DM168

DM168 SCORPIO INVESTIGATION

Liquidation and litigation woes: A strike at the heart of the Gupta empire

Ajay Gupta and younger brother Atul Gupta at a one-on-one interview with Business Day in Johannesburg, South Africa, on 2 March 2011. (Photo: Gallo Images / Business Day / Martin Rhodes)

The bid to liquidate the Gupta-owned Oakbay Investments has reignited, and this time a former business associate – who is already engaged in a R1-billion war with them in Bermuda – wants in on the fight.

First published in the Daily Maverick 168 weekly newspaper.

International businessperson Daniel McGowan – on the verge of snatching the Gupta family’s once-prized Optimum Coal from them – now also wants to liquidate their flagship company, Oakbay Investments.

McGowan’s Centaur De Roodepoort, a local mining company, has applied to intervene and back liquidation proceedings brought by the business rescue practitioners (BRPs) dealing with the Gupta company.

This comes amid a court battle playing out between McGowan and the Guptas in Bermuda in a case that centrally features Optimum Coal Mine (see sidebar).

The liquidation of Oakbay could prise open one of the biggest blind spots in the Gupta enterprise.

McGowan is hoping to latch his liquidation bid in respect of a R500,000 cost order on to the R400-million lawsuit that BRPs Kurt Knoop and Louis Klopper initiated on behalf of Islandsite Investments 180 and Tegeta Exploration and Resources in January 2020.

Tegeta is the Gupta company that owns a high-value basket of assets comprising Optimum Coal Mine (OCM) and Optimum Coal Terminal (OCT). These entities are among eight Gupta-owned companies plunged into voluntary business rescue in February 2018 after major South African banks terminated Gupta bank accounts.

Oakbay has remained firmly under the control of the Guptas via proxy and longtime employee Ronica Ragavan, who is the acting CEO. If the winding-up application is successful, it would place Oakbay in the hands of a court-appointed liquidator who may not necessarily share the Guptas’ view on what litigation to engage in.

Oakbay is the entity through which the Guptas are pushing a legal challenge against the Industrial Development Corporation  (IDC) in New York.

In that case, they seek to contain the damage of a court order that allows the IDC to subpoena their financial records from 17 New York banks. This could be a potentially powerful cache of records for South African law enforcement.

The Guptas, via Oakbay, are trying to ensure that those records are only used in the IDC’s civil suit against them.

Liquidation would likely trigger a 417 inquiry into the affairs of Oakbay, a company that is widely regarded as the heart of their once powerful empire.

As a holding company, Oakbay’s “business” is to hold shares in the various companies in the Gupta group. “Its substratum as a business is dependent on the underlying value of its equity in its subsidiary companies,” liquidator Kurt Knoop says in a filed affidavit.

On this front, Tegeta, which owns the Optimum assets and Shiva Uranium, sit with total creditor bills in excess of R4-billion and other companies in the group are either in business rescue or have been liquidated.

Knoop says it flows then that the entire business foundation of Oakbay had failed and that it was neither rational nor reasonable that it could ever recover as a business.

This liquidation bid – the third since 2018 – though launched by the BRPs in January 2020 had stalled for unknown reasons.

Now McGowan, relying on bad debt of just R500,000, is getting in on the action.

In an affidavit dated 17 August 2021, McGowan says Centaur De Roodepoort (CDR) had a R45-million claim against the insolvent estate of another Gupta company, Westdawn Investments.

Westdawn, an Oakbay subsidiary, was liquated in October 2018, but then Ragavan in her capacity as director of Westdawn, and Oakbay as shareholder of Westdawn, launched an application to rescind the liquidation order.

CDR opposed this application and the High Court in Pretoria dismissed the application, with costs, in October 2019.

The Guptas then went to the Supreme Court of Appeal (SCA) and the Constitutional Court with further unsuccessful appeal bids and both failed.

With CDR having opposed this wave of litigation, it then obtained a taxed bill of costs for just over R500,000.

McGowan says they have been unable to serve court papers and its clear that Oakbay is not trading or commercially active.

“Finally, as set out in various judgments by the Supreme Court of Appeal, an analysis of Oakbay’s financial statements reveals that Oakbay was used as a conduit to launder money in and out of South Africa.

“Axiomatically, that conduct should be stopped, and a liquidator should be appointed to examine the affairs of the company,” McGowan adds. CDR seeks either to support the liquidation application filed by the BRPs or to obtain a self-standing winding-up order.

“Based on the debt and Oakbay’s inability to pay it, I submit that Oakbay should be wound up,” McGowan says in the affidavit.

The Guptas previously twice averted the liquidation of Oakbay, in both instances by paying up debts of R2-million and R3.8-million, respectively, thereby causing the court action to be withdrawn at the eleventh hour.

Yet the latest attempt is markedly different, in that the claims now total in excess of R400-million, cash the Guptas may not have readily available – or may not be willing to cough up.

The liquidation application is the latest development in an endless stream of dramas the Gupta enterprise has faced in recent months. The National Prosecuting Authority has obtained arrest warrants for brothers Atul and Rajesh Gupta and their wives, Chetali and Arti, in connection with a criminal case in the Free State.

South Africa is awaiting a decision on its requests for Interpol Red Notices in respect of the four Guptas. DM168

Workers at Gupta-owned Optimum Coal Mine during a protest on 21 February 2018 in Middelburg, Mpumalanga, South Africa. (Photo: Gallo Images / Netwerk24 / Felix Dlangamandla)

Oakbay lawyer’s response

Oakbay was unaware of Centaur’s intervention application until contacted by DM168.

Attorney Pieter van der Merwe said he would peruse the documents and decide on the appropriate course of action after a discussion with his client.

Oakbay is not involved in the Bermuda litigation and its efforts are concentrated on the Optimum process in SA, Van der Merwe said in response to a request for comment.

Guptas keep litigating in SA courts

Although they abandoned their Saxonwold mansion years ago, the Guptas continue to litigate extensively in South Africa. These are court cases relevant only to the latest bid to liquidate their holding company:

Oakbay Investments

Strike 1: Tegeta Exploration and Resources, a Gupta company that owns Optimum Coal, Optimum Coal Terminal and Koornfontein, filed liquidation proceedings that were withdrawn once the Guptas paid up the R2-million in rent arrears in 2018.

Strike 2: Months later, Tegeta again applied for the company’s winding up over a R3.8-million debt. The Guptas defended this case but, bizarrely, coughed up the cash with judgment pending, thereby again avoiding liquidation.

Strike 3: The BRPs for Tegeta and Islandsite jointly filed a third liquidation application in January 2020.

Oakbay is also involved in litigation involving the Industrial Development Corporation in New York. Oakbay applied to remove the BRBs and lost. An appeal to the Supreme Court was shot down in May 2021 and an application to the Constitutional Court is pending.

Islandsite 180 and Confident Concepts

The Guptas obtained a High Court order to remove Kurt Knoop and Louis Klopper as the BRPs of these two companies. They also secured an order to execute that order while the BRPs went to the Supreme Court of Appeal. Knoop and Klopper won, in both cases, at the SCA in November and December 2020.

The Guptas then headed to the Constitutional Court for leave to appeal. In August 2021 that court dismissed both applications. In addition, the National Prosecuting Authority obtained a draft restraint order against Islandsite in June 2021. The Guptas recently lost a bid to litigate on behalf of Islandsite after the Free State High Court said proxy Ronica Ragavan did not have the legal standing to instruct lawyers BDK to act for the company because it was under the legal care of the BRPs.

Westdawn Investments

The company, which previously traded as JIC Mining Services, was plunged into liquidation by Kal Tire Mining over a R900,000 debt in October 2018.

A month later the Guptas went to court to rescind the order and their application was dismissed in August 2019. Their application for leave to appeal this ruling was dismissed too. They then went to the SCA, again. The application was dismissed with costs on 8 May 2020. They next headed to the Constitutional Court and, in November 2020, this bid too was dismissed with costs.

This fight ultimately led to the latest liquidation efforts brought by Centaur De Roodepoort. DM168

Deal for Guptas’ Optimum Coal gets approval from regulator

The Competition Commission has given the go-ahead for a merger that takes a R1.3-billion debt-to-equity deal for the Gupta-owned Optimum Coal Mine one step closer to conclusion.

International businessperson Daniel McGowan’s Liberty Coal received unconditional approval for the merger with OCM and Optimum Coal Terminal (OCT) on 11 August 2021.

The assets are among several Gupta-owned entities placed into voluntary business rescue in 2018 after the country’s major banks terminated their accounts. Optimum is envisaged to change hands as part of an R1.3-billion debt-to-equity deal that flows from a business rescue plan that was adopted in September 2020.

The regulator’s approval comes weeks after the Zondo Commission heard testimony by Paul Holden of Shadow World Investigations about how the Guptas had bought the mine with the alleged proceeds of crime.

Holden urged authorities to launch proceedings to attach the mine, saying the Guptas had mobilised money derived through State Capture to buy the asset.

He testified that the 2015 purchase was done via cash flows originating with Griffin Line, a Gupta-linked company registered in Dubai.

Griffin Line, Holden said, had provided a $100-million loan to Centaur Ventures Limited (CVL), a Bermuda-registered company that was at the time 50% owned by Akash Garg, the Indian businessman who married one of the Gupta’s daughters at Sun City in 2013.

McGowan, who is now looking to liquidate Oakbay Investments, and Garg were co-directors of Centaur Ventures at the time.

