating advantage, it could not be said that they were entering a compromise or arrangement with the company." It was submitted that the resuscitation of the 1s t Respondent is in the best interest of not only the parties to this cause, but rather the majority of the people on the Copperbelt Province of the Republic of Zambia who are greatly dependant on the viability of the 1st Respondent Company. That the majority of the scheme creditors of the 1s t Respondent have agreed and are willing to compromise by making concessions with regard to the debt owed to them by the R-14 Scanned with CamScan,ner company. It is expected that many of these scheme creditors shall continue business with the company and shall also benefit from its revival as a going concern in the event that the scheme is sanctioned by the Court. The 1st Respondent relied on the case of Posnet Zambia Limited v Western Union (z) Limited (6CJth) and the other 93 Creditors of Postnet Zambia2 wherein it was noted as follows; "In a petition to sanction the scheme of arrangement, the Court is not sitting as an Appellant Authority to closely scrutinise the scheme and even to substitute the democratic will of the parties to the scheme with the Court's view of what is fair or if a better scheme can be formulated. The Court's role in the scheme is only supervisory to ensure that the scheme is not unfair, contrary to public policy, unconscionable or against the law." It was submitted that, considering the fact that the 1st Respondent is in a state of provisional liquidation, the mover of the application for the Scheme of Arrangement is the 1s t Respondent and by virtue of Clause 2 of the Ex Parte Order alluded to above, the Provisional Liquidator of the 1st Respondent is empowered to make any compromise or· arrangement with the creditors relating to the Company. R-15 Scanned with CamScanner It was submitted that the classes in the scheme represented the most effective approach of ensuring that there is fairness in those who are owed the sum of US$1Million or less in Class I of creditors and placing those who are owed the sum of over US $1 Million in Class II of the creditors. The attention of the Court was drawn to an English case of Re Noble Group Limited3 in which an application was made for an order sanctioning a scheme of arrangement between the Company and its scheme creditors, wherein the Court set out factors which the Court will consider when exercising its discretion to sanction a scheme; Compliance with the provisions of the statute (relating to class composm.o~ stal:utory majorities and adequacy of the explanatory statement}; a. Fair representation within the class (absence of coercion within by the majority to promote interests adverse to the class}; b. Whether the scheme is a fair scheme which a creditor could reasonably approve; and c. The absence of any defect making the scheme unlawful or inoperable. It was submitted that the factors outlined above have been satisfied as follows; R-16 Scanned with CamScann,er That the explanatory statement and the scheme proposal shared with all the creditors demonstrates that the 1st Respondent is compliant in relation to matters of class composition, statutory majorities and the dissemination of information through the explanatory statement and in compliance with the Act. b. That the requirement of fair representation by the majority within the class and lack of coercion has been satisfied as shown by the explanatory statement wherein it proposed and divided the creditors into two classes of scheme creditors, a separation made to account for the differences in the magnitude of their claims. Further, that the minutes of the creditors meetings duly approved the proposed scheme by more than 75 percent and that the creditors in all classes who voted for the proposed scheme did so voluntarily. c. Pertaining to the question of whether the scheme of arrangement is a fair scheme which a creditor could reasonably approve, it was submitted that there is evidence of a notice to convene a meeting which provided time lines for convening the meeting of the creditors and voting on a proposed scheme of arrangements. It was further contended that the scheme of arrangement and explanatory statement shows that the creditors were provided with sufficient information and enough time to properly consider their options. d. As regards the absence of any defect making the scheme unlawful or inoperative, it was submitted that the 1 st Respondent satisfied all the statutory requirements, class composition, attaining the majority vote and providing the creditors with sufficient time and information. On 18th June, 2024, the Affected Creditor filed skeleton arguments in support of the Notice of Intention to Object. The Affected Creditor R-17 Scanned with CamScanner submitted that the objection was raised pursuant to Section 46(10) of the Act. That the foregoing provision allows any creditor who claims to be affected by the proposed scheme of arrangement to attend the hearing and the Court has jurisdiction to consider all the objections raised before the application to sanction the scheme can be considered. In relation to the classification of creditors, it was submitted that creditors were classified solely on the basis of the amount the 1st Respondent owes each creditor. It was contended that this was a clear violation of well-established legal principles on the classification of creditors in the scheme of arrangement. That the question of classification of creditors, for the purposes of scheme of arrangements, goes to the jurisdiction of the Court to sanction the scheme. That for the aforestated reason, the classification of creditors must be done in compliance with the law. Reliance was placed on a Hong Kong case of UDL Argos Engineering and Heavy Industries Company Limited & 7 Others v Li Oi & Others4, wherein it was held as follows; R-18 Scanned with CamScanner "If a scheme of creditors meeting(s) are not properly conducted, the Court has no jurisdiction to sanction the proposed scheme." It was the submission of the Affected Creditor that the Act does not specifically provide for how the creditors are to be classified in a scheme of arrangements, but that Courts have developed necessary rules for guidance. That there is sufficient case law to this effect. In support of said proposition, reliance was placed on the English case of Sovereign Life Assurance Co (In Liquidation) v Dodd5 which was summarized in the case of ULD Argos Engineering & Heavy Industries Company Limited & Others supra as follows; "Persons whose rights are so dissimilar that they cannot sensibly consult together with a view of common interest must be given separate meetings. Persons whose rights are sufficiently similar that they can consult together with a view to their common interest should be summoned to a single meeting. The test is based on similarity or dissimilarity of legal rights against the Company, not on similarities of interests not derived from such legal rights. The fact that individuals may hold divergent views based on their private interest not derived from their legal rights against the Company is not a ground for calling separate meetings." R-19 Scanned