AG ‘snubs’ demand for Salima Sugar audit review

Attorney General (AG) Thabo Chakaka-Nyirenda has snubbed AUM Sugar and Allied Limited’s (AUM SAL) demand to review the forensic audit report which revealed over K50 billion payments could not be validated at Salima Sugar Company Limited (SSCL).

Ministry of Justice spokesperson Frank Namangale said in an interview last Saturday that AUM Sugar’s request to review the audit lacks basis, adding that the AG already filed a defence to the International Court of Arbitration of the International Chamber of Commerce’s ICC.

Early this year AUM SAL, through KD Freeman and Associates, wrote the AG, requesting to engage its own independent auditor to review the 2023 audit report, arguing its findings had “very serious allegations”.

This was after government through the Green Belt Initiative Holdings Limited (GBIHL), the parent company for Salima Sugar and GBI—terminated its shareholding deal with AUM Sugar and Allied Limited in SSCL due to breach of contract.

But in an interview last week, Shadreck Mhango, one of the lawyers representing AUM SAL, said the Attorney General decided to disregard their demand letter which highlights a number of issues that put to question the audit report.

Further, Mhango said the International Court of Arbitration of the International Chamber of Commerce’s (ICC) Dispute Resolution Services was also yet to receive a detailed response from the AG and other respondents who include SSCL, GBA and the GBIHL.

AUM SAL, India-based counsel Sangramsinh Yadav, took the matter to the ICC in March this year for arbitration following the termination of their shareholding agreement in SSCL.

“The AG has not yet responded to our request to review the forensic audit. The review was intended to draw the AG’s attention to a number of issues that needed fresh look. But now that will be up to the ICC to determine,” said Mhango.

Namangale said in an interview: “As regards the issue of review of forensic audit it lacks basis.”

In their demand letter, AUM SAL lawyers laid down what they described as “five fundamental flaws” to challenge the forensic audit conducted by Audit Consult.

The grounds included an alleged lack of evidence indicating that Audit Consult is a certified forensic accountant, use of ISRS 4400 Standard and use of sampling, time limitation for the forensic auditor and an alleged lack of comprehensive evidence and specificity.

Against this background, the letter reads, the disgruntled AUM SAL believes the findings are characterised as inconclusive, indicating a scenario where definitive evidence or concrete data to support clear outcomes were not sufficiently obtained or presented.

Further, the letter said given the breadth of the flaws and depth of their impact they are proposing a fresh and objective forensic audit.

Meanwhile, the High Court Commercial Division in Lilongwe has directed that AUM SAL and the GBIHL should proceed with arbitration “without delay.”

The directive follows an application filed by AUM SAL seeking interim reliefs from the court pending arbitration determination at ICC.

AUM SAL dragged GBIHL, Green Belt Authority, SSCL and the Attorney General to the High Court in Lilongwe as first, second, third and fourth defendants respectively.

The defendants raised several preliminary objections and counter applications including a stay of the proceedings and the arbitration, pending criminal proceedings, dismissal of AUM SAL application for being defective for lacking commencement proceedings and for being an abuse of court process for bringing a similar matter decided earlier by the same court.

However, Justice Charlotte Wezi Malonda essentially dismissed all the preliminary objections and the counter applications by the defendants.

In her ruling, she also deferred jurisdiction of the matter to the ICC arbitrators, citing article 26 of the Arbitration clause between the Parties, which provided that arbitration is the preferred form of dispute resolution “without recourse to the ordinary courts of law.”

Further, Justice Malonda stated that the arbitrator before the ICC is “fully seized of this matter and to dispose of the matter expeditiously based on the burning issues raised by the parties.”

GBIHL and AUM SAL signed the Shareholding Agreement of the SSCL on August 27 2015, under the Public Private Partnership (PPP) venture wherein GBIHL held 40percent shares whereas the Indian company held 60percent.

SSCL was incorporated on October 22 2015, under Laws of Malawi and under the said agreement AUM SAL was required to contribute $17.1 million while GBIHL was to put in $11.4 million. Further, SSCL was to further take a loan of $43.6 million to complete the project.