High Court dismisses lawsuit by Indigo Telecom company against IEBC over Sh36m deal

Presiding Judge Milimani Commercial and Tax Division, Justice Alfred Mabeya. [Courtesy: Twitter - @Kenyajudiciary]

The High Court in Nairobi has dismissed a case filed by satellite-based communications service provider Indigo Telecom Limited.

The company had sued the Independent Electoral and Boundaries Commission (IEBC) for lack of payment after the supply of satellite communication equipment.

The presiding judge of Milimani Commercial and Tax Division, Justice Alfred Mabeya, in his judgment, said there was no evidence that had arisen in the IEBC for the subject equipment for which its procurement committee gave approval for direct procurement.

"The plaintiff has failed to prove its case to the required standard and the suit is therefore dismissed with costs," the judge said.

In civil case no. 391 of 2015, the plaintiff, Indigo Telecom Limited claimed that on 21/02/2013, it submitted a quotation to the defendant, IEBC, for the supply of satellite communication equipment.

On 25/02/2013, the plaintiff received LPO No. 1905534 from the Commission ordering equipment worth Sh36,364,273. The plaintiff delivered the goods on 1/03/2013 and sent Invoice No. 066620 on 11/0/2013 which was payable before 31/03/2013.

It was the plaintiff's case that due to the short notice, it sought short-term financing for two weeks and that the IEBC failed to settle the debt which forced the plaintiff to clear the loan leading to financial hardships.

Indigo Telecom prayed for judgment against the defendants for Sh39,364,272 plus interest at 2 per cent per month from March 31, 2013, when the said amount became due until payment in full, plus costs of the suit.

However, in its part, IEBC denied the claim. Its case was that the LPO was issued illegally and in violation of the procurement principles stipulated in the Constitution 2010. That the LPO was issued in contravention of the fair administrative action in Article 47 of the Constitution and the Public Procurement and Disposal Act.

The IEBC further contended that there was no contract between it and the plaintiff, Indigo Telecom, and that would be against public policy to settle the unlawful claim.

Listed as second, third, fourth, fifth and sixth defendants in the lawsuit were former CEO Ezra Chiloba, current CEO Marjan Hussein Marjan, Betty Sungura Nyabuto, Osman Hassan Ibrahim and Praxedes Torrey respectively.

They each filed respective statements of defence in which they denied the plaintiff's claim in total. In the reply to the defence, Indigo Telecom, however, denied that the LPO was illegally obtained nor that it contravened the Constitution and the Public Procurement and Disposal Act.

Justice Alfred Mabeya in his judgment classified three issues for determination in the suit.

"The issues that fall for determination are three; whether there was any contract for supply of goods between the parties and if so, whether it was lawful. The other peripheral issue is whether the 2nd to 6th defendants were proper parties to this suit," the Judge said.

On the first issue on whether there was any contract of supply of goods between the parties, the court noted that there should be a consideration which may be evidenced by part performance.

"The plaintiff submitted a quotation to the 1st defendant for the supply of satellite communication equipment. The quotation was produced on page 2 of PEex1. This was followed by the 1st defendant issuing the plaintiff with a Local Purchase Order No. 1905534 ("LPO") ordering equipment for a total sum of Sh9,364,273.30. The LPO was produced on page 3 of PExh1.

The goods were delivered vide delivery note no. 066620 and duly received. Invoice No. 066620 for Sh39,364,272/30 was issued in respect thereof. It is clear from the foregoing that there actually existed a contract between the parties," said Justice Mabeya.

The second issue on whether the contract was lawful and enforceable, the court took the view that the provisions in the law were meant to avoid circumstances where rogue individuals in public institutions would singly cut deals with third parties and circumvent the Constitutional imperatives of transparency, accountability and competition.

"The defendant's case was that in as much as the Procurement Act provided for direct procurement for sole dealers, there was a due process to be followed as provided for under sections 74 and 75 of the PPDA. That procedure was not followed when the subject LPO was issued.

On the other hand, the plaintiff submitted that the alleged procedures were internal to the 1st defendant. That the transaction was a direct procurement which is allowed by law as the plaintiff was the sole dealer with the subject equipment. That the then existing urgency necessitated direct procurement," said Justice Mabeya.

The court further noted that there is a strict requirement on the part of a public entity to ensure compliance with certain requirements before resorting to direct procurement.

"All that happened is that the plaintiff initiated the process by issuing a quotation to the 1st defendant for its equipment. Then out of nowhere, an LPO was issued to the plaintiff to deliver the same. Then an invoice followed.

The plaintiff's witness admitted that he had dealt with public entities and knew the procurement procedures well. In this case, apart from the plaintiff's quotation and the LPO, there is nothing to show that the 'deal' was for the benefit of the 1st defendant. There was also no explanation by PW1 why the deal never followed the procedure which he very well knew," ruled the Judge.

He further noted that the contract was unenforceable.

"The plaintiff perpetrated and assisted an unnamed official of the 1st defendant to break the law. The plaintiff cannot be allowed to benefit from a wrong it initiated.

As regards the liability of the 2nd-6th defendant, I see none. They were not involved in the transaction. The plaintiff knew who it dealt with in the transaction but it shielded them by not joining them in the suit. It wrongly dragged the 2nd to the 6th defendant to this suit," said Justice Mabeya.