with CamScanner In further expounding the principles of classification of creditors, reliance was also placed on the Telewest Communications Plc7 wherein it was held that; "There is no dispute that, in the circumstances of the case like the present, the relevant rights of creditors to be compared against the tenns of the scheme are those which arise in an insolvent liquidation. Strictly speaking, because the Company is not in liquidation the legal rights of the bondholders are defined by the tenns attached to the bonds. However, the reality is that they will not be able to enforce those rights and that in the absence of the scheme or other arrangement their rights against the company will be those arising in an insolvent liquidation." The working of this principle was illustrated by two cases, In re Richards & Co 11 Ch D 676 the Court refused to sanction a scheme because it treated a creditor with preferential rights in a liquidation as an ordinary unsecured creditor. It appears that there was only one preferential creditor in that case and he objected to the scheme. If there had been a number of preferential creditors the scheme could have been sanctioned as regards them if they unanimously consented and if there had been a separate meeting of them at which the scheme was approved by statutory majority." The submission of the Affected Creditor is that, by placing preferential creditor.s in the same class as non-preferential creditors, the preferential rights of the Affected Creditor are taken away and hence the Affected Creditor is reduced to the same level as other R-20 Scanned with CamScanner creditors. That preferential creditors cannot reasonably be expected to consult with none preferential creditors for purposes of voting for or against the scheme. That while preferential creditors would want to secure their right to be paid first, none preferential creditors would want to increase their chances of being paid by reducing or possibly eliminating debt, thus the rights of the two are irreconcilable. It was contended that the electricity having been supplied during the time the 1st Respondent was under provisional liquidation, the debt was a liquidation cost and hence preferential in line with Section 127(l)(a) and (2)(a) of the Act. Thus, it was wrong for the 1st Respondent to place the Affected Creditor in the same class as non preferential creditors. In relation to the issue of disclosure of interests of the related entities, the Court was referred to Section 47(1) of the Act. The Court was further referred to Halbury's Laws of England Volume 7(2) 4th Edition 1996 Re issue at paragraph 1450 regarding the need to disclose interests of related entities; "When a meeting of creditors or members or any class of creditors of members is summoned, then, with every notice summoning the R-21 Scanned with CamScarnner meeting sent to a creditor or member, there must be sent a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors of the company, whether as director or as member or as creditors of the company or otherwise, and the effect of the compromise or arrangements on those interests in so far as it was different from the effect on the like interests of other persons." It was submitted that the interests of the 1st and 2 nd Respondent are not the same as the interests of ordinary creditors and thus it is imperative that the 1st Respondent discloses how the 2 nd Respondent and the Petitioner who are shareholder in the 1st Respondent intend to benefit in a way different from the benefits of the ordinary creditors. This would inform the members on whether or not to vote for the scheme. Noting that Section 47(1) of the Act uses the word "shall" counsel submitted that the requirement to disclose interests of the related entities is mandatory. It was asserted that the failure to disclose the interest rendered the whole scheme non-compliant. Reference was made to the UDI Argos Engineering case supra, Lord Millet of Hong Kong observed the following; "The court will decline to sanction scheme unless it is satisfied, not only that the meetings were properly constituted and that the R-22 Scanned with CamScaniner - ---·--- ............. - ---- ..... proposals were approved by the requisite majorities, but that the result of each meeting fairly reflected the views of the Creditors concerned. To this end it may discount or disregard altogether the votes of who, though entitled to vote at a meeting as a member of the class concerned, have such personal and special interest in supporting the proposal that their views cannot be regarded as fairly representative of the Class in question." The Court was therefore urged to disregard the votes cast by the related parties in assessing that the vote passed the statutory threshold of 75% of votes. Regarding the issue of proof of debts, it was the submission of the Affected Creditor that the 1st Respondent has not provided or made available any list of creditors with their respective amounts for verification by other creditors. In this regard, the Affected Creditor cited the Singaporean Court of Appeal case of Royal Bank of Scotland v TT International Limited and Another10 wherein it was stated as follows; ".... ... scheme creditors are entitled to examine the proofs of debt submitted by other scheme creditors in respect of the proposed scheme." The Affected Creditor also relied on the case of Re Horizon Knowledge Solutions Pte Ltd11 , wherein the Court withheld its R-23 Scanned with CamScanner approval for the proposed scheme of arrangement because it found that the creditors were not in a position to asses the fairness and reasonableness of the scheme due to lack of transparency in how related parties debt was incurred. It was also the submission of the Affected Creditor that having been denied the right to vote, notwithstanding the fact that it had submitted the claim and voting form, the approval of the scheme ought to be denied on this ground. The Affected Creditor however submitted that it is not against the idea of entering into a scheme of arrangement with the 1st Respondent, provided that its commercial interests be recognized and respected in the manner the scheme is organized. The Affected Creditor proposed the creation of a correct class (s) of creditors in accordance with the law and reconvening separate meetings of creditors per class to reconsider the proposed scheme. It was also submitted that, in the alternative, the Court must exercise the discretion vested in it under Section 48 (ii) of the Act which allows the Court to approve the scheme with variations to the extent that R-24 Scanned with CamScaniner the Affected Creditor, as a preferential creditor be paid all it's dues in the payments to be made. When the matter came up for hearing on the 19th June, 2024, both Counsel for the Applicants and for the Affected Creditor augmented their written submissions by oral submissions. I will not review the oral submissions as they essentially mirror the written submissions of the parties. I will, however, review the oral submissions of the Applicants in opposition to the objection because, as I ruled on 21 st June, 2024, the said reaction in opposition to the objection is to be taken as