Tribunal to Appeal in Carbacid Takeover Row

The legal battle over BOC Kenya's failed attempt to take over industrial oxygen manufacturer Carbacid was yesterday headed for the Court of Appeal signalling an even longer wait before shareholders in the two companies can trade their shares.

Capital Markets Tribunal (CMT) said it was appealing against a High Court ruling that it must comply with an earlier order asking it to hand over a report it used to make a ruling on the BOC case to the Capital Markets Authority.

In landmark ruling that involved two bodies created by the Capital Markets Authority Act, the High Court ruled that the tribunal is not a legal personality and can therefore not sue or be sued.

Lady Justice Rosalyne Nambuye's ruling and the tribunal's subsequent decision to move to the appeals court is the latest twist in a case that some lawyers have dismissed as serving the egos of those involved to the detriment of investors.

The suit pitting the CMA against the tribunal arose from Lady Justice Nambuye's earlier order that the tribunal hand over to CMA copies of a research report it had used to decide an appeal between the market regulator and BOC Kenya.

If the tribunal moves to the appeals court as indicated, hearing of the case will spill into the new year with its conclusion going into the year. BOC Kenya had moved before the tribunal seeking redress over CMA's decision to stop its takeover of Carbacid on the grounds that it had failed to meet conditions set for the deal.

Though the case before Lady Justice Nambuye involved the CMA and BOC Kenya, the order on the research report opened a new chapter that saw the tribunal enter the fray as an interested party.

The report in question was compiled for the CMT by a Nairobi lawyer at a cost of Sh250,000. The tribunal then used the report to determine the long-running dispute between BOC Kenya Limited and CMA.

In making the order asking the tribunal to make the report available to the CMA, Lady Justice Nambuye held that the High Court was simply exercising its powers to do what it ought to have done and therefore did not infringe on the CMT's independence and integrity.

"By calling for that report and have it scrutinized on appeal, the appellate court is simply exercising its powers under the said provisions to do what the tribunal failed to do and that is not a trespass on the tribunals independence, integrity and autonomy," said Justice Nambuye.

During the hearing of the case, lawyers for the CMA had argued that the tribunal was not a person and should thus not have audience in the High Court.

Lawyer George Oraro for the CMA argued that the tribunal had no power to sue nor could it be sued and therefore could not make an application in court.

Mr Oraro told Lady Justice Nambuye that unlike the tribunal, the CMA was established as a body corporate with the power to sue or be sued.

The tribunal through its lawyer Githu Muigai argued that its constitutional rights had been violated through an order compelling it to give CMA the report without being heard in court.

Shareholders in BOC Kenya and Carbacid are however looking forward to a quick conclusion of the matter that now appears set to determine how much longer they have to wait before they can trade their shares at the Nairobi Stock Exchange.

In a proposal filled with the CMA, Carbacid shareholders who agree to sell their shares to BOC Kenya stand to get a compensation package worth Sh1.4 billion.

Under a proposal filed with the CMA, the shareholders will earn a special dividend of Sh320 million at a rate of Sh30 per share and pocket another Sh251.2 million - Sh23.55 per share - in cash payment for their equity.

They will further benefit from new shareholding in BOC Kenya with two Carbacid shares yielding slightly more than one BOC share (one Carbacid unit will yield a 0.555 unit in BOC Kenya).

In the share swap, the 10.6 million plus shares in Carbacid Investments will yield 5.92 million new shares in BOC Kenya, which will be accommodated through an increase in the latter's shareholding.