Bank knew of Precision’s moves to settle debt

-Bulkan testifies

Managing Director of Precision Woodworking Ronald Bulkan is adamant that Republic Bank (Guyana) Limited was fully aware that it was in the process of settling its indebtedness when the financial institution nonetheless went ahead and appointed a receiver for the company.

Bulkan, who is now Minister of Communities, was on Thursday testifying at the High Court before Justice Navindra Singh in the civil proceedings filed against the bank for alleged breach of contract.

The witness outlined that following the dire financial straits in which his company had found itself at the end of 2010, he communicated to Managing Director of the bank John Alves of an offer he had been made and accepted for its sale.

He said that in a correspondence of June 24th, 2011, he told Alves of the offer he had been made to the tune of US$1.15 million. He said that Alves acknowledged receipt of that e-mail which was copied to S. Jagnandan.

Thereafter, Bulkan said that he was invited by Alves to a meeting at the bank six days later to discuss his company’s financial status.

During that meeting, he said he informed Alves and other bank officials that he had signed an agreement with Torginol Paints and released to Alves, a cheque for $30 million.

According to Bulkan, he told Alves that that payment would allow for his company to continue manufacturing, given that the amount represented a considerable sum of the company’s indebtedness to the bank.

Bulkan told the court that based on the agreement of sale, he then requested that the remaining indebtedness be converted into a term loan and that his company be considered for partial debt forgiveness, owing to its previous unblemished standing as customers.

The witness said that Alves explained to him that he did not have the authority to so do, but would have made the recommendation to the Board. Bulkan said he had also informed Alves of a telephone conversation he had had with R Rahaman and H Sugrim.

Bulkan said that while he and the bank had had previous discussions about appointment of a receiver, he was never made aware at any time that one had actually been appointed, nor that his company had gone into receivership—especially given the purchase offers he had been made.

According to the witness, while Kashir Khan (the receiver) was present at the June 30th, 2011 meeting, he was not made aware that that was the receiver until after the meeting had ended.

Bulkan said that in subsequent conversations, he told Khan of the agreement of sale he had secured.

To this, he said Khan informed him that all that would be needed is a new agreement of sale, by which he (Khan) would be the vendor as he at that point had been appointed receiver.

According to Bulkan, after following those procedures, it was agreed that the purchase price would remain the same.

He said, however, that Khan told him that the only change which would be needed in the new agreement, was the passage of the transport which he noted would be done over a four-month period.

Bulkan said he had no objections to this.  Thereafter, he added, the agreement of sale was taken to Torginol, which also signed.

Bulkan also spoke of a $6.9 million commission for the realtor, but was told by Khan that he [Khan] was not mindful of paying that sum to the realtor.

The trial continues on May 3rd at the High Court in Georgetown, where Bulkan will continue testifying.

Representing Bulkan is attorney Nigel Hughes. The bank, meanwhile, is being represented by Senior Counsel Robin Stoby, while the receiver is being represented by attorney Timothy Jonas.

At the commencement of the trial on March 28th, Bulkan said that a potential purchase offer was also made by businessman H Sugrim, owner of an establishment located close to Precision at Lot 35 Industrial Estate, Ruimveldt Georgetown.

In its statement of claim, Precision has said that owing to difficulties by which it was overcome, it was invited to and attended a meeting convened by the bank on June 30th, 2011.

Prior to the meeting, it said, it had borrowed from the bank and had repaid principal in full of about $513,000,000 and had paid interest in excess of $327,000,000 and was always considered by the institution as an “excellent customer.”

At the meeting, the company said its indebtedness stood at $406,553,074, representing the principal, and $10,613,224, representing interest.

Precision said that before the meeting, which dealt with an agreement of sale with Torginol Paints Incorporated for lots 21 and 32 of the property in transport No. 490/2008 for the sum of $230,000,000, its directors had informed the bank of their efforts to find a purchaser for part of that property, to which the bank had no objections.

Its statement of claim details that it thereafter accepted $30,000,000 from Torginol Paints as a deposit on the sale, which was then handed over to, and encashed by the bank.

According to Precision, it was only after the said cheque was handed over that Khan, in his capacity as receiver for Precision, was introduced to its directors by the bank as having been appointed receiver of the company under the existing debentures.

In its statement of claim, Precision advanced as unlawful, among other things, the bank’s appointment of Khan as receiver.

It has also argued that Khan failed to act honestly and in good faith in dealing with its property “in a commercially reasonably manner” and added that its assets were unlawfully disposed of.

It says it has suffered loss and damage as a result of the actions of the defendants.

It has also advanced that the bank breached the provisions of the Financial Institutions Act by attributing interest to the company’s outstanding indebtedness, when it was not permitted to do so.

It is also seeking a declaration that the appointment of Khan as receiver for Precision Woodworking Limited was unlawful, null, void and ultra vires to the Companies Act 1991.

It also seeks a declaration that Khan did not act in its best interest, given his role as agent of its company, nor did he exercise reasonable care in his dealings with its assets.

A declaration is also being sought that Khan has not acted and or conducted himself as the appointed receiver of Precision in accordance with the Companies Act 1991.

 

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