the Applicant's reply to the objection by the Affected Creditor. In reply to the assertion that the Affected Creditor is a preferential creditor and should therefore be classified differently, Counsel submitted that the Affected Creditor is not a preferential creditor and having been placed in Class II of creditors follows the law. It was submitted that the Affected Creditor admitted that the Zambian insolvency legal regime does not provide for how the creditors' classes should be constituted. Hence cases cited and relied upon by the Affected Creditor are merely persuasive. It was argued R-25 Scanned with CamScarnner that Section 48 of the Act does not create a distinction between preferential and ordinary creditors and therefore a separation was created in the scheme into Class I and Class II creditors. It was contended that what the Affected Creditors sought achieve was to secure it's own commercial interests as opposed to it's rights as a creditor in relation to the scheme. In support of the aforesaid proposition, the case of Re T & N1 1 was relied upon, wherein the Court held that separate meetings are required only if there are separate rights among creditors and not separate interests. In relation to the arguments that the Affected Creditor was denied the right to vote, it was submitted that the Notice convening meetings was issued on 8 th April, 2024 and made it very clear that the claim and voting form should be submitted to the Provisional Liquidator or Scheme Administrator by 17:00hrs on 20th May, 2024, failure to which the vote and the claim, would be excluded for purposes of the vote. That the Affected Creditor having only submitted their claim on 23rd May, 2023, were not eligible to vote. On the objection regarding related parties, it was submitted that full disclosure was made in that the Explanatory Statement made it very R-26 Scanned with CamScanner clear and disclosed that none of the GRZ entities nor any 2°d Respondent related entities are to participate in the creditors' scheme support fund amounting to US$250 Million reserved for creditors. Therefore, all entities listed on page 34 of the Explanatory Statement, with the exception of the Affected Creditor and Trafigura, will not get any money from the creditors' support funds. That the Chairperson's Report filed into Court on 6 th June, 2024, shows that this position was reiterated by the Provisional Liquidator at the meetings of both Class I and Class II creditors. Counsel asserted that the Chairman's Report contains the Chairman's scheme meetings script for Class II meetings contained at page 2 of the shareholder's script and that this is full disclosure of the GRZ and related parties' interests under the scheme. It was therefore stressed that the full implications of Section 47(1) of the Act have been complied with and that the meetings were within the law. In relation to a further limb of the objection that related parties had not disclosed their debt in relation to the 1st Respondent, it was submitted that the Court Order of 21 st February, 2021, among other R-27 Scanned with CamScanner things, appointed the Scheme Administrator to administer the affairs of the scheme and the scheme processes. That the notice to convene the creditors' meetings provided that queries relating to the scheme should be submitted to the Scheme Administrator. That the Affected Creditor, however, did not make any query seeking proof of debt of the related entities. Hence the Affected Creditor's arguments would have been valid if a query had been made. It was submitted that there would be a lot of prejudice to be suffered if the scheme is not sanctioned by the agreed effective dates because the scheme would lapse and the company would proceed into full liquidation and hence create prejudice in relation to the other 99.8% of the creditors. The I st Respondent opposed any deviations, either by a reconstitution or a variation of the scheme of arrangement as approved by the creditors. In relation to the alternative option proposed by the Affected Creditor seeking to immediately recover its entire debt from the US$250 Million creditors' support fund, it is the view of the 1st Respondent that, by so doing, the other creditors, particularly those in Class I R-28 Scainned with CamScanner would be adversely affected. That such an arrangement would create gross unfairness as it would produce a class of it's own, in which the Affected Creditor would be the only constituent. On the assertion by the Affected Creditor of being a preferential creditor, it was argued that preferential debts are not a creation of the parties but are rather set out under Section 127 of the Act and that the said provision covers liquidation costs, among others. It was posited that the Affected Creditor has not qualified it's debt as a liquidation cost. That the question that needs to be determined is what amounts to liquidation costs? Counsel submitted that Section 127 of the Act sets out what amounts to liquidation costs. That the Affected Creditor's debt does not arise as consequence of liquidation and hence is not a liquidation cost. That just because the parties agreed to call it so does not make it one. Regarding the assertion by the Affected Creditor that only the Affected Creditor and Trafigura were independent creditors in Class II, reference was made to the Chairperson's Report in discounting that assertion. It was submitted that the Schedule to the Chairperson's Report shows that there was a minimum of 37 Class II R-29 Scanned with CamScanner creditors outside of the Petitioner, the 1st and 2nd Respondents as well as from parties set out on pages 34 and 35 of the Explanatory Statement. In concluding, Counsel referred the Court to the case of Postnet Limited supra wherein the Court held that the factual question to be determined by the Court is not whether the scheme is reasonable but whether the creditors could have approved it. It was submitted that the democratic will of the 99.8% of the Creditors must be given effect as the record has shown that sufficient information was provided on time for creditors to make honest decisions. It was prayed that the Court must sanction the scheme because the minimum threshold under the law was fairly and justly achieved. Determination Having considered the application, the objection to the application and the reply to the objection, I will proceed to first address the issues raised in objection to the application in the following order; 1. Classification of creditors 2. Disclosure of interests of related entities 3. Verifications of debts 4. Right to vote R-30 Scanned with CamScanner I will thereafter consider the question of whether or not to approve and or sanction the Scheme of Arrangement as proposed. Classification of Creditors The Affected Creditor contends that it is a preferential creditor and was therefore not supposed to be placed in the same class of creditors with non-preferential creditors i.e in Class II of creditors. It is the position of the Affected Creditor that it's rights, being dissimilar to the other creditors, the placing of the Affected Creditor in Class II of Creditors was a wrongful classification. The Affected creditor, among others, relied on the case of Telewest Communications PLC wherein the Court, in addressing the issue of classification, observed as follows; " the working of this principle is illustrated by two cases. In re Richards and Coll Ch D 676 the Court refused to sanction a scheme because it treated a creditor with preferential rights in a liquidation as an ordinary unsecured creditor. It appears that there was only one preferential creditor in that case and he objected to the scheme. If there had been a numberer of preferential creditors the scheme could only have been sanctioned as regards them if they unanimously consented or if there had been a separate meeting of them at which the scheme was approved by the statutory majority." R-31 Scanned with CamScanner advancing the case of the Affected Creditor being a preferential creditor, Counsel for the Affected Creditor at paragraph 4. 