Govt, insurer sh1.1b LCs bicycles battle rages on

Mar 29, 2013

The battle between Government and insurance firm NIKO Insurance Company over the sh1.1b insurance for bicycles meant for local council leaders, is still raging on at the Commercial Court, as the parties await the much-anticipated verdict.Government sued the firm in June last year demanding sh1.1

By Andante Okanya

The battle between Government and insurance firm NIKO Insurance Company over the sh1.1b  insurance for bicycles meant for  local council leaders, is still raging on at the Commercial Court, as the parties await the much-anticipated verdict.

Government sued the firm  in June last year demanding sh1.1b for purported breach of contract when the company acted as guarantor to the firm that was supposed to supply the 70,000 local council  bicycles.

Amman Industrial Tools and Equipment Limited was contracted to supply the bicycles worth sh4.2b, meant for chairpersons of parish and village councils.The insurance firm undertook a Performance Guarantee Bond of sh1.1b in favour of Amman on November 25, 2010, to be paid in event of breach of contract.

On Wednesday in Kampala, the parties appeared in court presided by Justice Christopher Madrama. Government's chief legal advisor the Attorney General(AG) listed as the plaintiff, was represented by state attorneys George Kalemera, and Elison Karuhanga.The insurance firm was represented by lawyer Moses Adriko. Peter Nyombi is the AG.

The AG is expected to file written submissions by April 5, and avail NIKO's a copy. NIKO is expected to respond by April 15, and avail the AG a copy. Any further responses are expected to be made by April 22. Hearing is scheduled for April 30, and the parties are expected to elaborate on their written submissions, and make clarifications for emphasis.

Government is also demanding general damages with a 28% annual interest from the date of judgement till payment in full. It also wants costs for the suit in addition to a 28% annual interest on the $489,650 from May 24, 2011 till full payment.

Court documents show that on November 26, 2010, the Local Government ministry on behalf of Government, awarded Amman the contract to supply the bicycles.The Performance Bond was to be valid from November 25, 2010 to May 24, 2011.

However, the AG states that on May 10, 2011, the Local Government ministry permanent secretary John Muhanguzi  Kashaka(currently suspended and on trial at Anti-Corruption Court) wrote to the managing director of the insurance firm, informing him that Amman had failed to deliver the bicycles.

The AG notes that Amman had agreed to deliver the bicycles by February 25, 2011. He claims that although the deadline was extended to May 25, 2011, the company still failed to comply.

The AG subsequently wrote to the company on May 23, 2011, informing it that the bond's expiry date was May 25, 2011. A  bank payment advice form was attached to the letter. Subsequently, in a letter dated August 4, 2011, the insurance firm's claims manager wrote to the AG, and informed him that the firm had started the process of paying the bond.

But the AG asserts that in a letter dated September 11, 2011, the firm drew his attention to a Parliamentary  probe when the subject of the LC bicycles became a stormy topic of debate.The firm stated that Government officials  had been implicated in the  purported fraud.

Court documents show that on October 4, 2011, Nyombi expressed discontent when the firm introduced new conditions like the Parliamentary probe, which were not part of the agreed terms.

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