BATTLE OF BANKS

Reprieve for NBK over Sh500 million botched driving deal

Ecobank and NBK digital driving licenses financing deal moves to appeal court

In Summary

•NBK secured the Sh2.3 billion deal from NTSA for the smart card driving licenses, but the lender subcontracted Pesa Print for the job

•The high court found NBK in breach of the financing deal for failing to make payments due to Pesa Print directly to Ecobank to settle a $3.5 million loan offered to the subcontractor

The National Bank of Kenya (NBK) has temporarily succeeded in suspending an order requiring it to pay over half a billion shillings to Ecobank for financing a deal for the supply of digital driving licenses.

Appeal judges Martha Koome, Daniel Musinga and Gatembu Kairu gave NBK another chance at fighting the award after holding that its appeal is arguable and if the order sought is not granted it will be rendered useless.

 

NBK lost the case at the high court when judge Grace Nzioka ordered it to pay the money to Ecobank based on an agreement signed three years ago, which compelled the lender to pay Ecobank on account of a firm that had been subcontracted to supply the digital driving licenses.

 

According to the agreement, NBK had committed to pay Ecobank within 150 days after signing the license deal for a loan the lender had offered Pesa Print, to finance the production of the second-generation smart card driving licenses.

NBK secured the Sh2.3 billion deal from National Transport and Safety Authority (NTSA) for the smart card driving licenses, but the lender subcontracted Pesa Print for the job.

Justice Nzioka found NBK had breached terms of the financing deal after it failed to make payments due to Pesa Print directly to Ecobank to settle a $3.5 million loan offered to the subcontractor.

NBK had said payment to Ecobank was based on it receiving payment from NTSA for the contract, arguing that the transport regulator had delayed settling the bill.

Aggrieved by the high court decision NBK moved to court of appeal.

In its appeal papers NBK had said that the payment of the said monies will cause it to take the position of primary obligor for the credit facility; that the decretal sum is a substantial amount of money and if it is compelled to pay at this stage, its services will be severely hampered.

 
 

It faulted the high court judge for: misconstruing the import and meaning of “Receivables”; for failing to hold that the NBK’s obligation to pay the receivables only arose once it received the receivables under Invoice No.00229, and therefore since NTSA had not yet made the anticipated payment the applicant’s obligation to pay Ecobank under the Deed of Assignment of Receivables had not crystalized.