11 of the skeleton arguments in support of the notice of intention to object submitted as follows: "In the present matter, CEC is a preferential creditor. The debt arises from the electricity CEC has supplied to KCM during the time of KCM has been under Provisional Liquidation. The electricity was supplied for the purposes of enabling the provisional liquidator to carry on with KCM business as in reasonably necessary for the purposes of winding up. Clearly this ts a liquidation cost and the same is a preferential debt in the line with Section 127(1J(a} and (2J(a} of the Corporate Insolvency Act. KCM has in fact recognized the debt as a preferential debt as per supplemental agreement signed between CEC and KCM's provisional liquidator, which has been exhibited in the affidavit in support. Because CEC ts a preferential creditor, we submit that it was wrong for KCM to place CEC in the same class as none preferential creditors and therefore the meeting was not properly convened and the proposed scheme should not be sanctioned." The supplemental agreement referred in the foregoing submission is exhibited to the affid~vit in support of the notice of intention to object as exhibit MM9. Paragraph 3 of the said supplemental agreement provides as follows; " 3. O. it is the understanding of the parties that the amounts herein due for payment by KCM to CEC shall insofar as the Corporate R-32 Scanned with CamScanner Insolvency Act refers be construed as follows: that all the monies due for power supplied from the date of appointment of the Provisional Liquidator for ongoing supplies of electricity and any accumulated debt arising there from shall be deemed to be preferential debt; and 3.2. that all debt that was incurred prior to the date of appointment of the Provisional Liquidator in relation to the Total Outstanding KCM Obligations shall be treated as preferential debt powers of Provisional Liquidator and shall be construed as such PROVIDED that the rights accrued in relation to any or all payments previously made under this agreement and the PSA shall continue to have full force and effect." It is not in dispute that that the Affected Creditor did enter into the aforestated supplemental agreement with the 1st Respondent and the Provisional Liquidator of the 1st Respondent. The parties agreed to treat the debt arising from the power supplied by the Affected Creditor to the 1st Respondent during the period of the provisional liquidation as a preferential debt. Infact clause 3.2 of the supplemental agreement appears to capture debt that was incurred by the 1st Respondent before provisional liquidation and elevates it to the status of preferential debt in amalgamation with the debt that was to be incurred from the supply of electricity during the period of provisional liquidation. R-33 Scanned with CamScanner will, however, show that the Applicants disputed the Affected Creditor's claim to the status of preferential creditor. The submissions by the Applicants on the issue was that preferential creditors under the Zambian insolvency law are categorized as such by Section 127 of the Act. That the status of a creditor as a preferential creditor is one which is attained by specification of the law and not necessarily by agreement or wishes of the parties. Regard to the foregoing submission, it is necessary to have recourse to Section 127 of the Act which provides for matters of preferential debts as follows; "{1) In a winding-up, the following shall be paid in priority to all other unsecured debts {a) Costs and expenses of a winding-up including the payable taxed costs of a petitioner, the remuneration of the liquidator, and the costs of an audit carried out; (b) Amounts due, including (i) wages or salary accruing to every employee within the period of three months before the commencement of the winding-up; (ii) leave accruing to every employee within the period of two years before the commencement of the winding up; (iii} paid absence, not being leave, accruing to every employee within the period of three months before the commencement R-34 Scanned with CamScanner of the winding-up; (iv) recruitment or other expenses or other amounts repayable under a contract of employment. (c) Severance pay to each employee, equal to three months wages or salary; (d) all amounts due in respect of workers' compensation which accrued before the commencement of the winding-up; (e) any tax, duty or rate of payable by the company for any period prior to the commencement of the winding-up; (/) Government rents less than five years in arrears at the commencement of the winding-up; (g) rates payable to a local authority that were due and payable win three years before the date of commencement of the winding-up; and (h) any other creditors (2) Debts referred to in subsection (1) shall rank as follows; (a) firstly, debts referred to in sub section(l)(a); (b) secondly, debts referred to in subsection(l)(e), {fl and(g); (c) Thirdly, debts referred to in subsection(l)(b), (c)and(d); and (d) fourthly, debts referred to in subsection (l)(h). (3) Debts with the same priority shall rank equally between themselves and shall be paid in full. (4) Where the property and asserts of the company are insufficient R-35 Scanned with CamScanner to meet the debts specified in subsection (3), the debt shall abate in equal proportions between themselves." A consideration of the relevant provisions of Section 127 of the Act supra reveals that under the Zambian insolvency law, preferential debts are those categorized as such under the af orestated provisions of the law. For purposes of Zambian insolvency law, it is the creditors with claims for debts set out under Section 127 ( 1) (a) (b) (c) (d) (e) (f) and_ (g) of the Act, who can be properly categorized as preferential creditors in a winding-up or liquidation process. All other debts are categorized under Section 127 (1) (h). The actual ranking of the priority in the preferential debts and by extension to the ranking of the creditors concerned, is provided for by Section 127 (2) which also ranks all other creditors, categorized under Section 127 (1) (h), at the very bottom of priority. While the matter in casu is not a winding up or liquidation process, it is important to note that in ascertaining the rights of creditors under a scheme of arrangement, the yard stick