High Court blocks $75m IPTL pay as Malaysians speak out

The High Court on thursday granted an injunction barring the withdrawal of $75 million (Sh121 billion) escrow monies paid to VIP Engineering and Marketing, a local company that had at one time owned 30 per cent of the Independent Power Tanzania Limited (IPTL).

Liquidators of the IPTL’s majority shareholders, Mechmar of Malaysia, through their lawyers, IMMMA Advocates, have filed an application at the High Court seeking an injunction to stop the withdrawal and use of the $75 million paid to VIP Engineering and Marketing in January this year.  High Court Judge Fauz Twaib gave the order after the plaintiff—Mechmar, currently in liquidation, filed a suit together with an application for injunction on March 17, 2014.

In the main suit, Mechmar is seeking orders against VIP Engineering and IPTL for payment of contractual and damages of $52.5 million which is 70 per cent of $75 million, the total value of the IPTL asset which has been extracted from the company in breach of the Articles of Association.

The plaintiff also wants contractual damages of reduction value of the plaintiff shares in the company valued at $175 million.

In addition to the suit, the plaintiff filed an application for injunction for orders to “restrain VIP Engineering or any person pursuant to the order control for instructions from taking possession of exercising beneficial and/or legal right.”

The case came for hearing on Wednesday, this week, before the ruling was issued yesterday in favour of Mechmar, hence introducing a new twist in the IPTL sale saga.

New development from Malaysia

 Nearly a week after The Citizen published the version of Pan Africa Power Solutions Tanzania Limited (PAP), detailing how the company acquired the Independent Power Solutions Tanzania Limited (IPTL), Mechmar liquidators have come out to explain what really transpired behind the scenes and in the corridors of justice.

Mechmar Corporation Berhad (MCB) is a Malaysian company incorporated in Kuala Lumpur, which used to own 70 per cent of the IPTL in Tanzania until it was placed under receivership in 2008 and late in May 2012, put under liquidation.

In a letter they wrote to The Citizen on March 18, this year, the liquidators of Mechmar, a company which PAP claims to have bought in 2011 and therefore acquiring the right to own 70 per cent share of IPTL, have disowned Mr Harbinder Singh Sethi.

PAP was in em-safariPG02-210314 corporated with the capital of Sh5 million divided into 5,000 shares worth Sh1,000 each, according to Brela’s letter signed by Mr E. Kakwezi, Principal Assistant Registrar of Companies.

The shareholders of PAP are Mr Sethi whose physical address is Plot No. 887, Mrikau Street, Masaki in Dar es Salaam, holder of 2,500 shares; and Simba Trust that holds 2,500 shares. Simba Trust, according to the Brela letter to The Citizen, gives its physical address as: 3 Ribbonwood Street, SunnyBank Hills QLD 4109, Australia.  Reacting to claims by PAP Executive Chairman, Mr Sethi and his legal counsel, Joseph Makandege, said the Malaysian liquidators stated categorically that the man who claims to have fully and legally acquired IPTL is not the Mechamar’s custodian in Tanzania.   

In their letter, the Malaysian liquidators state that PAP didn’t buy the 70 per cent IPTL shares from an offshore company, Piperlink, registered in British Virgin Island as Mr Sethi and his counsel claimed in Dar es Salaam last week.

The Malaysians move comes amid a threat by PAP to sue The Citizen over allegations that the company and its directors have been defamed by a series of articles the paper published earlier this month.

The revelation also raises key questions on the saga surrounding the acquisition of IPTL amid Mr Singh’s claims that he didn’t come to Tanzania to make money, but rather, to “help the country”.

Mechmar liquidators through their lawyers, Mr Lim Lit and Mr Andrew Heng, say in their letter: “To the contrary, Sethi and his legal counsel were placed on formal notice of our appointment as Mechmar’s joint liquidators, the corresponding vesting of Mechmar’s global interests in the liquidators and requesting that he (Sethi)/or his legal counsel refrain from holding himself/themselves out as Mechmar’s legal representative(s). A copy of the joint liquidators’ letters to Sethi and his counsel are attached.”

According to the letter, Malaysian High Court through an order dated April 16, 2012, confirmed that only the joint liquidators could represent Mechmar within IPTL—casting doubt on whether earlier claims that PAP had legally acquired 70 per cent shares in the Tegeta-based power plant are authentic.

 The articles aforementioned (published last week in  The Citizen), quote PAP’s legal counsel as saying Mechmar’s shareholding interest in IPTL was acquired by Mr Sethi from a company known as Piper Link Investments Limited (Piper)…This is in conflict with the following facts:

•  In 2008, Standard Chartered Bank Hong Kong Limited (“SCB”) appointed one Martha Kaveni Renju (the share receiver), as receiver over the entire ordinary issued share capital of IPTL, which includes the shares held by Mechmar as well as those of VIP Engineering and Marketing Limited (VIP). Following the share receiver’s appointment, Mechmar no longer had any rights to deal in Mechmar shares in IPTL.

•  In 2010, the share receiver applied to the High Court in the British Virgin Islands (BVI) seeking orders restraining the completion of a purported sale of Mechmar’s shares in IPTL to Piper. The application succeeded. The BVI High Court recognised the share receiver as the proper legal custodian of the shares, a position she maintains to this clay.

• The share certificates in question were delivered by Piper to the High Court in the British Virgin Islands in accordance with an earlier freezing order and order for custody dated 8th November, 2010.

• In parallel proceedings in Malaysia, the country’s high court granted an interim injunction, on 4th  October 2010, preventing any dealings by Mechmar in its shares in IPTL…This was followed by a restraining order granted by consent on 12th August 2011 preventing Mechmar from dealing in its shares in IPTL until redemption of SCB’s outstanding debt. Both, the BVI and Malaysian jurisdictions fully recognised SCB’s security over Mechmar’s shares in IPTL and the legal rights of the share receiver.

The Citizen on Friday: