Ukwala Supermarket petitions court to review Sh1b security order

NAIROBI: Ukwala Supermarket has asked the High Court to review its earlier orders requiring it to deposit hefty security to cover for tax row with the Kenyan Revenue Authority (KRA) before it could sell its outlets to a Botswana company, Choppies Ltd.

Ukwala Supermarket argued the orders by the court requiring it to issue a Sh1 billion security to sell its outlets will cause damages to its operations.
The supermarket chain moved to the High Court to defer the orders issued by Justice George Odunga, arguing that it would suffer if the orders obtained by Kenya Revenue Authority (KRA) were implemented. According to Ukwala’s director, Rohit Maaghanlal Shah, the taxman allegedly did not disclose that it had the same case before a tribunal when it obtained the orders. Mr Shah stated in his court documents that the dispute between the supermarket chain and KRA was in respect of Sh500 million dispute and not the Sh946 million as claimed by the taxman.

“It’s unnecessary for this court to impose such a draconian order for the provision of a guarantee for the entire amount claimed by the respondents, which is in excess of Sh1 billion yet the assessed disputed taxes due to the respondent was only Sh500 million,” the director stated in his court documents. The judge had given the Ukwala Supermarket management a window to complete the sale on condition that it provided a security equal the contested amount. “The applicant is hereby restrained from disposing of its outlets until further direction of the court. In the alternative, Ukwala deposits security for the full amount in court,” the judge held.

Ukwala filed the suit in September after the KRA demanded a Sh946 million for corporate and Pay-As-You-Earn (PAYE) dues and a withholding tax for the period between 2011 and last year.

But the taxman argued Ukwala has already agreed to the tax debt and should therefore not be allowed to evade the claim until the judge has determined how much it should pay.

The Botswana Company announced that it had closed a deal to buy out 10 Ukwala outlets, half of which are spread in Nairobi, Nakuru and Kisumu.
It had already approached Competition Authority’s (CA) in a bid to clear the acquisition process and was given the green light last week. KRA wants the supermarket to settle the debt before completing the sale.

Choppies, listed on both the Botswana Stock Exchange and Johannesburg Stock Exchange, will become the first foreign supermarket to successfully enter the Kenyan market through the acquisition of Ukwala stores.

The Kenyan retailer in its court documents has already protested against the taxman’s move to send a copy of its demand to Choppies, saying that it was not party to the dispute. The retailer also insists that its Nakuru and Kisumu subsidiaries have no tax arrears and should be left out of the dispute.