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[2018] ZAGPPHC 6
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Annex Distribution (Pty) Ltd and Others v Bank of Baroda (52590/2017) [2018] ZAGPPHC 6 (12 March 2018)
IN
THE NORTH GAUTENG HIGH COURT, PRETORIA
[REPUBLIC
OF
SOUTH AFRICA]
CASE
NO: 52.590/2011
DATE
:
12/03/2018
In the
matter
between:
ANNEX
DISTIRIBUTION (PTY) LTD
First
Applicant
CONFIDENT
CONCEPTS (PTY) LTD
Second
Applicant
SAHARA
COMPUTERS (PTY) LTD
Third
Applicant
VR
LASER SERVICES (PTY) LTD
Fourth
Applicant
SAHARA
CONSUMABLES (PTY) LTD
Fifth
Applicant
INFINITY
MEDIA NETWORKS
Sixth
Applicant
ISLANDSITE
INVESTMETS ONE HUNDRED AND EIGHTY (PTY) LTD
Seventh
Applicant
KOORNFEONTEIN
MINES (PTV) LTD
Eighth
Applicant
OAKBAY
INVESTMENTS (PTY) LTD
OAKBAY
RESOURCES & ENERGY (PTY) LTD
Nineth
Applicant
TenthApplicant
OPTIMUM
COAL MINE (PTY) LTD
Applicant
SHIVA
URANIUM (PTY) LTD
Twelfth
Applicant
TEGETA
EXPLORATION AND RESOURCES (PTY)
Thirteenth
Applicant
WESTDAWN
INVESTMENTS (PTY) LTD
Fourteenth
Applicant
IDWALA
COAL (PTY) LTD
Fifteeth
Applicant
TEGETA
RESOURCES (PTY) LTD
Sixteenth
Applicant
MABENGELA
INVESTMENTS (PTY) LTD
Seventeenth
Applicant
MABENGELA
RESOURCES ENERGY (PTY) LTD
Eighteenth
Applicant
KOORNFONTEIN
REHABILITATION TRUST
Nineteenth
Applicant
OPTIMUM MINE
REHABILITATION TRUST
Twentieth
Applicant
And
BANK
OF BARODA
(“BOB”)
Respondent
JUDGMENT
MAVUNDLA
J;
[1]
These proceedings raise, one way the other, in my view, the question
whether the Courts, with the hand of the law, should take
a
perigrinus witn the scafful of the neck, oblige him against his will
to operate its b1Jsiness in the Republic, be it for a limited
or
unspecified period'?
[2]
This question arises in the backdrop of the application brought by
the applicants, who approached this court seeking the following
order
against the respondent:
[1]
The applicants, who are all large commercial entities
operating in various sectors of the South African economy, approached
this
court on urgent basis in terms of rule 6(12) seeking an interim
interdict as follows:
"2.
Pending the final determination of the relief sought in part B
of the application under the above
case number pursuant to the
order of Makgoka .J delivered on 9 October 2017;
2..1
The respondent is directed forthwith to cease any conduct that will
have the effect of not permitting the first to twentieth
applicants
to operate the banking accounts held with the
respondent in the same manner as they did immediately
prior
to the notices of determination dated 6
July 2017, subject to the respondent's
terms and
considerations as may be applied from time to time, as directed
by Makgoka J on 9 October 2Cl17;
2.2
The respondent is interdicted and restrained from giving
effect to and or implementing in any manner its expressed intention
to
refuse
to
take deposits and or to terminate its
banking operations in the Republic of South Africa to the extent that
this may
be in conflict with the
judgment and order of Makgoka J
delivered on 9
October
2017;
2.3
Directing that In the event the respondent fails to comply
with the order in paragraph 2. 2 above, that it and its principal
officer/
chief executive officer, Mr Manoj Jha will be ipso facto in
contempt of this order and will be required to show cause within 3
days of the order as to why Mr Manoj Jha should not be committed to
imprisonment for 30 days;
3...
3.1
Declaring that the conduct of the respondent as evidenced in
its letter to the applicants date 12 February 2.018 is in contempt of
the judgment and order of Mkgoka J delivered on 9 October 20J.7, and
in particular, paragraph 1.3 thereof.;
3.2
Postponing the question of an appropriate sanction in relation
to such conduct for later determination;
4
Costs of suit on the scale of attorney and client, including
the costs of two counsel and directing that the use of two counsel
was reasonably required in the circumstances."
[2]
The parties first locked horns before Makgoka J, who described
them as follows: "The applicants are all large commercial
entities
operating in various sectors of the South African economy.
