High court lifts freeze on SportPesa’s bank accounts

What you need to know:

The taxman said the freeze, which also affected SportPesa’s pay-bill and till numbers, was prompted by a tax evasion investigations.
The KRA obtained an extension of the preservation orders on September 11 for 21 days.
The orders were once again extended on October 5 for another 60 days.
Justice Majanja, however, cut short the orders which were to run until December 4.

SportPesa can now access its bank accounts after the High Court lifted orders barring the gaming firm from dealing in the cash deposits over a Sh14.3 billion tax claim by the Kenya Revenue Authority (KRA).

Justice David Majanja on November 13 gave Pevans East Africa, the company behind the SportPesa brand, control of its bank accounts that had been frozen since August 20.

“The preservation order issued on September 11, 2020 and extended on October 5, 2020 be and is hereby discharged,” the judge ordered.

“That this matter be and is hereby stayed pending the hearing and determination of Milimani High Court Misc. Application No. 045 of 2020 or until further orders of the court.”

The taxman on August 20 issued preservation notices to Pevans’ bankers, invoking the Tax Procedures Act (TPA) that allows it to make such a move if it believes tax collection is being frustrated.

The taxman said the freeze, which also affected SportPesa’s pay-bill and till numbers, was prompted by a tax evasion investigations. The KRA obtained an extension of the preservation orders on September 11 for 21 days. The orders were once again extended on October 5 for another 60 days.

Justice Majanja, however, cut short the orders which were to run until December 4. The judge said the unlocking of the bank accounts was necessitated by Pevan’s successful argument that the KRA had failed to disclose material information to the court when seeking the ex-parte orders, including the fact that there are several pending cases addressing the same tax dispute.

The taxman is demanding a total of Sh14.3 billion, arguing that it has been unable to collect the amount because of the gaming firm’s “fraudulent schemes.”

Pevans said that the KRA was abusing the court process by filing new cases.

Another judge, for instance, declined to grant any preservation orders on February 19 and directed the taxman to serve the application for hearing inter-parties.

Pevans said the KRA has not prosecuted the matter which is still pending determination.

The gaming firm also said that KRA failed to disclose that the claim of Sh14.3 billion is a combination of various demands made by the taxman in 2018 and 2019 for payment of withholding tax on winnings paid to punters and is the subject of various cases.

The KRA argued there was no need to disclose the other cases because they are different. Justice Majanja, however, rejected the taxman’s argument, noting that the various cases have the same building blocks, including the Sh14.3 billion tax claim.

“The statutory right of KRA to move to the court ex-parte is accompanied by an implied duty on KRA to disclose to the court all material facts that have a bearing on the matter,” the judge said.

“This duty of candour is fundamental where a party approaches the court for ex-parte orders has been buttressed in a catena of decisions by our superior courts.”

The KRA said its preliminary assessment showed that Pevans owed Sh12.3 billion as principal tax and Sh2.4 billion as penalties.

The taxman sought to have the company’s bank accounts frozen to allow it to investigate allegations of its tax evasion schemes.

Pevans’ operating licence was revoked in July last year over the tax row, freezing the popular SportPesa brand that had millions of loyal customers.

The company’s chief executive, Ronald Karauri, recently tried to bring back SportPesa through a new Betting Control and Licensing Board (BCLB) licensee, Milestone Games Limited.

Mr Karauri had acquired an effective 54.4 percent stake in Milestone through a series of investment vehicles ahead of the attempt to revive SportPesa on October 30.

BCLB, however, clamped down on the operation within hours, saying the SportPesa trade name belongs to Pevans.

Milestone’s managers Wilson Karungaru and Bernard Chauro have since been charged in court with appropriating the SportPesa brand.

BCLB said Milestone’s authorisation to operate under the Sportpesa brand was an error.

“According to information in our possession, the tradename SportPesa belongs to M/s Pevans East Africa Limited,” the regulator wrote to Milestone, prohibiting the firm from using SportPesa’s domains, short codes and pay bill numbers.