Kombucha owners fight over company shares

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LOCAL health drink Kombucha is likely to absent on shelves and fridges of many super markets as production has been suspended due to a disagreements over shares among family members who own Gavi Beverages limited which produces the drink.

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The Kombucha factory has since been illegally locked up by a cousin of the Reddy brothers in a hostile takeover whilst the matter is still active in Court leaving a multitude of workers stranded.

To protect the interests of the business shareholders of the company, Syam Gavi Reddy, Babitha Kokonda, Madhusundan Gavi Reddy, Subashini Gavi Reddy, Kenyan Vedaste Nzeyimana and Gavi Beverages limited have rushed to Court to stop Uma Gavi Reddy who has the least shareholding stake in the company from grabbing it from them.

The discords are as a result of the alleged mismanagement of funds by the Syam and Uma who were reported to the police by company managing director Madhusundan.

It was alleged that Syam and Uma used the sales profits to fund some politicians in the PF and another political party during campaigns in the run up to the 2021 general elections which resulted to their sacking from the company.

However the duo who has been in hiding since it was requested to account for funds went to Court to fix their brother Madhusundan over the shareholding in the company.

Uma capitalised on some verbal agreements that he and his cousins Syam and Madhusundan agreed on prior to the incorporation of the company and used the same against his cousins in the law suit he instituted before Court in 2022.

Uma claimed he was ruled out from the meeting which was held to discuss shareholding of the company among other agreements.

Upon being successful at kicking his cousins and spouses out of the family business using the Court proceedings as a rubber stamp Uma has locked up the factory on Monday without registering the successful arbitral relief sought in the Court and at PACRA.

However In and affidavit in support of originating summons to set aside final award pursuant to section 17 of the Arbitration Act no. 19 of 2000, Madhusundan said the arbitral tribunal erroneously awarded Uma without fully understanding the family feud.

Madhusundan said that the company was incorporated on April 22, 2015 for the production of a health drink known as Kombucha utilizing a formula developed by Kenyan national Nzeyimana.

He said at the time of incorporation the shareholding of the the company was that Uma held 500 shares equivalent to a 5% stake in total issued shares.

Syam received an allotment of 1,500 shares in the company and the remaining 8000 shares were earmarked for allocation to him (Madhusundan) post incorporation in an oral agreements alleged to have been forged in 2015 between Uma and himself as the main funder of the project.

He said following the special resolutions passed on November 2, 2015 and filed at Patent and Companies Registration Agency (PACRA) on November 12, 2015 and December 10, 2015 the shareholding of the company was as follows;

Syam held 10, 500 shares equivalent to 15% stake in the total shares, Babitha, 17, 500 shares equivalent to 25%, Madhusundan held 17, 500 equivalent to 25%, Subashini held 21, 000 shares equivalent to 30%, Nzeyimana held 7,000 equivalent to 10% and Uma held 3, 500 equivalent to 5% stake in the total shares.

Madhusundan said Uma declared a dispute alleging severe breaches of the Articles of association and other matters relating to the management of the company and commenced an action against the applicants under cause no. 2022/HPC/0150.

He stated that Judge Etambuyu Mwenda-Zimba refered the matter to arbitration pursuant to Articles of the company under clause 9 which contains an arbitration clause.

Uma is said to have been aggrieved with the allotment of shares and a resolution made to increase the share capital of the company from K10,000 at K1 each to US$50, 000 at US$1.00 each share.

Among the reiliefs soughts were that the resolution of November 10, 2015 and December 10, 2015 and the increase of share capital were void and of no effect.

Madhusundan said despite the resolutions being passed in 2015 Uma took no steps to challenge the resolutions and waited until March 2022 to commence the action despite being informed about the resolutions via email on November 13, 2015 but neglected to challenge the same.

He contended that the tribunal had no powers to entertain the case for being statute barred and should have dismissed it for want of jurisdiction.

Madhusundan said an application was made to have the matter dismissed on the said reason in October 2023 but the Arbitral tribunal declined to hear the application and on January 22, 2024 an Arbitral award was delivered eliminating all the applicants as directors from the company.

“The award shows that the Arbitral tribunal did not holistically adress the questions raised or totally misunderstood the issues resulting in injustice,” he contended.

Madhusundan said the articles of association were not binding on the applicants as they were not signed or executed by shareholders of the company.

He clarified that he and Subashini were not party to the Articles of association and cannot be bound by the arbitration or the final award.

“There was no consent order by the parties to appoint the arbitrators but the Arbitral tribunal proceeded to adjudicate on the matter and based most of their award on the provisions of the Articles of association,” said Madhusundan.

“The final award is contrary to the public policy. The Court has power to grant an order setting aside the final arbitral award.”

By Mwaka Ndawa

Kalemba January 26, 2024.

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