They each have a bank-client relationship with the bank. The
first
applicant, Annex Distribution (Pty) Ltd (Annex), the second
applicant, Confident Concepts (Pty) Ltd (Confident); the third
applicant,
Sahara Computers (Pty) Ltd, (Sahara Computers) and the
fourth applicant, V.R Laser Services (Pty) Ltd (VR Laser) have loan
and
/or overdraft facilities with the bank in terms of facility
agreements. In addition, together with each of the fifth
to twentieth applicants, they have one or more trading or
transactional accounts with the bank.
[3]
The respondent is an Indian international bank,
with its major shareholder being
the
Government of India. It is regulated by the Reserve Bank of India. In
South Africa it has its principal place of business situated
in
Sandton, Johannesburg. Its bank operations in South Africa are
limited to two branch offices, one in Durban and one in Johannesburg
together with a regional office which is attached to the Johannesburg
branch). It employs 16 people across its entire South African
operations. The bank does not operate as a clearing bank in South
Africa. Instead, it conducts a correspondent banking facility
with
Nedbank, one of South African leading commercial banks. A clearing
bank is a bank that directly transfers funds from its own
infrastructure to any third party bank account; vide Makgoka
judgment.
[4]
Makgoka J accepted allegations by the major banks in South .Africa
that the applicants are all owned and controlled
by members of
the Gupta family and their dose associate, either directly or
indirectly, or that they form part of the Oakbay Group
of
companies, or are otherwise closely
affiliated with this group.
This
culminated
in the major banks severing: any business relationship with the
respondent. This prompted the respondent on the 6 July
2017 to send
each of the applicants a letter communicating its decision to
terminate the transactional facilities
in just six days'
notice, on 17 July 2017 to be precise. The respondent also sought,
according to the. applicants, unilaterally
to impose new terms upon
Annex's non-fund facility.
[1]
[5]
The applicants then on urgent basis brought the application
which served before Makgoka J who granted the following order with
further
ancillary reliefs:
'1.
Pending the final determination of the application referred to in
paragraph 2 of this
order, the respondent is interdicted from:
1.1
de-activating and / or dosing the applicants' banking accounts held
with the respondent and /
or from terminating the banker-customer
relationship between the applicants and the respondent for the
reasons stated in the determination
notices dated 6 July 2017;
1.2
demanding the first to fourth applicants to repay the sum owed by
each of these applicants to
the respondent in terms of their loan and
overdraft agreements with the respondent for the reasons stated in
the termination notices
dated 6 July 2017;
1.3.
in any way limiting the manner in which the applicants operated their
banking accounts prior
the termination notice accounts are operated
by the applicants so as to ensure that the applicants are permitted
to operate the
banking accounts in the same manner as they did
immediately prior to the notices of termination dated 6 July 2017,
subject to the
respondent's terms and conditions as may be applicable
from time to time.
2.
Within 15 days of the granting of this order, the applicants
shall launch an application against the respondent for the final
relief
the applicants deem appropriate concerning the validity or
otherwise of the termination notices dated 6 July 2017 issued by the
respondent;
3.
The interim order referred to in paragraph 1 above shall
lapse should the applicants fail to launch the application
referred to in paragraph 2 above within the time frame stipulated
in the order."
[6]
It is common cause that the applicants have already complied
with the Makgoka J order in that on 30 September 2017 they filed
their
part B application. The part B application is as yet to
be heard.
[7]
It is prudent to chronicle the contents of the letter of
6 June 2017 which are:
"You are aware that
the firm/ group, for quite some time, has been in the news, and has
been attracting adverse publicity in
media, which in the opinion of
the bank, is potentially risk and may affect the interests of the
bank to its detriment. We have
several times conveyed our bank's
concern telephonically but to no avail;
In
the circumstances, Bank (sic) has no option except to severe all its
ties with the firm. Therefore, please be informed that:
All deposit accounts,
such as savings, current and other deposit account which are in
operation will be deactivated on 17 July 2017;
All advance accounts be
settled not later than 30 September 207;
Non- fund based
facilities should be supported by 100% cash margin in the respective
current account, if any."
[2]
[8]
It is common cause that the respondent subsequently informed
the applicants per letter dated 12 February 2018 that:
“
2. The bank is now
implementing a rationalisation of its international operations, which
includes the closure of the South African
branch;
3.
Accordingly, the bank will terminate its local branch
operations with effect from 31· March 2018. As from that date
it will
no longer provide banking services in South Africa;
4.
In
order to
ensure an
orderly
closure program the
bank will
cease accepting any new incremental deposits from, or on behalf of
its customers, with effect from 01 March
2018."
