Telkom wins Sh6bn asset fight linked to botched Moi-era deal

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Telkom wins Sh6bn asset fight linked to botched Moi-era deal


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Telkom chief executive Mugo Kibati. FILE PHOTO | NMG

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Summary

  • Justice Ngenye Macharia nullified an arbitration award of September 2019 that ordered Telkom Kenya to hand over the 60-acre land in Jamhuri Estate along Ngong Road in Nairobi to Exclusive Estates Limited.
  • The 60-acre parcel of land was valued eight years ago at Sh6 billion by Camp Valuers at Sh100 million per acre.
  • Telkom Kenya has been seeking to sell properties spread across the country as it raced to raise cash for contribution to its failed merger with Airtel.

Telkom Kenya has won a court battle for a Sh6 billion property sold during the Moi-era in a deal that sucked in controversial businessman Francis Mburu.

Justice Ngenye Macharia nullified an arbitration award of September 2019 that ordered Telkom Kenya to hand over the 60-acre land in Jamhuri Estate along Ngong Road in Nairobi to Exclusive Estates Limited (EEL), which is associated with Mr Mburu.

The judgment means that Telkom Kenya has the right to retain the land or receive at least Sh6 billion to cede the property to Mr Mburu.

Telkom Kenya, which is 40 percent owned by the Treasury and 60 percent controlled by private equity group Helios, is one of Kenya’s biggest property owners given its legacy as a State corporation or the defunct Kenya Posts and Telecommunication Corporation (KPTC).

The telecoms operator, which recently put on sale multi-billion shilling properties to fund its Kenya operations,  challenged the Sh21 million deal and termed it grossly undervalued.

Justice Macharia agreed with Telkom that the arbitrator– Zehrabanu Janmohamed– re-wrote a contract between the parties by directing Telkom to accept Sh21 million for the controversial land.

“The court hereby finds that the arbitrator exceeded her jurisdiction by re-writing the contract between the parties and hereby sets aside the award dated September 6, 2019,” the judge said.

Although Mr Mburu did not purchase the plot, the arbitrator handed him the land on grounds that a deal he had entered into with a State agency to develop the property about 30 years ago gave him legitimate claim to the land. 

Ms Janmohamed ruled that Mr Mburu is entitled to 60 acres from the 79-acre parcel of land.

The trader has been in the limelight over the controversial sale of the Sh3.2 billion Ruaraka land to the Government, a matter that is the subject of the Ethics and Anti-Corruption Commission investigation and also embroiled in court cases.

The 60-acre parcel of land was valued eight years ago at Sh6 billion by Camp Valuers at Sh100 million per acre.

In 1993, KPTC excised part of its land and transferred it to Postel Housing Cooperative Society Ltd on January 19, 1993, for the construction of houses for its workers.

Postel Housing Cooperative Society Ltd then entered into an agreement with Mr Mburu’s EEL for construction of the homes in a deal that offered the tycoon’s firm the 60 acres for Sh21 million. The housing project collapsed and the transfer of the land was frozen.

Ms Janmohamed termed the deal valid and directed Telkom to subdivide the land within 90 days and for Exclusive to pay Sh21 million for the property.

But Telkom Kenya through Mr Kamau Karori argued that the award wrongly offered the land to Exclusive for a paltry Sh21 million, arguing that the land is worth more than Sh6 billion.

He argued that an Act of Parliament had then barred KPTC from selling its assets without the consent of the Minister for Transport and Communication.

He also pointed out that the arbitrator failed to consider crucial evidence but based her decision on issues introduced later.

The court also heard that the arbitrator demonstrated bias through offering Exclusive the multi-billion shilling property for less.

“The award is replete with inconsistencies and biased findings which amount to depriving the applicant of the right to have its dispute resolved before an unbiased tribunal and the application of the rules of natural justice,” he submitted.

Mr Mburu defended the arbitrator, arguing that the sale agreement was clear on the purchase price upon transfer of the land.

Telkom Kenya has been seeking to sell properties spread across the country as it raced to raise cash for contribution to its failed merger with Airtel.

The telecommunications firm had in August 2019 hired property dealing firm, Axis Real Estate, to dispose of the prime assets sitting on about 17.8 acres of land.

Airtel in 2019 had agreed on a merger deal with Telkom Kenya to create a stronger challenger for Safaricom, which controls more than 60 percent of Kenya’s mobile subscriptions market. The merger collapsed.

Telkom market share has dropped from nine percent in 2018 to 6.2 percent.

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