Proceedings in the case where Reserve Bank of Malawi (RBM) is claiming K1.4 billion from Mulli Brothers Limited (MBL) Holdings took a new twist yesterday when the Malawi Supreme Court of Appeal granted the company interim relief.
MBL Holdings obtained the Supreme Court order yesterday morning, barely 24 hours after High Court of Malawi Commercial Division Judge Jabbar Alide dismissed the firm’s earlier application in its entirety and with costs.
This Supreme Court stay order and subsequent granting of leave to appeal means implementation of Alide’s ruling has been put on hold and proceedings effectively stopped.
Reads the Supreme Court order in part: “It is hereby ordered and directed that the ruling of the court dated June 15 2022 and the proceedings herein be stayed pending hearing of the appeal.”
The central bank moved the courts to claim K1.4 billion as outstanding payment for a loan MBL Holdings obtained. Initially, MBL Holdings obtained a K2.1 billion loan from RBM to supply fertiliser under the Farm Inputs Subsidy Programme (Fisp) during the Democratic Progressive Party administration.
MBL Holdings, as a nominated supplier, had entered into an agreement with the Malawi Government through the Smallholder Farmers Fertiliser Revolving Fund of Malawi (SFFRFM).
In line with the facility, MBL through RBM applied for various letters of credit from Trade and Development Bank (TDB), formerly PTA Bank, in favour of ETG Agri Inputs FZE of the United Arab Emirates who were suppliers of the fertiliser.
The value of the letters of credit came to an equivalent of K2 111 609 862.71.
Based on the agreement, MBL Holdings assigned proceeds from the sale of the fertiliser by SFFRFM to RBM to recover the amounts and the letters of credit issued by TDB.
But SFFRFM did not remit the same to the RBM which resulted in MBL paying the central bank K709 620 000, leaving an outstanding balance of K1 401 989 682.71. This prompted RBM to commence court proceedings against MBL.
The central bank is demanding the K1.4 billion plus compound interest on the said sum at five percent above the National Bank of Malawi (NBM) plc base lending rate from March 1 2020 to the date of payment.
But MBL through its lawyers filed an application to stay proceedings of the case pending arbitration. In the application, MBL argued that disputes arising out of the matter should be referred for the arbitration based on the arrangement that was made.
In the application, MBL also argued that under the agreement, the obligation to pay RBM was assigned to SFFRFM, as such, the central bank should not commence any court proceedings as it is not within its jurisdiction.
But in his ruling on Wednesday, Alide dismissed MBL’s application in its entirety with costs on the basis that the company failed to demonstrate willingness to proceed with arbitration.
The judge said: “There is no indication or any evidence to suggest that the defendant [MBL] took any further steps then, or thereafter, to refer the matter for arbitration.
“In my view, the current application has failed to demonstrate that the defendant was, at the time the proceedings were commenced, and that it still remains, ready and willing to do all the necessary things for the proper conduct of the arbitration.”
In an interview after the Supreme Court granted the stay order yesterday, MBL Holdings lawyer Wanangwa Hara said they want the matter to go for arbitration as earlier alluded in their application with the commercial division.
“Our position is that the matter should go for arbitration. The Supreme Court will have to consider that question following this appeal,” he said.
Our efforts to speak to Attorney General Thabo Chakaka Nyirenda, who is representing RBM in the case, proved futile as he could not be reached for comment.
In March 2021, RBM sued MBL alongside four other companies for failing to repay about K3.2 billion in loans connected with subsidy fertilizer deals they signed with government.
Apart from Mulli, the others are Rock ba Rock accused of not paying back about K1 billion, Webb Commercials and FF Trading faces K308 million and K232 million, respectively.
The other company is JF Investments Limited which allegedly owes the central bank K152 million.