Uchumi Supermarkets Ltd is battling to keep off a demand by a supplier that the retail chain be wound up over a Sh53 million debt.
The supplier says Uchumi has no capacity to meet its financial obligations. The retailer has however dismissed the claims saying its inability to pay the debt does not warrant it being wound up.
San Giorgio Ltd, a limited liability company incorporated in Kenya and based in Mombasa, is claiming Sh53,106,754 from Uchumi for goods and services it says it had provided the supermarket as at March, last year.
Uchumi says the petition goes against the spirit of the Insolvency Act, whose key objective is to give struggling companies a second chance.
The law, the retailer says, gives indebted companies an opportunity to settle their financial obligations as they continue to operate, instead of shutting their doors abruptly.
“To call upon the court to order the winding up of the supermarket is such a drastic measure that should only be resorted to if San Giorgio Ltd demonstrates, first, the existence of the debt and second, that Uchumi is totally incapable of paying the same,” said Uchumi Supermarkets Ltd in the court papers.
BUILDING THE ECONOMY
Uchumi added that its asset base far surpasses the debt in question and it would be unreasonable to wind up the chain.
The supermarket says it plays a crucial role in building the economy through the taxes it pays and the many Kenyans it employs both directly and indirectly. To wind up the supermarket will have a huge negative impact to the country, Uchumi adds.
San Giorgio claims says it made several requests to Uchumi seeking to be paid for supplies but the demands were not acted upon. The supplier had written to Uchumi, stating that unless it was paid the Sh53,106,754 within three weeks of the notice dated October 15, 2015, “it will consider Uchumi is unable to pay its debts within the meaning of Section 220 of the Companies Act,” hence leaving the supplier with no other option but to petition the High Court for a winding-up order without further notice.
San Giorgio wants Uchumi closed down by a court order under the provisions of the Companies Act, and that the official receiver be appointed as a provisional liquidator. The supplier also wants to be paid the costs of the case through sale of Uchumi’s assets. The case will be heard on April 22.