Kenya Pipeline Company (KPC) has suffered a blow after the High Court froze its bank accounts, over a disputed debt with construction firm Zakhem International Construction Limited.
High Court Judge Josephine Mong’are allowed the application stating that a debt of more than Sh485 million had not been paid by KPC.
The oil firm had opposed the application arguing that all the debt due to the Lebanese firm, arising from construction of the Mombasa-Mombasa pipeline, were settled through consent.
“The court finds in favour of the plaintiff (Zakhem) that the amount of Sh485 million is owing and remains outstanding,” said the judge in a verdict on Monday.
KPC through lawyer James Kihara asked for the suspension of the decision pending appeal, but the judge directed him to file a formal application.
The construction firm had asked for the freezing of KPC’s bank accounts in Equity Bank Kenya, Stanbic Bank Kenya, KCB Bank Kenya, NCBA Bank Kenya, Citibank, Co-operative Bank of Kenya and Absa Bank Kenya and funds in the accounts used to settle the debt.
The judge noted that an account at Equity Bank had enough money to satisfy the debt and said other bank accounts would be unfrozen once the money is paid.
KPC challenged the case arguing that it was a ploy by Zakhem to revive a case that was settled in 2023. Another application by the firm, seeking to freeze KPC’s bank account at Standard Chartered Bank Kenya over an alleged debt of Sh926 million, was dismissed by Justice Mong’are on May 29, 2025.
“The respondent (KPC) has since settled the full agreed amount as per the consent and there is no amount due and owing to the applicant. Further, the applicant had not disputed entering the consent or the contents,” KPC’s acting chief legal officer Nelson Nyaduwa said in an affidavit.
According to Mr Nyaduwa, Zakhem had initially sued KPC seeking payment of $126 million (Sh16.2 billion). The High Court then issued a partial judgment on June 16, 2020, directing KPC to pay $44 million (Sh5.6 billion) to Zakhem.
KPC appealed the decision and as the matter was pending resolution, the parties entered into negotiations.
The corporation later released the funds but Kenya Revenue Authority (KRA) issued agency notices, demanding tax from Zakhem.
KRA successfully argued its case and KPC was forced to release Sh915 million to the taxman, while the balance of Sh485 million was to be released to Zahkem. KPC and Zakhem later signed a consent and the matter was settled on September 25, 2023.
Zakhem won the tender to build a 20-inch 45-kilometre Nairobi-Mombasa pipeline in 2014. The contract was to be completed in 18 months at a cost of Sh48 billion but several disputes delayed its completion.
The firm is also facing numerous suits by subcontractors who are pursuing payment from the works done.
Mr Nyaduwa said during the negotiations, all issues including exchange rate and the amounts payable were deliberated and agreed upon.
“As regards EOT 1-4 in which the court awarded the applicant (Zakhem) $44,019,024, parties amicably agreed to the amount payable to the applicant after applying the requisite exchange rate,” he said.
Mr Nyaduwa said there was no enforceable decree that can arise from a case that has since been withdrawn.