[3]
[9]
Consequent to the aforesaid letter of 12 February 2018, the
applicants brought the present application. Seven of the applicants,
namely the 2
nd
, 4
th
, 5
th
, 7
th
,
10
th
, 11
th
and 12
th
applicants,
have since been placed under business rescue. On the hearing of this
application they were not represented,
although an affidavit of
the business rescue practitioner who is managing the affairs of the
aforesaid seven applicants was
handed in on the day of the hearing of
this application. The essence of the said affidavit is that the seven
respondents associate
themselves with the application. I need not add
[10]
According to the applicants the purposes of the application is
to seek an order in terms of which the respondent
is restrained from carrying out and giving effect to that
which its letters of 12 February states it will do. They
contend
that there are two principal remedies sought; mainly the first is an
interim interdict which seeks to maintain the
operation of the
applicants' banking facilities pending the finalization and
determination of the pending litigation between the
applicants and
the respondent so as to prevent frustration of the Mkgoba judgment in
favour of the applicants. The application
also seeks to ensure that
the remedy of interim interdict granted by Makgoka J remains
effective and that the effectiveness of
the order is not frustrated.
A
further relief sought is to direct Baroda, in the event
of failing to comply with the relief aimed at
preventing
it from implementing its expressed intention to refuse to
take deposits and or terminate its banking operations
in South
Africa, that Baroda and its principal officer/ chief
executive officer, Manoj Jha ("Mr Jha")
be
ipso
facto
held in contempt of the court order and be
committed to prison for a period of thirty days. The applicants
further
seek a declaratory that Baroda's conduct as evidenced
in its letter of 12 February 2018 constitutes
contempt
of the Judgment and order of Makgoka J. in particular
paragraph 1.3 thereof.
[11]
In regard to point of effectiveness of the court order, it was
submitted that if the Court does not grant the relief
sought, it would result in Baroda not providing the banking
facilities, thus resulting in part 13 falling away rendering part B
academic. It was submitted further that this
would amount to an unjustifiable
infringement of the applicants' rights enshrined by section 34 of the
Constitution to have any dispute resolved by the application
of law decided in a fair public hearing before
court of law. The applicants further contend
that the courts are enjoined in considering
whether to or not to grant an interim interdict, they are to
do
so in a way that promotes the objects, spirit and
purport of the Constitution. The court
is not
required to determine the merits of and with its
prospects of success in Part B, only
relevant to
the extent that it assist the court in determining whether or not the
applicants have made out
a prima facie
right, relying on the
matter of
National Treasury and
Others v
Opposition to Urban
Tolling Affiance'
(OUTA) and Others
2012 (6) SA 223
(CC) at para 45,
[12]
The respondent's case in opposing the application is in
particular,
inter a/ia,
that it does not operate a clearing
bank in South Africa. It historically enjoyed a correspondent banking
relationship with Nedbank
which permitted funds
of Baroda's customers to be transferred from Nedbank's
infrastructure
to third parties. The respondent has
decided to exit the South African banking sector because it is not
economically viable
for it to remain in South Africa. Besides,
Nedbank has terminated its relationship with Baroda as a result of
which, Baroda is
unable to provide any meaningful banking services to
its customers. Baroda further cannot procure a correspondent banking
relationship
with the three remaining major banks
and therefore pleads impossibility.
[13]
It is trite that the applicants, seeking an interim bear the
onus of persuading the court that:
(a) they have a
prima
facie
right,
(b) they will
suffer irreparable harm;
(c) the balance of
convenience favours the grant of the relief;
(d) they have no
other remedy.
[14]
In my view, the crisp issue in this matter is whether the
Courts, can direct the respondent to continue with its operations in
the
country against its will. I shall therefore deliberately not deal
with all the issues mentioned in para [13] above. It suffices
to
point out that in so far as having no other, remedy, in my view, the
applicants certainly do have one, and that would be a damages
claim
against the respondent were they to prove that they have suffered
damages as the result of the respondent's
action to
close their operations in South Africa.
[15]
It is not disputed that:
15.1
the respondent has a total complement staff of 16 employees
manning both
its two branches;
15.2
the respondent does not have its own infrastructure, but relies on
that on Nedbank;
15.3.
Nedbank has terminated its relationship with the respondent;
15.4
The major banks have severed relationship with the respondent
on account of adverse publicity.
15.5
Sahara
Computers
closed and
was
abandoned,
and
its
assets
are
incorporated
into the fifth respondent.
[4]
15.6
the
Bank of Baroda's Board resolved and approved the closure of the
respondent's operations in South Africa
after it took into account,
inter
alia,
the
adverse publicity of the Bank as the result of its
association
with
Sahara Group/ Gupta family.
