Appeal court sends Sh1b maize case back to the High Court

The Court of Appeal has re-opened the  Sh1 billion maize saga centred around Sirisia MP John Waluke and his former business partner Judy Wakhungu.

In their judgment, Justices Gatembu Kairu and Aggrey Muchelule unanimously agreed that there was a need for the High Court to hear the National Cereals and Produce Board (NCPB) and the Ethics and Anti-Corruption Commission (EACC) claim that the documents used to award Erad Supplies and General Contractors Ltd millions of shillings from the public coffers were allegedly forged.

The judges said there was a need to scrutinise the new evidence by the parastatal and the anti-graft body, as it boiled down to whether the arbitration award in favour of Waluke and Wakhungu’s company, Erad Supplies and General Contractors Ltd, was legal or not.

“We are satisfied that the additional evidence, which alleges that the award was procured through misrepresentation and was not enforceable in law, raised material and substantive issues that require interrogation,” the bench headed by Justice Kairu ruled.

The third judge in the case, Justice Fred Ochieng, died before the judgment was delivered.

The maize saga stems from a 2004 deal between NCPB and Erad for the supply of 40,000 tons of maize.

Erad, in its case, claimed that it was unable to supply the maize as the NCPB failed to open a letter of credit in its favour. It asserted that this was against their agreement.

EACC and NCPB want the Sh560 million award given to Erad set aside, saying one of the directors had lied under oath and that the award had been procured through perjury and false documents, contrary to public policy.

The two went for arbitration, which ended in favour of Erad, and it was awarded Sh560 million.

In between their court battles, Erad collected Sh30 million. Nevertheless, the interest accrued over time had reached Sh1 billion.

The deal also attracted a criminal case, with Waluke and Wakhungu being jailed by the magistrate’s court but acquitted by the Court of Appeal.

In the case, EACC said it had obtained crucial evidence recorded by South African authorities on 29 October this year, which was critical to the appeal filed by NCPB in a bid to salvage its assets from auction.

“The evidence obtained is critical and goes to the root of the integrity of the arbitration and raises questions on whether the court process is being abused for fraudulent purposes,” the agency said, adding that EACC was investigating the allegations of corruption and irregularity in the procurement by Erad to supply maize to NCPB.

“In particular, one of the documents on the basis of which storage charges of over Sh90 million was awarded to Erad is forged and did not emanate from the purported supplier M/S Chelsea Freight of Durban in South Africa,” it argued.

According to EACC, South African authorities established that Chelsea Freight closed shop in 2013, and two of its former directors, currently trading as LTD Logistics Solutions, gave evidence that they neither owned a warehouse nor dealt in maize supply or handling business.

Thilogan Pillay and Freddy Chetty, according to EACC, had sworn that the invoice placed by the company before the arbitrator did not emanate from their offices.

NCPB, on the other hand, argued that Erad had no maize to deliver. It asserted that the deal was “smacking of mischief, corruption, and pure theft of public funds”.

According to the board, a contract between Erad and Ropack International showed no delivery within the promised terms.

Erad, on the other hand, opposed the case, arguing that it was an abuse of court process.

The firm had argued that EACC had no right to appear in the appeal as it had not been a party to the proceedings in the lower and superior courts over the case.

The commission and NCPB want the Sh560 million award given to Erad set aside, saying one of the directors had lied under oath and that the award had been procured through perjury and false documents, contrary to public policy.

Erad had applied to sell immovable assets such as silos and NCPB land to recover the remaining Sh200 million when the appellate judges stopped the process.