The state owned textile mill, Hawassa Textile SC, won a civil suit against Natenael Plc, a company engaged in textile and industry product distribution, involving a claim of around 1.2 million Br, after the latter failed to pay for the textile products supplied to it.

A contract for the sale of fabric was signed between Natenael and Hawassa Textile SC in September 2007. At the time, the textile factory was under the management of Narin Orme Textile Group, a Turkish company which leased the state owned factory from the Privatisation and Public Enterprises Supervising Agency (PPESA).

The textile factory agreed to supply dyed fabric in different colours, according to the order of Natenael, with payments made in cash or on credit. The private company was expected to issue a 30-day postdated cheque when the sale was on credit and provide an insurance performance bond as security for the credit facility, it was agreed. Failure to pay the matured cheques would entail a 7.5pc interest in addition to forfeiture of the guarantee for settlement of the loan to the extent of the defaulted balance, it was also agreed.

The agreement signed between Adugna Kabatu, director general of Natenael Plc, and Habib Narin, chief executive officer (CEO) of Narin Orme Textile Group and former CEO of Hawassa Textile SC, was due to be terminated six months after its signing.

However, the textile factory filed a lawsuit with the Federal High Court, Eighth Civil Bench on November 9, 2009, against the private company, claiming default of the payments to the amount of around 1.2 million Br with interest.

The people sent by the plaintiff to deliver the court summons found the stores of the private company, located in Merkato, shut down and could not find the owners, according to Cherinet Gebrehiwot, attorney of Hawassa Textile.

The court, which tried the defendant in absentia, ruled in favour of the textile factory to the amount claimed with interest on August 17, 2010.

"Several contracts were signed with the private company and it has been paying its liabilities for some time," Cherinet told Fortune.

The board of directors of the textile factory, which resorted to a court remedy for the overdue payments, is yet to decide how to recover the money.

"We were looking for properties of the defendant to apply for an injunction order, however, we have found nothing so far, and there is no balance in their bank account." Cherinet said. "We will simply go ahead with a judgement execution proceeding."

There are other companies with similar cases of overdue payments against which the textile factory is preparing to file a suit, according to Cherinet, who declined to disclose the names of the companies.

Hawassa Textile was leased to the Turkish company in July 2005. The agreement was terminated in September 2009, and the company was handed back to the PPESA. The PPESA had also cancelled the five-year lease contract with the Turkish company on Arbaminch Textile factory in March 2009, due to growing debts under the new management.

Hawassa Textile SC, which was established 20 years ago with a capital of 211 million Br, is one of the public enterprises that was up for auction by the PPESA during the 2009/10 fiscal year. It failed to be privatised when no one from the private sector made any offers. It is now back on the list of companies that the PPESA intends to privatise this fiscal year.

Natenael Plc was registered at the Ministry of Trade and Industry (MoTI) in February 2003, with a subscribed capital of 600,000 Br, with 67pc of the shares owned by Adugna and the remaining owned by Mekdes Betre.