KRA stopped from selling assets of troubled Moi-era road contractor

The High Court has stopped the taxman’s bid to attach assets owned by troubled Moi-era road contractor Kundan Singh International (KSC) over a Sh226 million claim.

Justice George Odunga issued an order barring the Kenya Revenue Authority from attaching the contractor’s assets on condition that the company deposits Sh100 million in court as security.

The construction firm, which grew and thrived during retired President Daniel Moi’s era, filed the suit in May to stop the taxman from selling its assets, arguing that it had not been furnished with a prior demand for the sum as required by law. KRA had claimed that the amount accumulated between 2010 and 2015.

The taxman’s claim came just three months after Bank of Africa (BOA), KCB and I&M Bank placed the road contractor under receivership over a combined debt of Sh3.8 billion it has failed to repay the lenders.

“That the applicant is in receivership is not in question. Whether or not it will slide into liquidation cannot be determined at this stage. However that route cannot be ruled out. The grant of leave to commence proceedings herein shall operate as a stay on condition that the applicant provides a suitable security worth Sh100,000,000.00 within the next 15 days,” Mr Justice Odunga ruled.

He added that if the security is in form of assets, KSC and KRA will appoint a valuer to ascertain the value.

KSC had argued that the taxman issued it with tax compliance certificates, meaning it could not turn around and demand unpaid duty. It further said that the land KRA had threatened to attach has been charged to Bank of Africa (BOA), KCB and I&M Bank.

READ: KCB and I&M sucked in road contractor's receivership suit

But KRA said the tax certificates only confirm that an individual or company has filed returns based on self-assessment. The taxman added that books of accounts can still be audited to verify whether all duty has been paid.

“Issuing of a tax compliance certificate does not prohibit KRA from carrying out audits on the tax affairs of a company and raising any taxes that are proved to be unpaid. KRA may withdraw the certificate if new evidence materially alters the tax compliance status of the recipient,” KRA added.

Barely a month after being placed under receivership, the Ethics and Anti-Corruption Commission accused KSC of colluding with Mr Kamau to alter designs for the Sh2.6 billion Kaptana-Kapsokwony-Sirisia Road with the aim of stealing project funds.

KSC is in a separate suit battling BOA, KCB and I&M Bank over their takeover of the road contractor’s operations. The firm argues it was not issued with sufficient notice before being placed under receivership.

Kundan Singh borrowed the colossal sums to secure funding for the multi-billion-shilling construction projects it had won, including the Bura Irrigation Scheme (Sh7.3 billion), the Voi-Mwatate Road (Sh2.2 billion) and the New Songwe International Airport in Mbeya, Tanzania (Sh1.8 billion).

KSC has faulted slow payment from the government for the loan defaults, as it insists it is owed over Sh1 billion for completed projects.