End of an era as contractor Mugoya goes to liquidation

A High Court judge has ordered the liquidation of former property development giant Mugoya Construction Company, driving the final nail into its coffin following endless legal battles that the firm has been fighting to stay alive.

Justice Francis Gikonyo has ordered that a receiver manager be appointed to sell off the firm’s assets and pay creditors after finding out that it is unable to pay any of its debts.

The petition to wind up Mugoya Construction was filed by law firm Gichuki King’ara & Company Advocates, which negotiated a Sh324 million compensation from the National Social Security Fund (NSSF) in a botched development deal in Karen, Nairobi.

The law firm held that the firm, owned by Ugandan tycoon James Mugoya Isabirye, owed it Sh35 million from the NSSF negotiations. Another firm-Dew Security Services-said the firm owes it Sh14 million from unpaid bills.

“I am aware that winding up is a draconian step to take, but in the circumstances of this case the only appropriate thing is to make a receiving order against Mugoya Construction Company. Accordingly, the company shall be wound up in accordance with the law,” Mr Justice Gikonyo held.

Lawyer Gichuki King’ara says it successfully sued Mugoya Construction in 2009 to realise its legal fees but that the company has since filed an avalanche of court applications to buy time to transfer its assets to Uganda and hide some of them under shell corporations.

The law firm maintained that the judgment has never been challenged.

Mugoya Construction emerged among a group of politically well-connected contractors that made money from government contracts during the reign of former President Daniel arap Moi.

READ: Tycoon Mugoya’s fortunes dwindle with winding-up plan

Since the exit of Mr Moi, Mr Mugoya has been in the news for all the wrong reasons. Mr Mugoya, 63, studied engineering where he is said to have struck a friendship with Mr Moi’s son.

This ushered him into the corridors of power, yielding a business partnership that made him a beneficiary of coveted projects like NSSF’s Embakasi Housing in 1993.

Things changed for Mr Mugoya after 2002 when two road contracts he had been awarded were cancelled by the Narc government.

Mr Justice Gikonyo added in his ruling that controversies surrounding Mugoya Construction have made it difficult to establish whether it is capable of paying its creditors. The judge said the developer’s case was not helped by the fact that it has been inactive since 2008.

“There is no satisfactory explanation of the failure to pay that has been offered by the company. The company has been accused of hiding its attachable assets, refused to furnish security or produce books of accounts or provide explanations regarding its assets or money it received from NSSF.

“Conviction in the company’s insolvency is further built by the fact that the company last filed its annual returns in March 2008. It seems to have ceased trading despite keeping an office in Nairobi,” he added.

Mugoya Construction had told the judge that its debt to King’ara was disputed hence the winding up petition was unwarranted.

But the judge ruled that Mugoya Construction had failed to show why it disagreed with the law firm’s demand, which would have been reason to consider stopping its liquidation.

Mugoya Construction’s owner has since the decline of his company had several run-ins with the law. He has been arrested and charged in Kenya and Uganda.

He was arraigned in a Nairobi court in 2010 for allegedly selling off construction machinery worth Sh3.5 billion that had been charged to Kenya Commercial Bank.

In 2010 he was charged in a Kampala court alongside Uganda pension fund officials with operating an illegal joint real estate venture valued at Ush8 billion (Sh235 million).