to be used is not how their rights compare to each other in a scheme of arrangement or against a company as a going concern. The proper test to be applied is to compare the rights of creditors as they would stand in a winding R-36 Scanned wit h CamScanner I ( t1P or liquidation process. The aforesaid position was also espoused by the Court in the case of Telewest Communications supra. The Courts in the cases of Re Hawk Insurance13 , Re Baic 14 and Re Insolvency Marine and General Insurance15 all affirmed the principle that where the alternative to the scheme of arrangement is the liquidation of a company (as in casu), the rights which the creditors would have in that liquidation is the proper comparator as opposed to the rights of the creditors against a company in a scheme of arrangement or as a going concern. Applying the aforestated comparator test to the case in casu and regard to the categories and ranking of preferential debts under Section 127 of the Act, the question would be, if the 1st Respondent was to go into liquidation, would the debt owed by the 1s t Respondent to the Affected Creditor qualify as a preferential debt under Section 127 as set out above? Admittedly, the Affected Creditor did supply electricity to the 1st Respondent during the period of provisional liquidation. The electricity cost which forms the debt owed to the Affected Creditor is what is asserted to be preferential debt because, as the Affected Creditor contends, it was a liquidation cost. It is indeed the correct position that Section 127 (1) (a) of the Act does d esignate "costs R-37 Scanned with CamScanner tiJJd expenses of winding up" as preferential debts. The question to be determined, however, is whether the costs for the electricity supplied to the 1st Respondent qualify as winding up costs/expenses. In the view of the Court, for costs/expenses to qualify as winding up costs/ expenses, the same must be costs/ expenses of the Liquidator in the actual process of the winding up and must not be costs/ expenses related to the ordinary commercial activities of the I company undergoing the liquidation process. Generally, liquidation costs/ expenses relate to the secretarial support of the liquidator and a significant part of such costs/expenses also relate to legal costs involved in the enforcement process of the winding up order itself. For purposes of only appreciating what sort of costs/expenses are envisaged as costs/ expenses of winding up, recourse can be had to the Insolvency Rules of England, 1986, which rules contain an extensive listing of winding up costs/ expenses. The said costs/expenses mainly relate to the secretarial and liquidation process costs/ expenses of the Liquidator. In the case of Re Oak Pits Colliery Co. Ltd16 expenses such as the rent for a building used by the Liquidator for winding up were R-38 Scanned with CamScanner ,. accepted as costs/ expenses of the winding up. Again, it can be noted that those are typical secretarial and process related costs/ expenses of the Liquidator in a winding up. In view of the foregoing, I find that the electricity costs forming the debt owed to the Affected Creditor are not winding up costs or expenses. The debt owed to the Affected Creditor by the 1st Respondent is therefore not a preferential debt as envisaged under Section 127 (i)(a) of the Act. The agreement by the parties to designate the debt as preferential is of no consequence in the face of specific identification and categorization of preferential debt under Section 127 of the Act. The status of preferential creditor is one that is ordained by law and not by the agreement of the parties. The objection by the Affected Creditor to be classified under Class II of creditors on the ground that the Affected Creditor is a preferential creditor therefore lacks merit as it has no founding in law. In the event, I find no basis to interfere with the classification of creditors that included the Affected Creditor in Class II of creditors under the Scheme of Arrangement. R-39 Scanned with CamScanner J)isclosure of Interests of Related Entities The limb of this objection is premised on Section 47(1) of the Act which requires the disclosure of interests regarding, among others, related entities that are subject of a scheme of arrangement. Section 47(1) of the Act provides as follows; " Where a meeting of Creditors or any class of Creditors or of members or any class of members is convened in accordance with this Part, the company shall prepare a statement explaining the effect of the compromise or arrangement and in particular stating any material interests of the directors in the company or a related body corporate, whether as directors or as members or as creditors of the company or otherwise and the effect of the compromise or arrangement, in as far as it is different from the effect on the like interests of the other persons." In advancing the argument related to disclosure , Counsel for the Affected Creditor submitted as follows; " It is noteworthy that among the members of Class (II), in which CEC was placed, were Vendanta entities, ZCCM, and Government entities (GRZ entities). KCMs shareholding structure as appearing at page 22 of the explanatory statement though Vendata, ZCCM, and the GRZ are the only shareholders. Further, these proceedings were commenced by ZCCM to wind KCM up and have been vigorously opposed by Vendanta as the record will show both in this Court and R-40 Scanned with CamScanner ( in the Court of Appeal These parties now wish to resolve their legal battles by taking KCM out of liquidation using the proposed scheme. This is evidenced by the consent order they entered into in the Court of Appeal to discharge the order staying winding-up proceedings (page 19 of the explanatory statement}. Clearly, the interests of Vendata and ZCCM are not the same as the interests of ordinary Creditors. Their greatest motivation is to have their legal dispute resolved, and not to secure the payment of the debt owed by KCM. It was therefore important that KCM discloses how Vendanta and ZCCM stand to benefit from the scheme in a way different from the benefits of ordinary creditors. This would inform other creditors in deciding whether or not to vote for the scheme." In opposing of the foregoing argument, Counsel for the Applicant referred the Court to the Explanatory Statement filed before the Court as a schedule to the Chairperson's Report. Particular reference was made to paragraph 6.4.2 (c) of the Explanatory Statement, which Counsel submitted, does disclose the fact that the GRZ and Vedanta related entities would not participate in the payout from the Creditor Support Fund provided for under the Scheme of Arrangement in the sum of US$250 Million. The relevant portion of paragraph 6.4.2 relating to the said disclosure provide as follows; "It is anticipated that any Zambian Government Authority as well as any Vedanta entity as indicated in paragraph 5.1.6 (b} will elect Option 3. This will entail that, the scheme entitlement of any R-41 Scanned with CamScanner Government Authority and any Vedanta entity as aforementioned shall be applicable to the distribution of free cash flow in accordance with paragraph 6.4. S(c) as