Salzgitter Handel GMBH v Sembule Steel Mills Limited (COMPANY CAUSE NO. 06 OF 2001)
Observed later treatment
No later-treatment classification is recorded for this judgment.
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Holding
The court granted the winding-up petition. The petitioner, an unsecured creditor owed US$1,059,133.02 for steel supplies, proved that the company was unable to pay its debts. The court held that an unsecured creditor is entitled to petition for winding up and that the existence of a secured creditor's rescue package does not bar such relief where insolvency is established. The petition was not an abuse of process.
Outcome
Company wound up by court order and liquidator appointed
Facts
The petitioner, a German company, supplied steel billets and wire rods to the respondent company in 1996 and 1997 on credit terms providing for interest at 4% above current rates on delayed payment. By March 2001, the principal and interest owed totalled US$1,059,133.02. The respondent admitted the debt in September 1999 but failed to pay despite demands. PTA Bank, a secured creditor owed US$9,140,000 secured by mortgages and a debenture, intervened with a rescue package in March and September 1999, offering to settle 60% of the petitioner's debt from 2003. The petitioner was unwilling to accept this deferred payment scheme and filed a winding-up petition in May 2001. PTA Bank opposed, arguing that winding up would frustrate its rescue efforts and that the petition was merely a debt collection tactic.
Issues
- Whether the respondent company should be wound up by the court under section 222(e) of the Companies Act on the ground that it is unable to pay its debts.
- Whether the petition was an abuse of process amounting to improper use of winding-up machinery for debt collection.
- Whether the intervention of PTA Bank as a secured creditor with a rescue package should preclude the making of a winding-up order.
Orders
- The company Sembule Steel Mills Limited be wound up by the court under the provisions of the Companies Act.
- Mr Edwin O. Tile, Accountant/Auditor of J.W. & Partners, Amber House, Kampala Road, Kampala, be appointed liquidator of the company.
- By subsequent consent order, Mr Fulgence Mungereza of F. Mungereza & Co. Consultants be appointed liquidator to act jointly with Mr Edwin Otile.
Rules and key headnotes
Legislation cited (1)
- Companies Act Cap.85 s.222(e)
Cases cited (2)
- Mann v Goldstein [1968] 1 WLR 1091
- Re Hoima Ginners Limited (1964) EA 439
Full judgment
The original judgment as reported. Read the original PDF before relying on any passage.