NCPB to pay grain supplier Sh521m after losing appeal

National Cereals and Produce Board (NCPB) is set to pay Sh521 million to a private firm for breach of a grain supply contract after losing another appeal to block the payout Wednesday.

The High Court Wednesday ruled that NCPB must pay Erad Suppliers & General Contractors the cash after the firm inked a deal in 2004 to supply the NCPB with 40,000 tonnes of white maize at $229 per tonne.

The grain supply was aimed at replenishing the country’s reserves, but the Ministry of Agriculture terminated the contract and Erad, owned by businessman Jacob Juma, sued NCPB for breach of contract.

The payout means tax payers will bear the burden despite Erad having not supplied a single grain to the board.

NCPB has filed several appeals to block the payout, going to the High Court on January 2 after losing its appeal at the Court of Appeal on December 18.

“I am convinced that it is an abuse of the court process intended to defeat the ends of justice by ensuring that the respondent (Erad) never enjoys the fruits of its judgement,” ruled Justice J. Kamau.

“For the reason that this court’s hands are tied for lack of jurisdiction in this matter, I hereby dismiss the applicant’s notice of motion,” the judge ruled.

The ruling sets the stage for NCPB to pay up or face auctioneers whom Erad plans to deploy to the firm’s premises on Friday.

Erad has argued that termination of the contract made it incur heavy losses including loss of profits at the rate of $49 (Sh4,165) a tonne and $1,838,000 (Sh156.2 million) as the cost of storing the maize.

NCPB and Erad opted for arbitration in settling the row, and the arbiter, Evans Thiga Gaturu, who ruled in favour of the grain supplier in July 2009 awarded it $3,106,000 (Sh264 million).

The arbitral award also provided that the amount would be compounded at an annual interest rate of 12 per cent if the payment is delayed—pushing the payout to Sh392 million.

NCPB went to the High Court to challenge the award before Justice J Njagi and lost.

The board appealed against the High Court decision and failed in judgement delivered by Justice George Odunga in February 2012, prompting Erad’s auctioneers to descend on NCPB’s premises.

NCPB then went to the Court of Appeal seeking to stop proceedings that its lawyer Katwa Kigen argued amounted to stopping payment to Erad.

The judges, however, dismissed Mr Kigen’s arguments, saying the application did not seek the court’s help in stopping payment.

The Court of Appeal argued that although the matter involves large sums of public money, it could not stop the arbitral award since NCPB’s lawyers had appealed against Justice Njagi’s decision to throw out its earlier bid to reverse the award.