High Court rules throws out lawsuit against Airtel Malawi Plc by its own minority shareholders

The Commercial Division of the High Court has dismissed a lawsuit filed by two minority shareholders of Airtel Malawi Plc, Chandrakant Makadia and Frank Harawa, in which — amongst others — they accused the company and its directors of concealing or failing to disclose that they had a “significant pending litigation” against them at the time the mobile service provider went public on an initial public offering (IPO) in 2020.

Makadia and Harawa also claimed that Airtel “fraudulently misrepresented its financial status”; “involved itself in unlawful and unfair trade practices”; and deceived Makadia and Harawa as shareholders.

The two further alleged that Airtel “acted in bad faith and not in the interest of the company’s shareholders resulting in them losing trust and confidence in Airtel’s directors”.

In terms of the reliefs, the two shareholders went to the extent of demanding that Airtel should be delisted from the Malawi Stock Exchange, citing that the company’s prospectus for its registered IPO of December 20, 2020 was “defective for failure to meet prescribed legal requirements”.

While asking Airtel directors to cease holding their positions, Makadia and Harawa had demanded to be awarded financial damages for what they claimed was for “deception, misrepresentation and breach of statutory and fiduciary duty”.

But Justice Msungama faulted that the two irregularly presented their case, when they asked the court to re-amend their statement of case, list of documents, add other defendants and also to regularise the proceedings.

Ruling for Airtel Malawi Plc

“The application for an order to regularise the proceedings came about upon realisation by the claimants that this matter, being a shareholder action, should have been commenced by way of petition and not by way of summons.”

The Judge further observed that  upon becoming aware that Makadia’s and Harawa’s action had been irregularly commenced Airtel — through their lawyers, DNC Chambers and Racane Associates — filed their an application for dismissal of the matter for being irregularly commenced.

Airtel’s lawyers further contended that the shareholders have no standing to take out an action in respect of matters of a regulatory nature against [Airtel].

Having heard all arguments from both sides, Justice Msungama took cognizance that Makadia and Harawa also took Illovo Sugar Malawi Plc in a Commercial Case No. 52 of 2020 in Lilongwe Registry in which Justice Charlotte Malonda also dismissed these two’s application as shareholders of Illovo, also because their action “been had wrongly commenced”.

Ruling for Illovo Sugar Malawi Plc

In her ruling on the Illovo Sugar case, Justice Malonda indicated: “It is my finding that the Court’s inherent powers to cure an irregularity under Order 2 rule 3 of the rules are not exercised as a matter of course. Such discretion is exercised on condition and subject to first determining what the effect such irregularity will have on the substance of the case.”

Thus Justice Msungama ruled that his Court “did not at any time have jurisdiction to preside over wrongly initiated proceedings” adding that “the jurisdiction cannot now be conferred on the court by an order regularising the proceedings”.

“The end result is that the appropriate thing to do is to have these proceedings dismissed in their entirety.”

The Airtel matter is the third one to be thrown out since last year involving Makadia and Harawa, as  shareholders in publicly listed companies. In March this year, Justice Msungama sitting in the Commercial Court  in Blantyre also dismissed another case against FMB Holdings Limited Plc and First Merchant Bank Plc by Makadia alone.

Also as stated above, in June 2021, Justice Malonda sitting in the Commercial Court in  Lilongwe dismissed another matter  against Illovo Sugar Malawi Plc by the same Makadia and Harawa.

In the case against Illovo Sugar Malawi, Justice Malonda ruled that she found that  the “mode of commencement used cannot be used to determine the rights of the parties and further cannot provide the reliefs sought” and thus, she dismissed the application.

In the Airtel Malawi Plc ruling, Justice Msungama has directed that Makadia and Harawa pay 75% of Airtel’s costs; in the case against Illovo Sugar  Justice Malonda ordered  each party to pay  own costs whereas in the case against FMB Holdings Plc, Makadia and Harawa have been condemned to pay 100% costs to FMB  Capital Holdings Plc and the other Defendants.

A source in the corporate industry, who did not want to be named, indicates that Makadia and Harawa systematically misuse the Courts to try and financially rip off private limited companies where they firstly purchase shares and then start inventing claims for legal redress.

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