KPC urges court to throw out Sh500m new claim filed by Lebanese firm

Kenya Pipeline Company (KPC) petroleum storage facilities in Nairobi on August 21, 2024. [Kanyiri Wahito Standard] Kenya Pipeline Company (KPC) has protested the suit to freeze its bank accounts in a fresh dispute with a Lebanese firm, Zakhem, over alleged unpaid Sh500 million. Barely weeks after the High Court threw out Zakhem's application to freeze KPC's accounts in yet another claim of Sh926 million, the firm's lawyer, Ahmednasir Abdullahi, filed another claim-this time targeting Equity Bank, Stanbic Bank, Kenya Commercial Bank, NCBA Bank, Citibank, Co-operative Bank, and Absa. The firm asked the court to order a freeze of all the accounts to force the bank to pay up the money claimed. However, KPC, in its reply, argues that the demands are illegal since the firm was paid in full after an agreement that all the cases before the court would be withdrawn. "I am also advised by our advocates on record, which advice I verily believe to be true, that a withdrawn suit is an end and no further proceedings can be taken in it; the suit and the plaintiff do not exist and no application such as the instant garnishee proceedings can emanate from the suit," said KPC's acting Chief Legal Officer, Nelson Nyaduwa. In a blow-by-blow account of how the Lebanese firm was paid, Nyaduwa said the firm had initially asked the court to force the corporation to pay $126 million (Sh16.38 billion). Following the case, he said, the court issued a partial judgment on 16 June 2020 for $44 million (Sh5.72 billion). However, before the money could be settled, the court heard that the Kenya Revenue Authority (KRA) came knocking for Sh6.1 billion tax, which was to be paid by Zakhem. According to him, another case arose from the tax demand in which the court ordered that KPC release Sh915 million to KRA, while the remainder of the total-Sh485 million-would be sent to Zakhem. He added that KRA was emphatic that it would not waive the taxes demanded. It again demanded Sh1.3 billion, which was the interest accrued. It attached the money which was to be paid to the Lebanese firm. Nyaduwa told the court that Zakhem, in its demand, had failed to disclose that the tax was never waived, nor was the interest, and that the same was cleared from the money it was demanding from KPC. According to him, they finally settled the disputes by agreeing on a final payment, which he asserts was paid. The officer said KPC owes Zakhem nothing. "I am advised by our advocates on record, which advice I verily believe to be true, that there is no enforceable decree that can emanate from a suit whose fate was withdrawn wholly," he said. Two weeks ago, Justice Wayua Mong'are, in her ruling, said the money held at the Standard Chartered Bank could not be used to offset Sh926 million, which Zakhem was demanding in a separate case. According to her, Zakhem had filed another case seeking similar orders, which were rejected. She said that it could not revive the same issue again in a separate case. "I note that in its present application, Zakhem is making the same arguments and tabulations that it made before the court in HCCOMM No. E322 of 2019. Zakhem cannot expect this court to make a dissimilar finding to that in HCCOMM No. E322 of 2019, as this would be akin to sitting as an appellate court on the findings of a court of concurrent jurisdiction, which the law frowns upon," said Justice Wayua. In its case filed before the Commercial Court, Zakhem wanted the court to attach KPC's bank accounts held in Standard Chartered Bank, Equity Bank, and Stanbic Bank. The firm claimed that the corporation had allegedly failed to honour its end of the bargain. "The respondent is undeniably and unlawfully indebted to the applicant to $7.1 million (Sh926 million). Despite any tactics, manoeuvres or attempts to delay or frustrate the execution of the decree, this debt remains due and payable. The respondent's continued evasion has not extinguished its legal obligation, nor does it diminish the applicant's right to recover the outstanding sum," argued Ahmednasir. Mr Ahmednasir explained that Justice Grace Nzioka had awarded his client $44 million (Sh5.6 billion at the current exchange rate) in 2020 and directed them to reconcile their accounts. He said KRA followed the judgment by demanding Sh5.1 billion in tax. According to the lawyer, Sh1.1 billion had been attached by KRA and retained by KPC. He said KPC ended up paying KRA Sh3.09 billion on 22 October 2020 and an additional Sh915 million on 8 January 2021, which was money owed to his client. He asserted that from the computation, there was some $7.1 million (Sh926 million) that the corporation did not pay. The lawyer explained that on 6 January 2021, Justice Ngenye Macharia directed that Sh485 million be released to Zakhem and paid in US dollars. "In compliance with Justice Ngenye's orders, the applicant obtained fresh warrants of attachment dated 27 January 2021 for the sum of $7.1 million, being the sum due and outstanding after making the deduction of both Sh3.09 billion and Sh915 million being principal tax paid to KRA and applying the correct exchange rate," said Ahmednasir. He added that Justice Ngenye again issued fresh orders requiring KPC to pay the contractor on 8 April 2021. The lawyer stated that the efforts to get the money were frozen after Kenya Pipeline moved to the Court of Appeal. Nevertheless, he stated that KPC withdrew the case on 11 March 2025. He said the State-owned firm has bank accounts in three banks, and the money held there is more than the amount owed. Zakhem's Managing Director, Ibrahim Zakhem, told the court that the dispute stems from a contract dated 1 July 2014 to construct KPC's Line One. He said the total amount the corporation owed his firm was $126 million (Sh16 billion under the current exchange rate), together with interest. Court battles have dogged the multi-billion-shilling contract. Initially, Ruhpumpen Global Ltd, a subcontractor, sued KPC, claiming that it had induced Zakhem to favour Ebara Corporation. Ruhpumpen's case was, however, dismissed. Fast forward to 2024, another subcontractor, Oilfields Engineering and Supplies Ltd, moved to court, seeking to recover money from Zakhem. It sought to freeze Sh4.1 billion, which was to be paid to Zakhem by KPC.

KPC urges court to throw out Sh500m new claim filed by Lebanese firm

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KPC urges court to throw out Sh500m new claim filed by Lebanese firm

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