https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7620

Zadock Furniture Systems Limited & another v Central Bank of Kenya (Miscellaneous Application E038 of 2025 & Commercial Arbitration Cause E054 of 2025 (Consolidated)) [2026] KEHC 7620 (KLR) (Commercial and Tax) (28 May 2026) (Ruling) Neutral citation: [2026] KEHC 7620 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Miscellaneous Application E038 of 2025 & Commercial Arbitration Cause E054 of 2025 (Consolidated) PM Mulwa, J May 28, 2026 Between Zadock Furniture Systems Limited 1st Applicant Maridadi Building Contractors 2nd Applicant and Central Bank of Kenya Respondent Ruling 1.Before the Court are two related applications arising from arbitral proceedings between the parties. By directions issued on 27th July 2025, the Court ordered that the two applications be heard together. 2.The first application is the Chamber summons dated 12th June 2025 brought under the provisions of Section 36 of the Arbitration Act of 1995 and Rule 4 and 6 of the Arbitration Rules 1997 and Section 3A of the Civil Procedure Act seeking the Final Award published on 9th December 2024 by the Hon. Mr. Justice E. Torgbor be recognized as binding and enforced by this Honourable Court, and the costs of this Application be borne by the Respondent. 3.The application is supported by the affidavit of Victor Swanya Ogeto, a Director of the 2nd Applicant and an Advocate, sworn on behalf of both Applicants. He depones that the 1st Applicant was nominated by the 2nd Applicant, Maridadi Building Contractors, as a subcontractor to supply and install furniture at the Respondent’s offices pursuant to sub-contract agreements dated 8th April 2008 and 23rd April 2008. According to the deponent, Clause 31.5 of the sub-contract agreement permitted the 1st Applicant to utilize the 2nd Applicant’s name and, where necessary, to be joined in arbitration proceedings against the Respondent. 4.The deponent further avers that disputes arose after the Applicants accused the Respondent of breaching the sub-contract agreements by failing to pay for works and services rendered thereunder. He states that by a consent dated 6th September 2012, the claim against the 2nd Applicant was withdrawn upon its joinder as a co-claimant in the arbitral proceedings. He further depones that the 2nd Applicant subsequently issued the Respondent with an irrevocable authority directing that any sums payable pursuant to a favourable award be paid directly to the 1st Applicant. 5.It is further deponed that the dispute was referred to arbitration before Hon. Mr. Justice Edward Torgbor, a Chartered Arbitrator appointed by the Chairman of the Architectural Association of Kenya. During the arbitral proceedings, the parties entered into two consent settlements dated 16th November 2015 and 27th June 2017, respectively, but subsequently disagreed on whether the consents ought to be adopted as an award on agreed terms pursuant to Sections 31 and 32 of the Arbitration Act. The Arbitrator thereafter invited submissions on the issue. 6.According to the Applicants, the Arbitrator subsequently published a Final Award dated 9th December 2024 in which he adopted the terms of the consent settlements as an arbitral award pursuant to Section 31(1) of the Arbitration Act and further awarded the costs of the arbitration and the Arbitrator’s fees against the Respondent. The Applicants maintain that no application had been filed to set aside the award within the timelines prescribed under Section 34 of the Arbitration Act and therefore urge the Court to recognize and enforce the Award in the interests of justice. 7.The Respondent opposes the application through the replying affidavit of Kennedy K. Abuga, sworn on 26th August 2025. He deponed that the Respondent had already filed an application dated 3rd July 2025 seeking to set aside the arbitral award published on 9th December 2024 and therefore denied the Applicants’ assertion that no challenge had been lodged within the timelines prescribed under the Arbitration Act. 8.The deponent further avers that the dispute arose from contracts relating to office modernization and workstation creation at the Respondent’s offices, under which the Respondent had appointed the 2nd Applicant as the main contractor and the 1st Applicant as a nominated subcontractor. He states that although the 1st Applicant had initially instituted proceedings against both the Respondent and the 2nd Applicant, the claim against the 2nd Applicant was later withdrawn and the latter joined the arbitral proceedings as a co-claimant pursuant to the consent dated 6th September 2012. 9.It was further deponed that during the arbitration proceedings the parties entered into two consent settlements dated 16th November 2015 and 27th June 2017 settling the disputes arising from the Phase I and Phase II claims respectively. According to the Respondent, the sums agreed under the consents, including payments relating to the arbitration costs and the Arbitrator’s fees, were substantially settled. The deponent however stated that disputes subsequently arose regarding alleged outstanding payments, withholding tax deductions, VAT remittances to KRA, and the scope of the consent settlements. He averred that the Respondent consistently maintained that the arbitral proceedings had effectively been concluded upon execution and implementation of the consents and that the Arbitrator had become functus officio. 10.The Respondent further contended that despite objections raised by its advocates, the Arbitrator proceeded to issue the Award dated 9th December 2024, adopting the consents as an award under Section 31(1) of the Arbitration Act and making findings on alleged outstanding sums and interest. The deponent asserted that the Arbitrator acted without jurisdiction since the dispute had already been compromised by consent and fully settled by the parties. It was further argued that under Sections 31 and 32 of the Arbitration Act, the Arbitrator’s role in relation to agreed settlements was merely supervisory and did not extend to making substantive determinations on disputed payments or imposing additional liabilities. 