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Swiss-based company Charles King SA – which entered into an agreement to purchase Tegeta Resources and Energy for R2.97bn – has approached the North Gauteng High Court with an urgent application to stop the sale of Tegeta's shares or assets.
The company approached the court on Thursday last week after hearing that the shares in question were to be sold by Tegeta.
Any sale of assets depreciates the value of the shares they have already agreed to pay R2.9bn for, the company argues.
Charles King SA formerly entered into an agreement with the Gupta-owned company, under business rescue since February, to purchase the shares. According to Charles King SA's sole director Amin Al-Zarooni, the sale of shares agreement concluded in August 2017 is still in effect.
Business rescue practitioners cancelled the agreement in April this year, however, on grounds that the full deposit had not been paid.
Charles King SA paid R64m, leaving a shortfall of R2.3m.
Dispute over cancellation
The company wants the court to interdict the sale of Tegeta's shares or assets pending a final determination on the dispute over the cancellation of the sale of shares agreement.
It is not the first time the company is taking legal action against Tegeta's business rescue practitioners. Fin24 previously reported that it had launched an urgent court bid to prevent the sale of the Gupta-owned Optimum and Koornfontein mines.
Advocate for Charles King SA, Piet Louw SC, told the court the purchase agreement was made before Tegeta was placed under business rescue.
According to Louw, the company attempted to pay the R2.3m shortfall – the "consequence of currency fluctuations" – into the indicated Tegeta account on 28 September, but the bank rejected the payment.
Charles King had always been willing to pay the outstanding amount, he argued, adding that an agreement had been reached to pay this amount after the Bank of India would no longer accept deposits for, and on behalf of, Tegeta.
The company rejected the cancellation and considered it a breach of contract, Louw said.
Furthermore, he added, the business rescue practitioners cancelled the agreement without giving notice, which constituted a repudiation of the agreement.
He asked the court to protect the assets while the arbitration process decided the way forward. According to the sale of shares agreement, in case of any dispute, the issue must be settled before the Arbitration Foundation of Southern Africa.
Straw man, real man
However, adv. Reenen Potgieter SC, representing Tegeta and the business rescue practitioners, argued that Charles King SA had used a "straw man fallacy" in attempting to convince the court that the assets should be frozen pending the arbitration. Charles King SA only argued that they had a right to arbitration, rather than the probability of success in arbitration, Potgieter said.
Charles King has failed to meet all four suspensive conditions contained in the sale of shares agreement, Potgieter added.
The suspensive conditions include a deposit.
"There are no prospects, that is why the applicant is so reluctant to go there [arbitration]."
The BRPs also maintained that the contract between Tegeta and Charles King had become void, which was why they cancelled the agreement.
Business rescue practitioner Louis Klopper told Times Select in May that at the time of the payment, Tegeta was experiencing a "liquidity crisis".
"The bank account shows they [Tegeta] had a cash flow problem at that stage and they needed R64m to pay their salaries," the publication quoted Klopper as saying.
Judgment has been reserved.
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