Supreme Court rejects DBE’s petition to freeze debtor assets
The embattled Crown Textile Weaving PLC has once again won its epic court battle surrounding Edget Yarn and Sewing Thread Manufacturing SC, which it bought from the government under the privatization program a decade ago.
In its hearing on Monday, the Federal Supreme Court rejected the Development Bank of Ethiopia’s petition to see the asset of Edget Yarn & Sewing Thread Manufacturing SC frozen until Crown settles a working capital loan it took five years back.
Edget Yarn, which was once under the ownership of the state, was transferred to Crown Textile back in October, 2006 as part of the state privatization program. At the time, Crown acquired Edget Yarn at a total cost of 47.7 million birr from the then Privatization and Public Enterprises Supervising Agency (PPESA). Upon the transfer, Crown paid 35 percent of the total amount.
The case began to unfold as DBE sued Crown Textile for unsettled 64 million birr, which was given as a loan to Crown. The loan, which was disbursed in 2012, during the tenure of Esayas Bahre, former president of DBE, was given as a working capital loan. It was said to be used to finance cotton raw material.
In that regard, the Bank claimed he working capital loan that Crown owes and argued for the settlement of the sum.
Having this in mind, back in March, 2017, the Bank petitioned the Lideta High Court to freeze all assets owned by Edget, which DBE claimed to be fully owned by Crown.
However, Crown counter argued that Crown and Edget are two different entities (companies), having separate legal personalities, and that Edget should not be liable for the case.
The bank explained to the court that Crown has already acquired Edget; and that the latter has used Edget as collateral to get loans before.
DBE’s lawyer also recalled a prior court case involving Crown and another company called Semera Agro Industries PLC, where the latter claimed that it has an ownership over Edget. However, at the time, the court has ruled in favor of Crown saying that Edget is rightly owned by it (Crown).
In 2010, another disagreement ensued between Abdulkadir Juhar, a major shareholder of Semera, and Mulunesh Abrha, the owner of Crown. The case, which ended at the Federal Supreme Court, revolved around Semera’s right as a shareholder of Edget to call shareholders’ meeting.
Accordingly, DBE tried to use the fact in the above three cases to prove that Crown fully owns Edget.
Crown on it part defended to both Courts that Edget has already been transferred to 15 shareholders and that it (Crown) is nothing but one of shareholders, at this time. It further claimed that the transfer of the shares was made on February 2016.
It is to be recalled that around the same time (February 2016), Crown Textile has won, yet again, another court battle against MIDROC Ethiopia Technology Group (MIDROC) regarding the ownership of Edget.
The relationship between Crown and MIDROC came into light when Crown failed to settle 65 percent of 47 million birr it owed PPESA, upon the transfer of Edget Yarn. MIDROC and Crown, at the time, agreed that the former will pay the remaining money to PPESA on its behalf. The two have signed a Memorandum of Understanding confirming their agreement.
Crown in return committed to transfer the rights of shares and physical properties of Edget to MIDROC. However, the process got stalled as Crown decided to stop the inventory process. When MIDROC demanded 33 million birr compensation for damages, which was caused by the delay of the transfer process, Crown argued that there was no binding contract between MIDROC and Crown. The claim by MIDROC for compensation hence went to an arbitration body.
The arbitration panel had then decided that there was no legal contract between MIDROC and Crown.
In the latest case between DBE and Crown, the bank argued that Crown’s restructuring of the ownership of Edget is an attempt by Crown to dodge its asset in Edget, according to its statement. Yet, Edget as one of the defendants argued that it should not be burdened with Crown’s liability.
In March, 2017, after reviewing their case, the high court has ruled rejecting DBE’s demand to freeze the assets of Edget. Rather it decided that it is only the share of Crown at Edget, which can be subjected to an asset freeze. In this respect, the court put an injunction order over 512 shares of Crown at Edget.
The bank has then brought its case to the Supreme Court appealing for its prior demand of freezing all assets under Edget.
First civil bench of the Supreme Court, which heard the case, was presided over by judges Gebeyaw Feleke, Ayesheshum Meles and Teshome Shiferaw.
To DBE’s dismay, however, the judges have accepted the high court’s ruling of freezing only the shares of Crown, at Edget.