Court spares Airtel Sh500m fine

Airtel Kenya CEO Adil El Youssefi displays an Airtel Money Visa during the official opening of Airtel offices in Nyeri town on September 3, 2014. Airtel Networks Ltd has been spared paying more than Sh500 million for alleged breach of contract with a former distributor. FILE PHOTO | JOSEPH KANYI | NATION MEDIA GROUP 

In Summary

• According to the deal, Nyutu ordered products from the company and after sales and distributions, made payments to Airtel’s bank accounts.
• Between March 6 and March 16, 2009, Mr Changa presented bank payment slips amounting to Sh11 million to Airtel (then Zain) employees, purporting that the amount had been deposited in the company’s accounts by Nyut
• In March 2009, it made Mr George Changa its agent who continued to order products from the company and make payments to the firm’s account.

By PAUL OGEMBA
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Airtel Networks Ltd has been spared paying more than Sh500 million for alleged breach of contract with a former distributor.

The decision by the Court of Appeal set a new precedent in disputes determined through arbitration, as judges ruled that a party could only challenge such an award at the High Court.

“When parties expressly exclude court intervention in their arbitration agreement, they should honour it and embrace the consequences.

They cannot turn around and claim that the very law they freely chose to govern their business is unconstitutional,” said Appellate Judge Wanjiru Karanja.

The dispute involved Airtel and Nyutu Agrovet Ltd over a special distribution agreement signed in April 2004 for supply of Airtel (formerly Kencell, Celtel and Zain) scratch cards within Nairobi’s Eastlands region.

According to the deal, Nyutu ordered products from the company and after sales and distributions, made payments to Airtel’s bank accounts.

In March 2009, it made Mr George Changa its agent who continued to order products from the company and make payments to the firm’s account.

BANK PAYMENT SLIPS

Between March 6 and March 16, 2009, Mr Changa presented bank payment slips amounting to Sh11 million to Airtel (then Zain) employees, purporting that the amount had been deposited in the company’s accounts by Nyutu.

Assuming that the payment slips were genuine, the company delivered scratch cards worth Sh11 million though the slips turned to be forgeries. They were later reversed, resulting in debit in the distributor’s account.

The phone firm terminated the contract with the distributor because of dishonesty.

However, as per the contract agreement, the row was referred to senior counsel Fred Ojiambo for arbitration who then awarded Nyutu Sh562,720,698 for alleged breach of contract.