Sunday, August 9, 2020

Choppies in court bid to close down Payless

Choppies has petitioned the High Court to place Payless under provisional liquidation over more than P100 million debts.

In 2018, the Competition Authority rejected an application for a buying group exemption from Choppies Distribution Centre and Payless Supermarket on the basis that the applicants are enterprises trading in the Fast Moving Consumer Goods (FMCG) and this makes them direct competitors. 

They were therefore, directed to dissolve an agreement that they had entered into because it had no substantial economic benefits for the public.

Now a legal tussle has ensued between the two former ‘allies’ with Choppies petitioning the High Court to place Payless  under provisional liquidation over more P100 million debts. On the other Payless is refusing to take responsibility for the alleged debt insisting that Choppies should furnish it with documentary evidence. 

The case is before Gaborone High Court’s Justice Modiri Letsididi. 

In the petition on behalf of Choppies Distribution Centre(Petitioner)  Choppies Chief Executive Officer Ramachandran Ottapathu argues that Payless (Respondent) should be wound up for each of the following reasons; a notice demanding payments of amounts due to Choppies which were served on Payless which has failed or neglected to effect payment. In the premises, Ottapathu said, Payless is deemed to be unable to pay its debt and is insolvent by operation of law. 

“Your Petitioner is moreover conscious that this Petition is being brought ex parte… (With respect to or in the interests of one side only or of an interested outside party). Your Petitioner has been advised and submits that is the usual procedure where giving notice of the winding up may lead to dissipation of assets by the debtor to the detriment of the general body creditors,” said Ottapathu. 

He noted that a significant proportion of the assets of Payless consist mainly of stock situate in the Stores, mostly of which is highly movable, perishable as susceptible to damage.

“It is imperative that the Provisional Liquidator be in a position to take control of the business of the stores in such as manner as to ensure the value in the stock is maintained for the benefit of all creditors,” said Ottapathu. 

According to court records, on 28 September 2015, Choppies Distributing Centre (as lender) and Payless (as borrower) entered into a loan agreement in terms of which Choppies would avail credit to Payless in respect of stock purchased from Choppies Distribution Centre. Choppies was also to avail funding from time to time to enable Payless to pay its trade creditors and service providers, purchase stock on behalf of Choppies. 

On 17 September 2019, Choppies wrote a letter to Choppies through their lawyers Bookbinder Business Law demanding payment from Payless saying the latter had neglected for failed to make payment to the former when due. Choppies demanded payment of  more than P121 million within 30 days of the demand being effected namely 17 September 2019. 

On 20 September, Payless, through their lawyers, Monthe Marumo &Co. responded denying any indebtedness as alleged by Choppies. Payless also demanded that it be furnished with “all records of all the accumulated rebates, all records of settlement discounts, advertising contributions, gross incentives received by Choppies, pursuant to the purchases made by Choppies on behalf of Payless Supermarket from 2014 to date.” 

Payless lawyers further stated that “We would further appreciate to be advised how all these were applied in each succeeding year to the Payless Supermarket account from 2014 to date.” 

Monthe Marumo &Co. also stated that “if same has been applied to the Choppies profit for the relevant period, we require to be advised of the basis of such application and for your client separately and distinctively state the amount applied in each succeeding year…”

Replying, Choppies said “our instruction is that PLS(Payless Supermarket) is in possession of all the documents and information now requested of CDC( Choppies Distribution Centre).” 

Ottapathu said that “in terms of the directive of Competition Authority the Buying Group was terminated on 10th January 2019 it being recorded that notwithstanding the termination of the Buying Group Choppies remained entitled to continue the financial oversight of Payless which it continues to do as of the date of this petition.”

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