Supreme Court of Appeal (SCA) has stayed a High Court Commercial Division ruling which dismissed applications by Mulli Brothers Limited (MBL) for stay of proceedings pending arbitration and a further order declining jurisdiction against Reserve Bank of Malawi’s (RBM) Court proceedings to claim a loan balance from the company.
The application was dismissed with costs.
This means that High Court Judge Jabbar Alide’s order for MBL to file defence within 7 days and subsequent mediation proceedings have been stayed.
The SCA order, which was granted 24 hours after the lower Court’s ruling, reads: “It is hereby ordered and directed that the ruling dated June 15, 2022 and the proceedings herein be stayed pending hearing of the appeal.”
RBM through their lawyer Thabo Chakaka Nyirenda dragged MBL to court claiming a balance of K1 401 989 682.71 from a K2.1 billion loan the company got to facilitate the supply of fertilizer to the government under the Farm Inputs Subsidy Programme (Fisp) in 2019.
RBM further demanded interest at 5 percent from March 1, 2021 when it commenced the action.
Court records show that MBL only paid back K709.6 million by December 20, 2020, when the company was supposed to finalize servicing the loan, but instead they failed, refused or neglected to pay RBM K1 401 989 682.71.
Through its lawyer Wanangwa Hara, MBL argued that the court has no jurisdiction to hear the case because the applicable law in respect of the facility agreement and letters of credit were based on Law of England.
He further said the matter should have been referred to arbitration because it was clearly provided that all disputes arising out of the trade finance facility agreement were to be referred for the same, and the court must enforce the provision.
Under the agreement, the government acting through the Smallholder Farmers Revolving Fund of Malawi (SFRFM) entered into contract with MBL to supply fertilizer under Fisp to the sum of K2.1 billion. In line with the agreement, MBL applied for various letters of credit from the Trade and Development Bank (TDB) in favor of ETG Agri Inputs FZE, the suppliers of the fertilizer.
It was Mulli’s argument that since he had entered into an agreement with government, acting through SFRFM, RBM was supposed to sue SFRFM to enforce its rights within terms of the contract as it had assigned or ceded its obligation to them.
However, Chakaka Nyirenda argued that MBL was not party to the facility agreement and was not therefore entitled to benefit from any clauses in the same.
In his ruling, Justice Alide said the court was satisfied that there was a valid arbitration agreement binding the parties to the facility agreement and that MBL did not surrender to the jurisdiction of the Court after making an appearance in the matter.
“In my view, the current application has failed to demonstrate that MBL 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. On this basis, I decline the application in its entirety,” reads part of the ruling dated June 15, 2022.
On Mulli’s plea that the Court should decline jurisdiction of the matter, Justice Alide said; “the fact that the parties agreed that the applicable law, in respect of the facility agreement, was the law of England does not oust the jurisdiction of this court to hear and determine this action.”
He then ordered MBL to file defence within seven days then the matter shall proceed for mediation.