[5]
15. 7
the relationship between the respondent and applicants is
contractual,
and therefore the respondent is at liberty to terminate its
relationship with the applicants; vide
Annex
Distribution (Pty) Ltd and others v Bank of Baroda;
[6]
Bredenkamp
and Others v Standard Bank of South Africa.
[7]
[16]
The
respondent without any infrastructure of Nedbank, cannot be
expected to service the accounts of the applicants.
Neither can
the Court compel it to go belly crawling to
Nedbank to demand re--installation
of the infrastructure. The
other
major banks have also turned their back against the
respondent. The respondent has every right to
terminate any
business contract, including that of the
applicants.
[8]
[17]
In
my view, the respondent has the right to trade,
which is protected by
the
Constitution.
[9]
This right entail,
inter
alia,
the
liberty to choose to or not to exercise
it within the confines of its whims or means.;
vide
Affordable Medicenes Trust v Minister of
Health
[10]
where the then CJ Ngcobo held that:
"Construed purposively,
therefore,
s22
embraces
both
the
right
to
choose
a
profession
and
the
right
to practice
the chosen profession:" The decision by the respondent to exit
South African banking sector, cannot, in my view,
be interfered with
by the Courts. Put differently, the Courts cannot compel the
respondent to keep the doors of its business
open for whatever
duration.
[18]
It is trite that a judgment must be understood in its entirety
and not piecemeal or selectively. The order of
Makgoka .J specifically restrains the
respondent from
interfering
with the accounts of the applicant for the reasons advanced in the
letter of 6 June 2017. The reason then was the adverse
publicity;
vide para [5] supra.
[19]
The respondent's decision to close its business and exit South
African banking sector, is predicated on commercial
consideration;
vide
para 6 supra. In my view, the Makgoka
J order has nothing to do with
the exit
of the respondent form South
Africa. It cannot therefore be said that the exit is
mala fide
and
calculated to frustrate the Makgoka J order, or in contempt thereof.
[20]
In the circumstances of this case, I therefor conclude that the
respondent's right to or not to trade supersedes, whatever
right, if
any, the applicants might have. I further conclude that the
balance of convenience by far outweighs that of the
applicants and
tilts in favour of the respondent. Consequently, I refrain to
exercise my discretion in favour of the applicants
and accordingly
decline to grant them the relief sought.
[21]
It is trite that the costs follow the event. The applicants
engaged the services of two senior counsel and two juniors, who filed
their heads of argument, and later a senior counsel and three juniors
who also filed supplementary heads of argument
and
moved the application. This demonstrates the importance of the matter
to the applicants. The respondent also engaged the services
of senior
counsel and three juniors, justifiably so, in my view.
[22]
In the premises the following order is made:
1. The application
is dismissed .with costs,
2. The applicants
are ordered jointly and severally, the one paying the other to be
absolved to pay the costs, inclusive the
costs of employing senior
counsel and three junior counsel.
_________________________
N.M.
MAVUNDLA
JUDGE
OF THE HIGH COURT
DATE
OF JUDGMENT
:
12/03/2018
APPLICANT'S
COUNSEL
:
ADV. A. R. BHANA SC
WITH
:
ADV J P DANIELS
SC
AND
:
ADV
C C. BESTER
AND
:
ADV
L SCHAFER
LATER
:
ADV.
A, O. COOK SC
WITH
:
A. J.
DANIELS
AND
:
ADV,
L. l. SCHAFER
AND
:
ADV.
B. T. MORETELWE
INSTRUCTED
BY
:
VASCO
DE OLIVEIRA INCORPORATED
RESPONDENTS'
COUNSEL :
ADV. AZHAR SHAM SC
WITH
:
ADV
JAWAID BABAMIA
AND
:
ADV
KEVIN ILES
INSTRUCTED
BY
:
MERVYN
TABACK INC
[1]
Vide annexures marked "FA 3.1" "FA 3.20".
[2]
Annexure''FA3.l- 320"
[3]
Annexure 'FA3.4"
[4]
Vide annexure L paginated page 390 and
paginated page 786 para98.3.
[5]
Vide annexure "I" at paginated page
435 of the replying affidavit; Certified
Copy
of the Boards Resolution No 25 dated 22 December
2017, annexure C-6 Approval for closure of South
African Territory
of two branches; and Executive summary of the
Board Meeting.
[6]
2018 (I) SA 562 (GP).
[7]
2010 (4) SA 468 (SCA).
[8]
Bredenkamp and Others v Standard Bank of South
Africa. supra.
[9]
S22 of the Constitution of the Republic of
South Africa, Act no l 08
of
1996.
[10]
2006 (3) SA 247 (CC) at 276 para[66]