Banking group Nedbank has launched a bid to liquidate the Leo Chetty Group, the owner of embattled private higher education institutions Damelin, CityVarsity, Icesa and Lyceum College — dealing a further blow to the group after the entities were deregistered by the government in March.
Nedbank aims to recoup nearly R50m in unpaid loans dating back to 2016 and has launched proceedings to liquidate 10 companies in the Leo Chetty Group.
The group argued in its defence that due to the Covid-19 pandemic in 2020, its colleges were unable to conduct their regular business as students were prohibited from attending lectures or staying in their residences.
It said the fallout from the pandemic had dealt a serious blow to the financial stability of the group, and the effect on its finances continued to linger long after the pandemic had subsided.
The company said its financial situation compelled it to restructure the three loans it had with Nedbank.
The company also contends that Nedbank rushed to launch the liquidation proceedings when it ought to have proceeded by way of action to recover the disputed debt.
Nedbank said that while it did renegotiate the terms of the loans with the group, it denied there was an agreement between the parties that eased the Chetty Group’s repayment obligations in respect of the three loans.
However, the Chetty Group maintained that the restructuring agreement was concluded and agreed to verbally with Nedbank — with the promise to reduce the said agreement into writing but this was not done.
The liquidation application came before this was done.
The Chetty Group claimed that at the heart of the alleged verbal agreement, Nedbank agreed that for the first two years from the conclusion of that restructuring agreement, only interest would be paid on the debt.
This would be paid by the individual companies in the group forming part of the educational component.
After the two-year interest-only payments, payments would then be made in respect of capital and interest for the remainder of the 10-year period.
Nedbank again denied such an agreement existed.
The liquidation application is yet to be heard, after the Leo Chetty Group brought an interlocutory application, trying to compel Nedbank to reveal certain information to it.
It said it wants access to Nedbank’s internal communication, to prove that an oral agreement was entered into by the parties.
Without merit
The high court in Durban on Wednesday said the discovery application brought by the Chetty Group was without merit, and dismissed it.
“I am unpersuaded that the respondent has demonstrated that any exceptional circumstances exist that would entitle me to grant the counter-application. If discovery were to be allowed on the speculative grounds advanced by the respondent, there is a possibility that an undesirable widening of the ambit of these proceedings will take root,” judge Robin Mossop ruled.
“I am fortified in the conclusion to which I have come by the limited relevance of the general documentation that is sought, the wide reference to what is sought, and to the pervasive perception that what is being engaged in is no more than a fishing expedition,” Mossop ruled.
The Chetty Group has two distinct companies, one that focuses on education, referred to as Educor, which conducts business as educational colleges under names such as Damelin, CityVarsity, Icesa and the Central Technical College.
Other companies in the group are property-owning entities.
There is a synergy between the educational limb and the property-owning limb as buildings owned by those companies in the property-owning limb are used as residences for students at the colleges, which are part of the educational limb.
The high court in Johannesburg ruled a year ago that the financial fallout of the Covid-19 lockdowns cannot be put forward as a basis to oppose liquidation applications.
In that matter, Restaurant Vilakazi, in the tourist destination of Vilakazi Street in Soweto, tried in vain to fend off a provisional liquidation launched by FNB over overdue debt.
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