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Kenya: Maltese Firm Triumphs in Row With Tablet Computer Supplier

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4 years ago

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Malta-based lender Utility Capital Management has won its battle with Education ministry supplier Ekaa Africa after the High Court ruled that the latter tried to evade repayment of a Sh41.8 million loan.

Justice Maureen Odero has ordered Equity Bank to wire money that Ekaa Africa received from the Education ministry to another account controlled by Utility Capital Management.

Court proceedings, which also revealed that Ekaa Africa may have tried to defraud the taxman when it imported tablet computers, show that the company diverted payments from the Education ministry to the Equity Bank account in a bid to avoid repaying a loan it took from Utility Capital Management.

Ekaa Africa borrowed $380,638 (Sh41.8 million) from Utility Capital Management so it could supply the interactive screens.

The screens are smart boards that were intended to replace blackboards in Kenya’s government-owned schools.

Smart boards

Under the loan agreement, Ekaa Africa was to open an account at Standard Chartered Bank and give Utility Capital Management control so that the lender could deduct its dues after payment from the Ministry of Education.

Utility Capital Management says it also paid the Kenya Revenue Authority (KRA) $4,979 (Sh546,943) in penalties after investigations showed that documents for the devices were falsified to evade taxes.

“As part of the financing which Utility Capital Management provided to Ekaa Africa, Utility Capital Management paid import duty for the said goods as well as penalties imposed by the KRA as a result of the investigation conducted by the KRA into false custom entries made by Ekaa Africa in its efforts to avoid import duties and taxes,” Utility Capital Management told Justice Odero.

Ekaa Africa director Dennis Mwenda Mugo says in his response that the company had borrowed money from Equity Bank and that Utility Capital Management was aware of the facility.

Commitment fee

He adds that Utility Capital Management demanded Sh1 million from Ekaa Africa as a commitment fee and that the money was paid.

Mr Mugo holds that the Standard Chartered account was also to be used by Utility Capital Management to disburse the loan. He adds that the lender only made one payment of $108,816 (Sh11.9 million) into the Standard Chartered account.

Ekaa Africa insists that when it applied for the Ministry of Education tender in 2015, it had not approached Utility Capital Management for the loan and the Equity Bank account was the one registered for payments from the government after the supply of the interactive screens.

A last-minute attempt to register the Standard Chartered account for payment failed, as the Ifmis platform failed to acknowledge the change.

The firm argued that Utility Capital Management paid only 30 per cent of the money to the manufacturer of the interactive screens.

Visiting without notice

Ekaa Africa accused Utility Capital Management of visiting Education ministry offices without notice and antagonising government officers while demanding the release of money to the lender.

The ministry threatened to cancel Ekaa Africa’s tender, but the firm fixed its relationship with the government and even registered the Standard Chartered account for payment.

Justice Odero, however, ruled in Utility Capital Management’s favour after finding that Ekaa Africa still received funds from the Education ministry through its Equity Bank account.

The moment the money hit the Equity Bank account, the lender deducted the Sh44 million that Ekaa Africa borrowed before approaching Utility Capital Management.