Govt sues Insurance Firm Over Botched LC Bicycles Deal

1859 Views Kampala, Uganda

In short
The government has sued an insurance firm seeking damages worth 1.1 billion shillings for purported breach of contract in the bungled purchase last year of 70,000 bicycles for village local councilors.

The government has sued an insurance firm seeking damages worth 1.1 billion shillings for purported breach of contract in the bungled purchase last year of 70,000 bicycles for village local councilors.

The Attorney General sued NIKO Insurance Company, the firm that acted as guarantor to the company that was supposed to supply the bicycles but did not honor its contract.

The Attorney General, in his complaint filed at the Commercial Court in Kampala on Tuesday, contends that the insurance company undertook a Performance Guarantee Bond of 1.1 billion shillings in favour of Amman Industrial Tools and Equipment Limited (Aitel) on November 25, 2010, to be paid in event of breach of contract.

Aitel was contracted to supply the bicycles worth 4.2 billion shillings, but the bicycles have never been delivered up to date meaning that the insurance firm has failed to meet its obligation.

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

The Attorney General notes that Aitel had agreed to deliver the bicycles by February 25, 2011 but failed to meet the deadline which date was later extended to May 25, 2011.

Court documents further indicate that on May 10, 2011, the then Local Government ministry permanent secretary John Muhanguzi Kashaka, who is now suspended, wrote to the managing director of NIKO insurance company, informing him that Aitel had failed to deliver the bicycles.

Few days later, the Attorney General wrote to the insurance company informing them about the bond's expiry date being May 25, 2011. Subsequently, in a letter dated August 4, 2011, the insurance company manager wrote to the AG informing him that the company had started the process of paying the bond.

But to the Attorney General’s surprise, in a letter dated September 11, 2011, the insurance company drew his attention to a Parliamentary probe when the subject of the bicycles became a stormy topic of debate. The company stated that Government officials had been implicated in the purported fraud.

The Attorney General says he was discontented with the insurance company when it introduced new conditions like the Parliamentary probe, which were not part of the agreed terms for which they are claiming damages.

The court has subsequently summoned the insurance company to file its defense within 10 days, from the day it received the summons. The case has been allocated Justice Christopher Madrama, who is yet to fix a hearing date.