opposed to the Net Settlement Amount." In order to appreciate the foregoing disclosure in it's proper context, it is important to have recourse to Option 3 that is referred to in the same. Option 3 , which is expected to apply to GRZ and Vedanta related entities provides as follows ; " No upfront part payment as part of the First Distribution or the Second Distribution. Payment on Account of it's Admitted claims in accordance with the waterfall set out in paragraph 64. S and in particular paragraph (c} thereof (each Class II Schemes Creditor electing this Option 3, a "Class II (Option3} Scheme Creditor)." Option 1 is the only option available to Class 2 Scheme Creditors which results in them receiving a part payment on account of their Admitted Claims at or shortly after the closing of the Restructuring." Having considered the Explanatory Statement, it is clear that the GRZ and Vedanta entities are expressly identified as such in the Explanatory Statement. Further, the option that these related entities have elected to exercise under the Scheme of Arrangement has been disclosed as above. The disclosure is that the related entities are expected to exercise Option 3 , which entails that the related entities will not benefit from the Creditor Support Fund that R-42 Scanned with CamScanner js expected to be set aside should the Scheme of Arrangement be approved by the Court. By the related entities opting for Option 3, the related entities have shown that, in relation to the benefits that will accrue to other creditors under the proposed Scheme of Arrangement, particularly under Option 1 and Option 2, the related entities will in fact take a shave. This is because they will not benefit from the Credit Support Fund available under the Scheme of Arrangement. The interests of the related entities talcing a shave are obviously motivated by the need to get the 1st Respondent, to which they are related, operating as a going concern by tal<lng it out of the course of liquidation. I am therefore satisfied that the Explanatory Statement adequately explains the interests underlining the manner of the related entities' participation in the Scheme of Arrangement. The compromises by the related entities, who collectively hold over 90% of the debt owed by the 1st Respondent, may prevent the 1 st Respondent from collapsing under the sheer weight of the debt held by the related entities and hence give a chance to the 1st Respondent to survive. The disclosed position of compromise of the related entities in that regard, is R-43 Scanned with CamScanner actually beneficial to the Scheme of Arrangement. In the case of Wah Yuen Electric Engineering PTE Limited vs Singapore Cables Manufacturers PTE Limited17 the Court took the view that the manner of disclosure of the related entities' interests in that matter had the effect of the Creditors not being in a position to assess the fairness and reasonableness of the scheme. At page 37 the Court held that; "The Creditors could not determine whether the returns under the proposed scheme of arrangement were in fact greater than what they would expect in a liquidation. It may well be that a proper verification of the related party debts would reveal that related party debt did not in fact exists to the extent currently represented. In such a scenario, the returns to the Creditors in a liquidation would be larger than that currently estimated." Having, however, considered the disclosure made by the related entities in casu, I hold the view that the disclosure on the part of the related entities· is not a bar to the Affected Creditor to assess the fairness and reasonableness of the proposed Scheme of Arrangement. This is because the prospect of the Scheme of Arrangement succeeding actually depends on the compromises made and R-44 Scanned with CamScanner Jjsdosed by the related entities as provided in the Explanatory I statement. The disclosed interests of the related entities will benefit the majority of creditors, who include the Affected Creditor. I therefore find no basis to deny approval of the Scheme of Arrangement on the ground of disclosure and also hold that there is no basis for me to ·discount the votes of the related entities in the Scheme of Arrangement as I was urged by the Affected Creditor in the event that I was to find that the manner of disclosure by the related entities was not proper. Verifications of Debts On this limb of objection, the Affected Creditor submitted that; "Although the scheme administrator announced that the total debt KCM owes to Vedanta, ZCCM and other GRZ entities amounts to 93% of the total debt KCM owes to Class 2 Creditors, KCM has not been transparent about this alleged debt. KCM has not provided or at least made available for verification any list of Creditors with their respective amounts. With KCM and it's alleged majority Creditors being related entities with special interests to serve, there is a real danger of KCM readily admitting even unsubstantiated claims from these related entities in order to increase their voting right for the purposes of passing the scheme. This therefore, calls for the verification of the debt allegedly owed to these related entities. In this regard, the Singaporean Court of Appeal in the case of The R-45 Scainned with CamScanner Royal Bank of Scotland NV and Others V TT International Limited and another appeal (2012) SGCA9 stated as follows Scheme Creditors are entitled to examine the proofs of debt submitted by other scheme creditors in respect of a proposed scheme." In response to the foregoing line of objection, Counsel for the Applicant submitted that, contrary to the assertions of the Affected Creditor, there was no right to proof of debts under the Zambian insolvency law. In the Royal Bank of Scotland NV supra, a Singaporean case cited by the Affected Creditor, the Court, in addressing the issue of proof of debts, held that; "In Principle, therefore, a creditor has no legal right to have access to the proofs of debt of other creditors, except where his voting rights have been or are likely to be affected. In other words, he is entitled to access only if he produces prima facie evidence of impropriety in the admission or rejection of such proof of debt. At the hearing, we queried why OCBC did not apply earlier to the Court for an order that the respondent disclose the proofs of debt and supporting documentation which he requested." I am persuaded by the reasoning -of the Singaporean Court that the right to prove debts by a creditor in respect of another creditor's debt is not absolute. This is because under the Singaporean corporate insolvency legal regime, just like under the Zambian legal regime, there is no express provision of the law granting a creditor the right R-46 Scanned with CamScanner to prove a fellow creditor's debt. While in practice, a Scheme ,Manager, may allow a creditor to query another creditor's debt, it is the view of the Court, in agreement with the sentiments of the Court in the Royal Bank of Scotland NV case, that such an opportunity should only be extended to a creditor seeking to prove the debt of another creditor when there's a likelihood that the debt sought to be proved may adversely affect the