KE co-owner told to reply to plea to vacate stay on board change

The Sindh High Court (SHC) on Tuesday directed the foreign co-owner of Karachi’s sole power supply company, K-Electric, to submit a counter affidavit on an application requesting the court to vacate the interim stay order on the proposed change of the KE board.

On October 21 the court had stopped any change in the present KE board of directors on a lawsuit filed by Saudi Arabia- and Kuwait-based companies Al-Jomaih Power Limited and Denham Investment.

The two companies, which own 46.2 per cent of the shares in KES Power Limited, a majority shareholder (66.4 per cent) in KE, had opposed the proposed change in the KE board of directors by other co-owners.

Another KE co-partner, Infrastructure and Growth Capital Fund SPV21 Limited (IGCF), which owns 53.8 per cent shares, questioned the maintainability of the lawsuit filed against the change in the KE board, and requested the court to vacate the interim stay order.

Filing an application against the grant of a stay order, IGCF said KES can nominate nine board directors out of 13, and according to the 2008 agreement, IGCF has the right to nominate five of the nine directors, while Al-Jomaih is entitled to nominating four directors.

Their counsel said that the entire dispute raised by the plaintiff is exclusively governed under the 2008 shareholders agreement, which provides for arbitration and cannot be avoided or bypassed by joining unnecessary parties to give a semblance of dispute relating to KE, which has nothing to do with the present dispute.

He said IGCF is entitled to nominating the specific, agreed-upon representation for the KE board of directors, and in case of objections or reservations, the dispute has to be referred for adjudication under the agreement.

He also said that the agreement between IGCF and Al-Jomaih is governed under the English law, and they are bound to resolve any disputes under Clause 25 of the agreement, which provides for arbitration.

He requested the court to vacate the interim stay order or modify it, and refer the matter for adjudication in accordance with Clause 25 of the shareholders agreement. A single SHC bench headed by Justice Adnan Iqbal Chaudhry directed the plaintiff Al-Jomaih and KE to file counter affidavits on the application within two weeks. The court in the meantime continued the interim order that stops any change in the present KE board of directors.

The plaintiffs said in the lawsuit that KE is owned and controlled collectively by them, IGCF and other investors, claiming that IGCF, in gross violation of the shareholders agreement, is attempting to transfer the beneficial ownership effect or management control of KE in connivance with Alvarez and Marsal, liquidators of IGCF.

They said that it has been reported in the media that the transfer of management control of a large part of KES and KE is in advance stages, for which a proposal has been filed that is awaiting approval by the grand court in Cayman Islands.

It is the same forum where the former co-owner, the Abraaj group, has filed for voluntary liquidation proceedings in terms of which Alvarez has been appointed to take over IGCF, they added.

They said that neither the plaintiffs nor the Government of Pakistan are aware of any such transfer of beneficial ownership change in the board or management control. They added that the plaintiffs are not part of any plan of the co-owners as regards the change in the KE board of directors, but it is being discussed by IGCF and Alvarez through proposals filed in Cayman Islands.

They pointed out that KE has also made a material disclosure to the Pakistan Stock Exchange in relation to the transfer of beneficial ownership and management control at the behest of IGCF, which is unlawfully trying to gain control over the national asset.

Their counsel told the SHC that the transfer of beneficial ownership in KE or any change in its board and management cannot take place without the approval of 75 per cent of its stakeholders, and the election of its board can also not take place without the approval of its shareholders and regulators.

He said that the shareholders agreement provides that any change in the control of K-Electric will be subject to national security clearance by the federal government as well as various statutory and regulatory approvals by the competent authorities.

He requested the high court to declare the acts of the defendants as regards the change in beneficial ownership and management control of KE in gross violation of the National Electric Power Regulatory Authority law and the shareholders agreement. The plaintiffs also requested the high court to monitor and regulate the affairs of the power company in accordance with the prevailing laws of the country.