Schweppes Zimbabwe Limited (SZL) has filed opposing affidavits with the Supreme Court in the case where Petter Trading of South Africa are challenging the Reconstruction Act that was used to seize Mutumwa Mawere's business empire.

Last month, Petter, which is under liquidation, argued that if the Supreme Court were to confirm the reconstruction of Mawere's assets, it was going to lose equipment it bought for SZL which is close to sealing a merger deal with Delta Corporation.

Petter is asking the Supreme Court to declare Sections 6, 12 and 18 of the Reconstruction of State-Indebted Insolvent Act (Chapter 24:27) in violation of sections 16(b), (c) and (d) and 18(9) of the Constitution of Zimbabwe and therefore of no force and effect.

Petter liquidator, Harry Kaplan said pursuant to Section 4(3) of the Reconstruction Act, an order issued against a company could affect any associate company or another which "benefited from the same credit or guarantee payable from public funds".

"The effect of this section was to place not only the Second Respondent (Mawere's SMM) under the control of the Fourth Respondent (SMM administrator Arafas Gwaradzimba) but also technically the Applicant (Petter) as it can be argued that it was an associated company of the Second Respondent on account of the fact that it carried business with the company," he said.

But in his opposing affidavit filed on September 25, SZL managing director, Charles Nkululeko Msipa said Coca-Cola Central Africa's (CCCA) rights to recover the shares in SZL from Fidelity Life Asset Management (FLAM) arose not from the implementation of the Reconstruction Act, but rather from the breach of the 2003 Sales Purchase Agreement.

SZL said CCCA paid for the assets which are subject of the application to the second respondent (SMM Holdings Private Limited) and Petter should look for relief from SMM.

"The issue as to whether or not the cited sections of the Reconstruction of State-Indebted Insolvent Companies' Act are unconstitutional or the actions of the Third (Patrick Chinamasa) and Fourth respondents are unfair and unconstitutional matters which do not concern SZL," Msipa argued.

SZL said since FLAM was in breach and SZL under reconstruction, CCCA had no option but to deal with Gwaradzimba.

"Further, in the circumstances that obtained at the time in which FLAM was in breach and SZL under reconstruction, CCCA had no choice but to deal with the Fourth Respondent who had the de facto and apparently de jure control of SZL and thus Applicant can have no grievance or right of claim against either SZL and or CCCA and this application simply has no merit against SZL and ought to be dismissed with costs on a scale of a legal practitioner and client," it said.

In 2003, FLAM entered into a Memorandum of Agreement of Sale with CCCA and Schweppes Holdings Limited in which the asset managers would purchase SZL for a price of $1 on top of a US$5.8 million injection for equipment upgrade.

The upgrade had to be completed in February 2004 for SZL to meet the international standards while CCCA had to dispose of the stake to comply with the Competition and Tariff Commission directive to localise the operation.

Since FLAM had no access to foreign currency, it turned to Mawere's Africa Resources Limited which then instructed Petter to pay for some equipment.

The equipment at the centre of the dispute includes a PET form System for the production of petforms, PET Blow Moulding System, a technological plant for making PET plastic bottles and 4PET Bottling lines.

Mawere's empire, FLAM included, was put under reconstruction in 2004 after the government said it was indebted to the state.

SZL was also put under reconstruction and was only released after CCCA had paid money owed to SMM and FLAM to Gwaradzimba.