rights and interests of the creditor seeking to prove the debt admitted · in a Scheme of Arrangement. This maybe because of some of impropriety in admitting that debt or as regards the truthfulness of it's existence. · In the case at hand, and as observed above, the debt of the related entities has no bearing on the Scheme of Arrangement in as far as access to the Creditor Support Fund is concerned. This is because the related entities have opted for Option 3 where they will not benefit from the disbursement of the Creditor Support Fund from which Fund the Affected Creditor actually stands to benefit. I, therefore, find no justification on the part of the Affected Creditor to claim for a right to prove a debt that does not affect their rights and interests in the Scheme of Arrangement. Further, no evidence of impropriety R-47 Scanned with CamScanner regarding the said debt has been suggested to warrant an exercise to prove the debt of the related entities. It is also doubtful if the Affected Creditor had approached the Scheme Manager seeking details of the debts the Scheme Manager admitted from the related entities. As rightly observed by the Court in the Royal Bank of Scotland NV case supra, such a request is supposed to be made timely, ideally at the time when the debts are declared and admitted. For the foregoing reasons, I find no merit in the objection relating to proof of debts. Right to Vote The objecti'on regarding the issue of voting is contained under paragraph 25 of the affidavit in support of the notice of intention to object. The Affected Creditor deposed as follows; "The explanatory statement at page 49 stated that the dead line for the receipt of voting and claim forms was at 5:00 PM three business days before the meeting. The CEC submitted it's voting and claim form an 23rd May, 2024. However, CEC was not allowed to participate in the vote. Employees of HLB who were in charge of voting at the NAPSA building in Kitwe indicated that the dead line for submitting voting and claim forms for the purposes of voting was 20th May, 2024. I immediately sent an e-mail to TAZA of HLB to explain that CEC had been denied the right to vote but there was no response." R-48 Scanned with CamScanner On this aspect of objection, Counsel for the Applicant drew the Court's attention to the fact that the meetings which were the platform for voting were actually ordered by the Court and that the notice of the said meetings was placed in Newspapers of wide circulation. It was submitted that the Affected Creditor ought to have known that the cutoff date for the receipt of documentation relating to claims and voting was the 20th of May, 2024. That it was not unreasonable for the Scheme Manager to decline receipt of the claims and voting forms from the Affected Creditor three days after the cutoff date for such receipt. In addressing this limb of objection, the Court observes that the Scheme of Arrangement involves close to 680 creditors. Therefore, it was not practicable for each and every creditor to be individually informed of the date for the meetings and the receipt of the documentation for the said meeting. That is the reason the Court directed that notices relating to the meetings be placed in Newspapers of wide circulation. It was therefore expected that an entity such as the Affected Creditor ought to have known the cutoff date for receipt of necessary documentation by the Scheme Manager. R-49 Scanned with CamScanner fU{ther, running a Scheme of Arrangement of such a magnitude obviously presented a serious administrative challenge on the part of the Scheme Manager and hence the need to strictly adhere to time lines prescribed in the notices as failure to do so would throw the entire scheme into disarray. It was therefore not unreasonable on the part of the Scheme Manager to decline to admit the Affected Creditor to the vote on account of the failure to submit necessary documentation on time. I thus find no merit in the objection based on the ground related to voting. On the whole, I find no merit in the objection filed by the Affected Creditor and I dismiss it. I will thus not grant any of the prayers by the Affected Creditor. Application to Approve and or Sanction Scheme of Arrangement The foregoing findings on the objection by the Affected Creditor notwithstanding, the Court is still under a duty to determine if the Scheme of Arrangement as proposed, meets the statutory imperatives and qualifies for approval/ sanction. In considering an application for approval/sanction of a scheme of arrangement, the Court must satisfy itself with a number of pertinent matters relating to a proposed scheme of arrangement. The authors R-50 Scanned with CamScanner of Charlesworth Company Law opme that the following are the considerations a Court must take into account before it can approve/ sanction a scheme; "first, that provisions of the statute have been complied with secondly, that the class was fairly represented by those who attended the meeting and that the statuary majority are acting bonaful.e and not coercing the minority to promote interests adverse to those of a class whom they purport to represent; and thirdly that the a"angement is such that a man of business would reasonably approve" I note from the Chairperson's Report and the attached Explanatory Statement that the meetings of creditors directed to be held by the Court were conducted as directed by the Court and in accordance with the law. The Chairperson reports that in both classes of creditors, the proposed Scheme of Arrangement received over 99% approval by way of votes from creditors. The foregoing reveals that the proposed scheme of arrangement complied with the statutory requirements under Section 46 (8) of the Act and Section 3 of the Companies Act which requires a majority vote of not less than 75%, of creditors voting at a m eeting t o agree to a schem e of arrangem ent. I am also satisfied that th e constitution of the classes of creditors into R-51 Scanned with CamScanner two groups of creditors i.e creditors owed less than US$ I Million and creditors owed more than US$1Million, is a fair representation of the classes of creditors and that the placement of creditors in classes of those with relatively small amounts owing and those with relatively big amounts owing, protects the former class of creditors from the possible coercion from those who are owed more money and whose vote, in relation to the value of debt they hold, would literally extinguish the voice of small creditors if they were to be placed in the same class of creditors. In terms of the reasonableness of the proposed scheme, I note that the overarching theme in the proposed Scheme of Arrangement is to remove the· 1st Respondent from the doldrums of provisional liquidation in which the 1s t Respondent has been languishing in the last five or so years with a view to get it running as a going concern. The compromises made by ·the majority creditors therefore do reflect the objective to rescue the 1st Respondent. It is trite, that a scheme of arrangement has the primary objective of providing relief or rescuing a company in distress, thus the objective of the proposed Scheme of Arrangement in casu, being