Last October, VRI Metals won a High Court ruling overturning the sale to Sherashiya, with Justice Zein Kebonang upholding arguments that the deal had improperly favoured the winning bidder.
VRI won a previous bidding round in 2022 for Pula Steel, but failed to settle the P16 million price tag, leading to another bidding process in 2023 won by Sherashiya. Both VRI and Sherashiya are Indian origin firms that specialise in steel manufacturing, with VRI being a subsidiary of Vision Ridge, which also owns the Ikongwe iron ore mine near Shoshong.
In a judgment issued recently, a three-member panel of the CoA found against the arguments advanced by VRI Metals at the High Court.
“The truth of the matter is that the first respondent (VRI Metals) just did not have the money to meet the purchase price,” the judges ruled. “The liquidator had, as a result, his back to the wall and was forced to cancel both agreements with the first respondent.”
The judges, led Justice Lakhvinder Singh Walia, said the liquidator, John Hinchliffe, was under a duty to act in the best interest of the creditors, which in the deal involved “procuring the best possible price for assets”.
“Briefly stated, the liquidation process is creditor driven and I cannot say that in proceeding in the manner that he did, the liquidator can be said to have done the creditors a disservice. “Certainly, there is nothing in the first respondent’s papers suggesting that the liquidator had not acted in the best interest of the creditors,” Walia wrote in the recent judgment.
VRI had claimed that after it won the 2022 bidding, it had spent P6 million “resuscitating the plant, hiring staff, settling rates and maintaining the plant generally”. However, the agreement was terminated on March 14, 2023 after VRI failed to abide by a requirement to settle the P16 million sale price.
Hinchliffe then invited new bids for Pula Steel on March 16, sending VRI an invitation to try again as well. The second selling process by the liquidator ended with Sherashiya being awarded the right to purchase Pula Steel, but VRI challenged the decision in court alleging unfair process.
The CoA found that VRI had two opportunities to purchase Pula Steel but both were “squandered for want of adequate finance”.
“In the circumstances of this case, it would have been foolhardy of the liquidator to chase shadows arising from the first respondent’s recalcitrance,” Walia said.
The CoA decision marks the end of a lengthy process taken to dispose of the country’s pioneering steel plant. Mmegi understands that transfer of ownership has taken place and operations at Pula Steel have already restarted in Selebi-Phikwe.
Pula Steel closed in 2017 – just two years after it was built at a cost of P130 million – strained by financial and technical challenges, particularly the shortage of its raw material, scrap metal. Prior to its liquidation, Pula Steel was fed with scrap metal from BCL Mine and was part of the mine’s life extension plans, known as Polaris II.
BCL Mine injected a total of P111.2 million into Pula Steel before shutting down in October 2016.
At the time of Pula Steel’s liquidation, creditors were reportedly owed about P100 million, meaning under the current deal, creditors would get back thebes for pula.
The liquidation process has been beset by challenges including lawsuits from the plant’s founders.
In 2020, a sale to South African buyers was cancelled after the bidder, DH Machine Manufacturing, was discovered to have been linked to Coinit Trading, a suspected pyramid scheme raided by the South African Hawks and financial investigators.
