The Central Bank of Kenya (CBK) has lost its bid to stop payment of a contested Sh122.4 million debt arising from office modernisation contracts signed nearly two decades ago.

CBK had asked the High Court to block enforcement of an arbitral award issued in favour of furniture maker Zadock Furniture Systems and contractor Maridadi Building Contractors, arguing that the claims had already been settled and that enforcing the award would expose public funds to double payment.

However, the court ruled that CBK had waited too long to challenge the award and could not revive objections it had failed to raise within the strict timelines prescribed under the Arbitration Act.

The Central Bank of Kenya (CBK) has lost its bid to stop payment of a contested Sh122.4 million debt.

Photo credit: File | Nation

The court struck out the bank's application seeking to set aside the award and allowed enforcement proceedings filed by Zadock Furniture Systems Limited and Maridadi Building Contractors.

Read: CBK: Liquidity challenges hampering debt repayment

The judge recognised the award issued by arbitrator Justice Edward Torgbor as binding and enforceable as a decree of the court, exposing CBK to claim for payment of the amount.

The dispute stemmed from contracts signed in April 2008 for the supply and installation of furniture during the modernisation of CBK offices and the then Deposit Protection Fund offices.

Maridadi Building Contractors had been appointed as the main contractor while Zadock Furniture Systems was nominated as the subcontractor responsible for the furniture works.

The two firms accused CBK of failing to pay for works and services rendered under the contracts, triggering arbitration proceedings that stretched for years.

During the arbitration, the parties entered into settlement agreements in November 2015 and June 2017 covering claims arising from different phases of the project.

CBK maintained that the settlements fully resolved the dispute and that it had settled all agreed sums, including arbitration costs and the arbitrator's fees.

The bank argued that disputes raised later over withholding tax deductions, Value-Added Tax (VAT) remittances and alleged unpaid balances had already been compromised through the consent agreements.

It further contended that the arbitrator had completed his role after implementation of the settlements and lacked jurisdiction to make further determinations.

According to court records, CBK said enforcement of the award would "occasion grave injustice, amount to double payment, and expose public funds to unlawful claims despite the disputes having already been compromised through the consent settlements."

Read: Cost of Treasury loans from CBK falls 55pc on lower rates

The bank told the court that the arbitral award improperly exposed it to an additional claim of Sh122.4 million.

However, Zadock and Maridadi argued that the settlements had not fully resolved all outstanding issues.

They said CBK failed to settle an outstanding balance of Sh1.1 million, a quantity surveyor's certificate worth Sh1.8 million and accrued interest.

The firms also challenged CBK's reliance on VAT deductions, arguing that the deductions did not satisfy the legal threshold for withholding VAT.

The decisive issue before the court became whether CBK had challenged the award within the mandatory three-month period prescribed by law.

CBK argued that time started running after it physically received the award on April 2, 2025.

The contractors countered that the bank had been notified on August 9, 2021 that the award was ready for collection.

In its ruling, the court agreed with the contractors. "Once the applicant was notified on August 9, 2021 that the award was ready for collection, time began to run," the court said.

"The present application, having been filed on June 27, 2025, nearly four years later, was clearly filed outside the mandatory statutory period prescribed by law."

It recognised the arbitrator's final award as binding and enforceable as a decree of the court.

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jwangui@ke.nationmedia.com