consistent with the fundamentals of a scheme of arrangement, is one that is in R-52 Scanned with CamScanner the best interests of the 1st Respondent and the creditors. In the postnet case, the Court held that " A scheme of Arrangement is intended to rescue a distressed company and every Company Court has to keep in mind the fact that the alternative to the scheme is liquidation and end to a Respondent Company." Having found that the proposed Scheme of Arrangement is focused on and is in the best interests of the 1s t Respondent, I am satisfied that the Creditors, in voting for the scheme, affirmed the objective of the proposed Scheme of Arrangement. In the case of Hindustan Lever and Another V. State of Maharashtra 18 cited in the Postnet case, the Court held that; " It is the Commercial Wisdom of the parties to the scheme who have taken an informed decision about the usefulness or the propriety of the Scheme by supporting it by the requisite majority vote." Where Creditors have approved a scheme of arrangement and the Court is satisfied that the proposed scheme conforms to statutory dictates, the Court cannot substitute the commercial wisdom of the creditors with it's own view of what a reasonable scheme of arrangement should be. In casu the proposed Scheme of R-53 Scanned with CamScanner ,Arrangement was approved by close to 680 creditors with an average vote of 99% in both classes of creditors. Having considered the terms of the Scheme of Arrangement as contained in the Explanatory Statement and regard to the overwhelming support the Scheme of Arrangement received from the creditors, I have no difficulties to find that the Scheme of Arrangement proposed is one that a man of business would reasonably approve. I accordingly approve and sanction the Scheme of Arrangement. Orders and Directions Having approved and sanctioned the Scheme of Arrangement, it is hereby ORDERED and DIRECTED that the Scheme of Arrangement with the Scheme Creditors of the Company, as stated in the Explanatory Statement and proposed in the Scheme Proposal be and is hereby approved and sanctioned in accordance with Sections 46, 47 and 48 of the Act. In line with clause 5.1 . 11 of the Explanatory Statement, it is further Ordered and Directed as follows; R-54 Scanned with CamScanner 1. That within Seven (7) calendar days of the date of this Order, the Provisional Liquidator shall lodge a copy of this Order with PACRA pursuant to Section 46( 12)(a) of the Act; and 2 . That the Scheme is binding on all the Scheme Creditors of the Company being the Class 1 Scheme Creditors and Class 2 Scheme Creditors as defined in the Explanatory Statement, and pursuant to Section 46 (8) of the Act; and 3 . That upon sanctioning or approval of the Scheme and the Order of this Honourable Court rendering such approval being lodged with PACRA, the Scheme shall be binding on the Company pursuant to Section 46 (8) of the Act. 4. That upon lodgment of a copy of this Order with the Registrar of PACRA pursuant to the Act and the Explanatory Statement and towards attainment of the Restructuring Effective Date, that; i). the 2 nd Respondent deposits funds into Escrow Account for the Creditor Settlement Support, Community Support and the Once-Off Employee Bonus Amount as follows on or before 8th day of July 2024; R-55 Scanned with CamScanner a). United States Dollars Two Hundred and Twenty-Five Million (USD225,000,000.00) for the creditor settlement; b). United States Dollars Twenty Million (USD20,000,000.00) for the once-off community support loan; c) . United States Dollars Seven Hundred and Fifty Thousand Two Hundred (USD750,000.00) for the once-off employee bonus. ii) the 2nd Respondent and the Petitioner shall cause communication to be made to the Escrow Agent for the release of funds to the Company for onward disbursement to the Scheme Creditors as stipulated in the Explanatory Statement of the Scheme of Arrangement on or before 10th day of July 2024. iii) the 1st Respondent 1s to receive the funds for onward disbursement to the Scheme Creditors as stipulated in the Explanatory St atement of the R-56 Scanned with CamScanner Scheme of Arrangement, and the 2°d Respondent to deposit an amount equal to United States Dollars Twenty-Five Million (USD25,000,000.00) as the balance of the creditor settlement amount. iv) the Winding-Up Proceedings shall forthwith terminate upon confirmation by the Shareholders of the Company by way of Notice filed into Court, following receipt by the Company of the funds referred to in (i) and (iii) above, that steps leading to termination of the Winding-Up proceedings have been fulfilled and the same occur on or before 12th July 2024. iv) the Company shall be taken out of provisional liquidation to being a going concern following upon confirmation by the Shareholders of the Company by way' of Notice filed into Court, following receipt by the Company of the funds referred to in (i) and (iii) above, that steps leading to termination of the Winding-Up proceedings have been fulfilled and R-57 Scanned with CamScanner that the Company is now a going concern and the same occur on or before 12th July 2024. v). the Provisional Liquidator shall immediately vacate her position upon confirmation by the Shareholders of the Company by way of Notice filed into Court, following receipt by the Company of the funds referred to in (i) and (iii) above, that steps leading to termination of the Winding-Up proceedings and vacation of the Provisional Liquidator have been fulfilled and the same occur on or before 12th July 2024. vi). the Board of the Company be immediately reinstated upon confirmation by the Shareholders of the Company by way of Notice filed into Court, following receipt by the Company of the funds referred to in (i) and (iii) above, that steps leading to termination of the Winding-Up proceedings and the Provisional Liquidator vacating her position have been fulfilled and the same occur on or before 12th July 2024. R-58 Scanned with CamScanner s. that in line with the Explanatory Statement, that the Restructuring Effective Date occurs on or before 16th day of July 2024. 6. that in line with the Explanatory Statement, payments to Scheme Creditors shall commence within Fifteen (15) calendar days after the Restructuring Effective Date or the next succeeding day which is a Business Day with the first distribution being on or before 31 st July 2024 and the second distribution being on or before 20th August 2024. 7 . that in line with the Explanatory Statement and further to paragraph 6 above, the Scheme Administrator causes a Notice to be issued to Scheme Creditors in Newspapers of wide circulation that the Restructuring Effective Date has been attained within Three (3) calendar days of the Restructuring Effective Date. 8. that in line with the Explanatory Statement, any Claims that would not have been submitted by the Bar Date (17:00h) (Lusaka time) on the date falling (30 days} from the Restructuring Effective Date, or, if that day is not a Business R-59 Scanned with CamScanner Day, the next succeeding day which is a Business Day), the same being on 15th August 2024, shall be forfeited. 9 . That each party bears their own costs. R-60 Scanned with CamScanner ~