Zimbabwe Revenue Authority v Pacific Cigarette Company (Private) Limited and The Master of the High Court N.O.

Pacific Cigarette Company (Private) Limited (first respondent) was placed under corporate rescue on 20 September 2023 due to financial distress caused by tax arrears totaling US$19,204,398.35 in income tax and US$330,140.26 in non-resident tax on fees (NRTF). A Corporate Rescue Practitioner (CRP) was appointed and developed a corporate rescue plan that was unanimously adopted by all creditors, including Zimbabwe Revenue Authority (ZIMRA), on 3 April 2024. Following approval of the plan, Pacific Cigarette Company applied for a Tax Clearance Certificate (TCC) on 2 January 2025. ZIMRA refused to issue the TCC, citing outstanding pre-rescue tax arrears exceeding US$19 million, despite the company settling current tax obligations of ZWL$1 million. ZIMRA maintained that no satisfactory payment arrangement had been concluded in terms of section 34C of the Revenue Authority Act. The first respondent argued that the pre-rescue tax obligations were incorporated into the corporate rescue plan and that ZIMRA's refusal violated the statutory moratorium under section 126 of the Insolvency Act.

• Whether ZIMRA's refusal to issue a Tax Clearance Certificate during corporate rescue proceedings constituted 'enforcement action' within the contemplation of section 126(1) of the Insolvency Act
• Whether the provisions of the Insolvency Act override those of the Revenue Authority Act regarding the issuance of Tax Clearance Certificates
• Whether a company under corporate rescue has an automatic right to a Tax Clearance Certificate despite not meeting the requirements under section 34C of the Revenue Authority Act
• The proper interpretation of 'legal proceedings' and 'enforcement action' under section 126(1) of the Insolvency Act
• Whether the court a quo erred in granting declaratory relief compelling ZIMRA to issue a TCC

The appeal was allowed with costs. The judgment of the High Court dated 20 February 2025 was set aside and substituted with an order dismissing the first respondent's application with costs.

The refusal by a revenue authority to issue a Tax Clearance Certificate to a company under corporate rescue, where statutory requirements under section 34C of the Revenue Authority Act have not been satisfied, does not constitute 'enforcement action' within the meaning of section 126(1) of the Insolvency Act. 'Enforcement action' refers to formal legal measures ancillary to legal proceedings, such as the execution of court orders through writs of execution or attachment, not routine administrative regulatory functions. The obligation to pay taxes arises ex lege (by operation of law) and exists independently of any enforcement mechanisms. Administrative actions by a revenue authority, including the determination of tax liability, issuance of assessments, and demands for payment, fall within the regulatory ambit of tax collection and do not trigger the protective moratorium under section 126 of the Insolvency Act. A company under corporate rescue must still comply with the statutory requirements for obtaining a Tax Clearance Certificate as prescribed by the Revenue Authority Act.

The Court observed that the essence of 'enforcement' lies in invoking the coercive power of courts to compel compliance with legal obligations. The Court noted that the appellant's routine administrative actions are necessary precursors to enforcement but are not, in themselves, enforcement actions. The Court remarked that courts are not at liberty to rewrite legislation under the guise of interpretation and must be guided first by the ordinary, grammatical meaning of statutory text. The Court commented that it is for the legislature to amend legislative provisions if the interpretation does not reflect legislative intention. The Court also noted that the South African case of Henque 3935 CC t/a PQ Clothing Outlet v Commissioner for the South African Revenue Service [2025] ZASCA 56, relied upon by the first respondent, was distinguishable as it dealt with a different question (whether SARS could set-off pre-business rescue tax debt against a tax refund) and left the question of what constitutes 'enforcement action' unanswered. The Court observed that the moratorium under section 126 serves as the cornerstone of the corporate rescue process, creating necessary space for rehabilitation free from immediate litigation pressures, but this does not extend to automatic exemption from statutory compliance requirements.

This case establishes important principles regarding the scope of the moratorium under section 126 of Zimbabwe's Insolvency Act in corporate rescue proceedings. It clarifies that the moratorium on 'enforcement action' does not extend to administrative regulatory actions by revenue authorities, particularly the refusal to issue Tax Clearance Certificates where statutory requirements are not met. The judgment reinforces the distinction between judicial enforcement mechanisms and administrative regulatory functions. It confirms that companies under corporate rescue do not enjoy automatic fiscal absolution and must still comply with tax legislation, including meeting the statutory requirements for obtaining TCCs. The decision protects the revenue authority's administrative mandate while balancing the objectives of corporate rescue. The case demonstrates judicial restraint in statutory interpretation, emphasizing literal interpretation unless absurdity results. It also has broader implications for understanding the exceptions under section 126(1)(f) regarding regulatory authorities executing their duties during corporate rescue proceedings.