Court grounds REA's cargo over Sh140m bank claim

NAIROBI: A consignment belonging to Rural Electrification Authority (REA) will remain grounded until a case surrounding an alleged debt of close to Sh140 million is heard and determined by the High Court.

The authority, together with Bear Afric Ltd, is embroiled in a legal battle lodged by Equatorial Commercial Bank (ECB), which claims the firm (Bear) had not honoured its end of the bargain by paying back the monies allegedly lent to it.

Equatorial Commercial Bank through its lawyer Daniel Kioko managed to secure temporary orders barring REA from disposing or using the consignment enclosed in 14 containers until the case is heard and determined.

“To date, ECB has used Sh137,000,000 towards the cost of goods, the taxes due to Kenya Revenue Authority, shipping, container freight and transport. The petitioner has been asking REA to pay directly in order to reduce the indebtedness, but it has refused or declined to respond to the request,” Kioko told High Court judge Farah Amin.

Bear Afric Ltd had won a tender to supply REA with electricity conductors and had approached the bank for a loan to clear the goods.

The financial institution further argued the firm had issued the consignment as security for the loan. According to ECB, the deal between it and Bear Afric was that it ought to pay for the conductors bought from China and the rest of the issues would be sorted by the Kenyan company.

However, the court heard that the consignment was held up in Mombasa from July last year for failure to pay clearance fees. “The goods arrived in Mombasa mid-July last year. The bank had already paid Tong Da cable Ltd. However, they were held at the port as the second defendant (Bear Afric) had not cleared import duty taxes,” the lawyer said.

Equatorial Commercial Bank, Kioko added, intervened and paid the monies.

DUTY CONCESSION

“By May 2015, the second defendant had not obtained the duty concession from KRA. The plaintiff in a bid to mitigate losses decided to step in and pay the taxes due to KRA, the shipping, container freight and local transport charges. To date the plaintiff has incurred a total of $1,085,006,” he explained.

The lawyer told the court his client will suffer losses in case the consignment was used or Bear Afric is paid before the debt is cleared.

The bank also asked the court to bar REA from paying Bear Afric pending the hearing of the case. The prayer was also granted on grounds that the bank will not slap the company with additional interests accrued at the time of the freeze orders.

“The plaintiff is to account for any interest received or incurred by reason of the preservatory orders. For avoidance of doubt the bank cannot be enriched by the orders to preserve assets,” the judge noted. The case will be mentioned on August 17.