KENYA – Ukwala Supermarkets has challenged a High Court decision to freeze the sale of its 10 retail outlets to Botswana firm Choppies Enterprises following a Sh946 million dispute with the taxman.
The company claims in an appeal to the decision that the taxman hoodwinked Justice George Odunga into issuing the order as the Kenya Revenue Authority (KRA) did not disclose in court that the dispute is part of separate proceedings before the its appeals tribunal, known as the Local Committee.
Justice Odunga last month stopped Ukwala from completing the sale of its outlets to Choppies, imposing a condition that it deposits Sh946 million in court as security for the transaction to proceed.
The deposit is supposed to secure KRA’s tax claim in the dispute. The taxman is yet to respond to the appeal.
“KRA did not disclose to the court that the matter of their claim for over Sh800 million is currently pending before the Local Committee. That makes it unnecessary for this court to impose such a draconian order for the provision of a guarantee for the entire amount claimed by KRA,” says Ukwala.
The retailer has blamed the court for refusing to recognise its application seeking to jail KRA officials for contempt, arguing that the taxman continued to assess its books of accounts in contravention of an earlier court order stopping the audit.
Ukwala adds that Justice Odunga erred in stopping the sale of Ukwala’s business to Choppies, as the taxman had not asked for such an order in any application.
“Once a contempt application was filed by Ukwala, the court should not have given KRA any right to address this court or seek further orders.
The court is yet, despite requests from the applicant on two occasions, to give directions on the contempt application,” the retailer adds.
Choppies in June announced it had reached a deal to buy 10 Ukwala stores, five of which are located in Kisumu, three in Nairobi and one in Nakuru and Bungoma.
The Botswana chain in November got the Competition Authority of Kenya’s (CAK) blessing to go ahead with its takeover of Ukwala.
The retailer, listed on both the Botswana and Johannesburg stock exchanges, will become the first foreign supermarket to successfully enter Kenya through an acquisition if the deal with Ukwala is successful.
The KRA had prior to Justice Odunga’s orders sent agency notices to Equity Bank, KCB and Diamond Trust Bank seeking to compel them to deduct the Sh101 million admitted tax from Ukwala’s accounts.
The banks, however, stated in response that they held no funds on behalf of Ukwala.
Ukwala now says it is attending the KRA tribunal proceedings under duress, as the law compels any aggrieved party to move to the Local Committee once it has been slapped with an agency notice.