IPTL ownership transfer improper, Appeal court rules

Tuesday August 03 2021
IPTL pic

A section of the IPTL power plant in Tegeta, Dar es Salaam. PHOTO | FILE

By The Citizen Reporter

Dar es Salaam. The transfer of all the affairs of the Independent Power Tanzania Ltd (IPTL) to full ownership of Pan-African Power Solutions (T) Limited (PAP) was improper, the Court of Appeal has ruled.

The decision of the highest court in the land means that the handing over of IPTL’s power plant to PAP - which had committed itself to expanding its capacity to 500MW, and sell power to the national power utility Tanesco - “was unlawful.”

The decision comes following an application in which a Malaysian firm which was IPTL’s majority shareholder, Mechmar Corporation Berhad, sought to revise a 2013 High Court decision to allow IPTL to transfer its affairs to PAP, owned by businessman Habinder Seth. Before the relationship between Mechmar - which had offered to partner with IPTL to build and operate an emergency diesel-fueled power plant - turned sour. The Malaysian firm held 70 percent of IPTL’s shares.

VIP Engineering, owned by Tanzanian businessman James Rugemalira, controlled the remaining 30 percent shares in IPTL.

Following disagreement between the two shareholders, VIP Engineering petitioned the High Court in 2002 for the winding up of IPTL.

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However, before the court had heard and determined the winding-up petition on merit, VIP Engineering filed in the High Court a notice of withdrawing the petition.

The reason behind the withdrawal was that VIP Engineering had transferred its shares in IPTL to PAP after the signing of a Shares Purchase Agreement (SPA) between VIP and PAP.

On September 5, 2013, the court granted VIP’s application to withdraw the petition to wind up IPTL and some consequential orders.

The court ordered, among other things, that the Administrator General, who was at that time the IPTL provisional liquidator, must hand over all IPTL affairs to PAP - including the power plant.

READ ALSI: Seth seeks plea bargaining, Ruge writes DPP to drop case

Mechmar protested the orders, and took the case to the Court of Appeal. Through its counsel, Gasper Nyika, the Malaysian firm argued that transferring IPTL affairs to the management of PAP on mere statement from the bar was legally wrong.

“Before the High Court was only a notice of withdrawal of the petition for winding up of IPTL, and no other application upon which the said court could order transfer of the affairs of IPTL to a third party - namely PAP,” argued the lawyer.

By entertaining and granting such a casual prayer, the lawyer submitted, that the High Court denied interested and necessary parties such as the Mechmar the right to he heard on the matter.

The lawyer further argued that the PAP was not party to the winding up proceedings at the High Court to warrant the reliefs and rights granted to it.

According to Mechmar, the SPA between VIP Engineering and PAP, which was the basis of the notice of withdrawal of the petition for the winding up of IPTL, did not involve them, thus anything touching their interest could not be relied upon.

“The applicant own 70 percent of the share-holding of IPTL and that any decision regarding management or ownership of IPTL ought to involve it and not be usurped by unilateral decision of VIP Engineering as contained in the Shares Purchase Agreement,” argued Mechmar’s lawyer.

IPTL pic2

James Rugemalira (left) Proprietor of VIP Engineering, which formerly held a 30 percent in IPTL and Hbainder Seth (right) Proprietor of Pan African Power Solutions (T) Limired (PAP). PHOTO | FILE

It also argued that the ruling of September 5, 2013 condemned their interests without being heard.

Replying, Mr Michael Ngalo (for VIP Engineering) supported the ruling of the High Court as being proper because the court granted a request made by the party that had brought the suit in the first place.

Melchizedeck Lutema, representing IPTL and PAP, said it would have been wrong for the High Court to ignore such a plea on the ground that there was a “representation application” yet to be resolved as long as VIP Engineering - who had instituted the application - had prayed for withdrawal of the matter.

Top court sets aside orders

In their judgment delivered on Friday last week, Judges Augustine Mwarija, Gerald Ndika and Marry Levira sided with Mechmar, saying that the issuing of orders that followed the granting of an application for withdrawal of a petition to wind up IPTL was a palpable error.

“The order for the transfer of the affairs of IPTL to the management or total ownership of PAP was manifestly improper. It purported to pronounce and confer rights on the PAP as if the court had heard and determined the petition on merit,” said the judges.

They went on: “Most disquietingly, PAP was a third party, as it was not a party to the proceedings before the High Court.

“We are firm in our minds that the High Court should not have embedded the withdrawal order with any other consequential order - save for the order in respect of costs. The consequential orders in this matter simply did not have any leg to stand on,” the judges ruled.