Billions at stake as company tussles with government, KRA over cash

NAIROBI: A construction company is locked in a scuffle with the government, the Kenya Revenue Authority (KRA) and Bank of Africa (BOA) over unfinished transactions it says could cost taxpayers billions of shillings.

Kundan Singh International Ltd, in papers filed at the High Court, says that the Ministry of Roads and Public works is withholding Sh2 billion payment that should have been remitted to its account for work it has already completed in unclear circumstances.

The firm has also instituted two parallel court cases to stop the Kenya Revenue Authority (KRA) from auctioning its assets to recover over Sh200 million it owes in unpaid taxes and the bank, which wants it put under receivership to recover a Sh400 million debt.

In the case before Justice Erick Ogola, Kundan Singh says it would lose contracts in Kenya and Zambia if it is placed under receivership.

The construction firm has blamed it woes on the government, which it says had failed to pay it despite completion of some road works it had undertaken on behalf of the State.

In the court papers, it says that the Ministry of Roads and Public works has withheld the Sh2 billion payment on grounds that it had not serviced the debt it owes the bank.

Securities sharing

The constructor states that it had paid the bank some money and would offset the balance once the State remits the Sh2 billion it is withholding.

The constructor also told the court that part of what BOA took as security for the Sh400 million debt was also offered to the Kenya Commercial Bank and I&M bank to secure a Sh3.5 billion loan. The securities are being held by the three Banks under securities sharing agreement.

It told the court Bank of Africa demanded Sh476 million from it on February 18 this year and simultaneously appointed Kolluri Ventaka Subbaraya Kamasastry as the receiver. The court was told that the bank didn’t notify the debtor about the action.

Kundan Singh informed the court that it had unclosed deals totaling Sh17 billion, which would be jeopardised if it is put under receivership.

But the bank, in mitigation, said it would not tamper with the operations of the instructor. It further promised it would not sack any of the employees for the period the firm would be under receivership.

But Justice Ogola did not issue stay orders. “The plaintiff does not have any compelling reasons. In addition, the plaintiff has not demonstrated any oppressive conduct on the side of the defendant (BOA).

Road map

I have struggled to understand the plaintiff’s request for 14 days. I have waited patiently for the plaintiff to state that on the fourteenth day, if such a stay was granted, the plaintiff would pay a particular part of the debt,” said Justice Ogolla.

“No tangible answer has come from the plaintiff except that after the said period it will give a road map to the recovery of the debt.”

Kundan Singh had indicated that it would sell its sister company, Window Vista Ltd for half a billion shillings to settle the Sh400 million debt. The constructor also owes KRA over Sh200 million in unpaid taxes tabulated over a period of five years.

In a separate case filed before Justice George Odunga at the High Court, the constructor says that the demand for payment and distress procedures initiated by the KRA are malicious, arbitrary, oppressive and is a violation of its rights to a fair hearing.