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Ketraco in court to free bank accounts in Sh10bn dispute with contractor
According to the firm’s legal team, execution must follow entitlement, not precede it, particularly where public funds are concerned and the risk of misdirection is real.
Kenya Electricity Transmission Company (Ketraco) has moved to court to lift an order obtained by a Spanish company freezing its 17 bank accounts over a disputed debt of Sh10 billion arising from a botched deal.
Arguing that the orders granted by the High Court on December 11 have the potential of disrupting the company’s operations and plunging the whole country into darkness, Ketraco has sought to unfreeze the order obtained by Instalaciones Inabensa S.A.
The claimant on July 28, 2023 transferred its rights to another Spanish firm C.A. Infraestructuras T & I SLU which has been seeking to collect the money from KenGen in the 10-year dispute.
The court documents stated that the freeze order has already caused serious operational paralysis at the company and Ketraco risked the failure to honour its contractual relationships with over 540 members of staff, who are entitled to salaries and other benefits.
“Similarly, the applicant (Ketraco) is now unable to meet its urgent contractual obligations, service loans, procure key inputs and operate the national transmission grid," said the firm in an application at the High Court.
"The garnishee orders issued by this honourable court effectively halt ongoing projects and threaten stable power transmission nationwide, with severe consequences for public safety, the economy, essential services and energy security.”
The company said if the order is not lifted, the banks will be forced to release the attached funds, a move that would halt Ketraco’s operations such as electricity transmission and maintenance of all electricity transmission lines with the potential of plunging the whole country into an electricity blackout.
“Any electricity blackout will equally cripple the Kenyan industrial sectors, and essential services like medical care. Such a scenario could easily portend socio-economic unrest,” Ketraco said in the application.
The High Court issued the orders to the 17 banks including NCBA Bank, Standard Chartered Bank Kenya, Co-operative Bank of Kenya, Citibank N.A. Kenya and KCB Bank Kenya, directing the lenders to hold any funds belonging to Ketraco.
The Spanish firm Instalaciones Inabensa sued Ketraco following the termination of two contracts for the construction of a power line and a substation in 2016.
Ketraco awarded the Spanish firm contracts for engineering, procurement, and construction (EPC) in 2013, but terminated the deal on April 25, 2016, prompting the matter to be referred to arbitration, where the tribunal found Ketraco in breach of contract.
In July 2019, the tribunal awarded Inabensa €37,365,691, plus interest and costs.
Not satisfied, Ketraco unsuccessfully challenged the award at the High Court, the Court of Appeal, and the Supreme Court.
C.A. Infraestructuras T & I SLU later filed a liquidation petition, but Ketraco sought to have the contractor compelled to deposit Sh185 million as security for costs.
Ketraco had also argued that the Spanish firm is a foreign company with no known assets in Kenya.
The electricity transmission company contends that the freezing of 17 accounts in a single stroke offends established doctrine governing execution against public utilities, and calls for judicial restraint where enforcement measures risk undermining statutory mandates and essential public infrastructure.
Ketraco further argues that the matter raises a threshold question of entitlement, namely whether execution against public funds should proceed before the courts are satisfied as to the identity of the lawful payee, in circumstances where the original contractor is bankrupt and subject to foreign insolvency proceedings.
According to the firm’s legal team, execution must follow entitlement, not precede it, particularly where public funds are concerned and the risk of misdirection is real.
While acknowledging that the dispute has been protracted, Ketraco maintained that the proceedings are confined to the manner and scope of execution, and sought clarification on how far garnishee jurisdiction may go when it intersects with public finance discipline and statutory governance.
The High Court had earlier rejected Ketraco’s application, saying it was a ploy to delay or frustrate the liquidation process and shield the electricity transmission company from the consequences of its long-outstanding decree.
“It is urgent that this court intervenes to stay the execution, for unless it does so forthwith, the public funds shall be irreversibly dissipated,” the company said in the application.