McGowan maintains that, prior to the sale of the creditor claim of R1.3-billion, CVL was the largest independent creditor of Optimum Coal.

This figure, according to McGowan, was for the pre-purchase of coal and had been independently verified by a third party expert appointed by the BRPs.

The claim was ceded to Templar Capital, a Bermuda-registered company through which the debt-to-equity deal for Optimum was proposed and voted on by creditors in September 2020.

CVL was placed into provisional liquidation in March 2021 and a legal challenge by Griffin Line involving the cession of the Optimum claim to Templar continues in Bermuda.

Brett Tate, attorney for McGowan in South Africa, said: “Mr McGowan currently owns 100% of Liberty Coal by virtue of his 100% shareholding in Templar Capital Ltd, which indirectly owns 100% of Liberty Coal.”

The BEE shareholding for the Optimum deal, as currently envisaged, provides for two allocations of 5% each for an employee and a community trust while a 20% stake is to be allocated to Foxridge Trading 49, Tate said.

The sole director and shareholder of Foxridge is Elsie Mahlangu. While little-known, Mahlangu is a director and shareholder of Plantcor, an established industry player that has been successfully mining for the business rescue practitioners at Brakfontein (previously a Gupta asset) since mid-2018. DM168

Ten Fast Facts

April 2016: Major banks begin to go public about terminating Gupta accounts.

October 2016: Pravin Gordhan seeks declaratory order, reveals R6-billion in suspicious transactions (covering a period going back to 2012).

November 2016: Public Protector releases damning State of Capture report.

June 2017: The #GuptaLeaks surface publicly.

September 2017: Bank of Baroda dumps the Guptas, revealing 45 suspicious transactions worth R4.2-billion, over a 10-month period, involving Gupta-linked entities and members of the family.

February 2018: Gupta Inc executives arrested in Estina Dairy corruption case.

August 2018: Guptas declare their concerns about returning to SA to appear at the Zondo Commission.

October 2019: US Treasury blacklists Gupta brothers Ajay, Atul and Rajesh, as well as their longtime partner Salim Essa.

April 2021: The UK announces financial sanctions against the Gupta brothers.

June 2021: NPA, under new leadership, strikes with a criminal case, arrest warrants and Interpol Red Notice requests over the Free State Estina criminal case. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

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All Comments 9

  • Honing in on the money flows is often the only way to get justice in these complex frauds – remember the only crimes that Al Capone, the most notorious American gangster in the 1930’s, was convicted of, were tax fraud charges – too many other potential witnesses were either “made to disappear” or were so terrified, they refused to so do. As with birds – “Birds of a feather, flock together” – criminals flock together and when the counter-parties accomplices and associates are corrupt ANC bigwigs and deployees, it can be hard to build a legally winnable case.

    Unless, that is, an immovable force like Zondo can get insiders to talk and thus crack the whole wide open.

    • Thank you for the detailed recap of events related to the Guptas.
      Two questions:
      – why has Interpol not yet acceded to the request for Red Notices to be issued?
      – has the UAE ratified and signed the extradition treaty with South Africa or are they still dragging their feet?

      • I have questions too…
        – could McGovern be a Trojan horse? Suing the Guptas for costs and then using their money to buy the asset for nothing from the liquidators?
        – with all the evidence of money laundering held by SA US& UK authorities, why is no country able to act?
        – How did the Guptas escape justice when arrested end up in Dubai?
        – who drove them to the airport? ( it would have been in a military or police vehicle) and private check In and flight probably. Door to door service some would say! Waterkloof airport perhaps?
        – how do these people sleep at night?

  • To Pieter van der Merwe of VDMA LAW:

    As managing partner of an upstanding South African Law firm I have no doubt you’ve been chatting to Rudi Krause of BDK attorneys regarding the brilliant strategy of charging the Gupta’s huge legal fees, losing horribly, and finally, the sweet bit! donating all your Gupta legal fees to charity to benefit the South Africans who have suffered most.

    So I’d just like to take this opportunity to say a quick thank you for putting South Africa first.

  • Despite what seems to be overwhelming evidence, the NPA is apparently doing nothing to recover the money stolen from us by these thieves? I have to ask why?

    • while I have no insight into the facts, just raising that “what seems to be” and “is apparently doing” indicate conjecture on your part?

  • I’m no expert, but SARS is actively pursuing taxpayers who default on their tax affairs, so why don’t they attach Optimum to settle the tax bill as the whole deal was tainted… at least the assets will be liquidated back into the fiscus, this is OUR taxpayer money we’re talking about!

  • Hopefully among all these parties laying claim to all-sorts, Eskom’s claim for the fraud that gave the Guptas the mine in the first place ranks highest?

    Whomever chose to do business with the Guptas have made their bed and should not benefit in any way