The High Court has stopped the Kenya Ports Authority (KPA) from revoking a controversial title deed of a plot in Mombasa Port leased to a company in 1949 by the colonial government.
The court also allowed the Ethics and Anti-Corruption Commission (EACC) to investigate possible collusion between some KPA officials and the directors of John Grossert and Company Limited over a controversial acquisition of a Sh16.4 million loan from Barclays Bank in 2002.
The plot, valued at Sh500 million, is believed to have been a source of grief for former KPA managers who have since been sacked after resisting politicians' moves to have it allocated to them.
According to the lease agreement between KPA and the firm, the property was to be used for repairs of boats and ships and nothing else. The EACC is expected to investigate how John Grossert and Company Limited used the plot as collateral to secure the loan.
Justice Erick Ogola said on Thursday that the EACC should conduct the probe and present a report to him in 90 days.
"The petition is hereby and shall be stayed for a period of 90 days with interim orders fully in force during the time," said Justice Ogola as he suspended the revocation of the lease by KPA.
The judge also ordered the EACC to investigate KPA's claims that the directors of John Grossert and Company Limited fraudulently acquired the shares of the company.
He gave the order after the company sued KPA and EACC, accusing them of trying to illegally take away the land it legally acquired.
The company went to court after KPA ordered it to return a title deed it has owned since 1949.
"The EACC is granted the full mandate to carry out all necessary investigation on the suit property. This must be done within 90 days from the date hereof and a report of the finding filed in court before October 5, 2018," said Justice Ogola.
The judge warned EACC against failing to file its report within 90 days, saying he will proceed with the case and render the judgment without the report.
The company directors say KPA has no legal rights to revoke the lease.
The company directors insist they are the legal owners of the company, denying claims that they fraudulently acquired the shares.
KPA also claims the company directors used the lease to take a Sh16.4 million bank loan against the rules of the lease agreement.
The company directors admit they took loans using the lease title deed but say they got consent from KPA.
“The consent to John Grossert and Company to charge the property to secure loan from Barclays Bank was procedural,” said a director.
KPA officials, however, say in 2002 when KPA granted consent for the company to charge the property for loan, they did not notice any fraud, which prompted them to order for investigation.
“KPA had no notice of any fraud, real or alleged or any investigation involving the suit property or proprietary rights of its directors over shares. KPA hopes that once the ongoing investigation is finalised, it will shed light whether there was collusion between directors of the company and senior KPA officials in consenting to creation of the charge and whether the directors of the company forged share transfer forms,” says KPA officials in an affidavit.