The long and controversial maize contract case between the National Cereals and Produce Board (NCPB) and Erad Supplies and General Contractors Limited has taken a new turn after the Court of Appeal ordered the High Court to conduct a fresh hearing.
The case, which involves over Sh1 billion, has dragged on for years and is linked to Sirisia MP John Waluke, one of the directors of Erad. The ruling comes as a major blow to Erad, which had previously been declared the winner in an earlier High Court decision that upheld a massive arbitral award against NCPB.
Appellate Judges Gatembu Kairu, Asike-Makhandia, and Aggrey Muchelule said the High Court mishandled the matter in its 2011 decision. They noted that the court failed to properly investigate serious claims of fraud, corruption, and misuse of public funds surrounding the deal. The judges stated that the lower court overlooked critical evidence that could have revealed irregularities in how the arbitration award was obtained, leaving many questions unanswered.
The dispute originated in 2004 when NCPB contracted Erad to supply 40,000 metric tonnes of maize to help address food shortages in Kenya. Erad later accused NCPB of breaching the agreement by failing to open a letter of credit as stipulated in the contract.
As a result, Erad took the matter to arbitration, where it was awarded more than US$3.1 million, equivalent to around Sh560 million at the time. With accumulated interest, the amount has now ballooned to over Sh1 billion.
NCPB, however, contested the award, insisting that Erad’s claims were based on forged and misleading documents. Among the suspicious claims was an invoice of US$1.1 million allegedly paid to a South African firm, Chelsea Freight, for maize storage.
Investigations later revealed that Chelsea Freight had never handled any maize on behalf of Erad, exposing the questionable nature of the documents submitted during arbitration.
The Ethics and Anti-Corruption Commission (EACC) also joined the case, providing fresh evidence that supported allegations of fraud and corruption. Despite this, the High Court had dismissed NCPB’s application to set aside the award, ruling in favor of Erad. The Court of Appeal, however, disagreed, stating that the High Court failed to apply Section 35 of the Arbitration Act correctly.
The appellate judges emphasized that the court should have considered whether enforcing such an award would go against Kenya’s public policy.
The judges underlined that enforcing an award based on false documents and payments for goods never delivered would contradict the principles of integrity, transparency, and accountability, which are deeply rooted in Kenya’s Constitution under Articles 10 and 201. They said doing so would not only damage public trust but also offend the moral and economic values that guide the management of public resources.
While the appellate judges stopped short of completely nullifying the arbitral award, they ordered that the matter be sent back to the High Court for a new hearing. The High Court is now expected to re-examine NCPB’s application, this time considering the new evidence supplied by the EACC.
The Court of Appeal further ruled that both NCPB and Erad would each bear their own legal costs for the appeal, marking yet another chapter in this long and contentious legal battle.