11.The Respondent maintained that 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. Consequently, the Respondent urged the Court to dismiss the application for recognition and enforcement of the arbitral award because the award was made without jurisdiction, contrary to public policy, and was therefore null and void. 12.The second application, dated 27th June 2025, is brought under Section 35(1) and (2) of the Arbitration Act, and seeks to set aside and stay of enforcement of the settlement award on agreed terms made by Hon. Justice E. Torgbor dated 9th December 2024. 13.The application is supported by the affidavit of Kennedy K. Abuga, the General Counsel of the Applicant, sworn on 27th June 2025. He deposes that the Applicant fully discharged its obligations under the consent settlements, including payment of the agreed settlement sums, arbitral costs, and the Arbitrator’s fees. However, notwithstanding the settlements, the 1st Respondent allegedly continued demanding additional sums said to be outstanding under the Phase I Consent, including claims arising from VAT deductions and unpaid certificates. The Applicant maintains that part of the settlement sum had lawfully been withheld and remitted to the Kenya Revenue Authority as withholding VAT and insists that the claims had been conclusively settled under the consent agreements. 14.The deponent further avers that the Applicant’s advocates repeatedly objected to any further arbitral proceedings on the ground that the Arbitrator had become functus officio upon execution and implementation of the consents. Despite those objections, the Arbitrator allegedly continued convening mentions and seeking verification of payments and settlement of alleged outstanding sum. 15.It is further deponed that in December 2020 the Arbitrator directed that the proceedings would terminate through adoption of the consents as an Award on Agreed Terms, a position opposed by the Applicant on grounds that the arbitration had already been concluded. Nonetheless, by a ruling delivered on 21st May 2021, the Arbitrator held that he was not functus officio and thereafter proceeded to prepare the impugned Settlement Award on Agreed Terms. According to the Applicant, it consistently maintained its objection throughout the proceedings and insisted that no further award ought to issue. 16.The Applicant further avers that by a letter dated 2nd April 2025, the 1st Respondent forwarded the Settlement Award on Agreed Terms dated 9th December 2024 and demanded payment of Kshs. 122,426,524.31. The Applicant contends that the Award improperly adopted the consent settlements as an arbitral award while at the same time awarding alleged outstanding sums and arbitral costs against the Applicant. It is the Applicant’s position that the Arbitrator lacked jurisdiction to issue the Award since the dispute had already been settled and the Arbitrator had become functus officio. The Applicant further contends that the Award is contrary to public policy as it exposes a public institution to double payment in respect of claims allegedly already settled under the consents. 17.The 1st and 2nd Respondents opposed the application through a preliminary objection dated 2nd September 2025, and a replying affidavit sworn by Victor Swanya Ogeto on 2nd September 2025. He deponed that the Arbitrator notified the parties on 9th August 2021 that the final Award on agreed terms was ready and the same was eventually published on 9th December 2024 after the 1st Respondent settled the outstanding arbitral fees. 18.The Respondents contend that the application is time barred under Section 35(3) of the Arbitration Act, arguing that the Applicant had knowledge of the Award as early as 9th August 2021 but only moved the Court more than three years later. Reference was made to various correspondences exchanged between the parties and the Arbitrator between 2021 and 2025 demonstrating that the Applicant was aware of the Award and had repeatedly been called upon to settle its portion of the arbitral fees to facilitate release of the Award. 19.The Respondents further contend that the application lacks merit since the dispute had not been fully settled by the consent agreements entered into by the parties. They maintain that although the parties executed two consent settlements dated 16th November 2015 and 27th June 2017 in respect of the Phase I and Phase II claims respectively, the Applicant allegedly failed to fully comply with the terms of the First Consent. In particular, it is alleged that the Applicant failed to pay an outstanding balance of Kshs. 1,179,010.46 together with a Quantity Surveyor’s certificate for Kshs. 1,849,980.07 and accrued interest thereon. The Respondents further contend that the alleged VAT deductions relied upon by the Applicant were unsupported and did not satisfy the legal threshold for withholding VAT. 20.It is further deponed that the issue of the Arbitrator’s jurisdiction and whether he had become functus officio had already been determined in the ruling dated 21st May 2021, in which the Arbitrator found that the First Consent constituted only a partial settlement and that outstanding issues remained for determination. According to the Respondents, the Applicant never challenged that ruling and indeed continued participating in the subsequent proceedings before the Arbitrator. The Respondents, therefore, maintain that the Arbitrator properly adopted and recorded the consents together with the outstanding claims as a Final Award on agreed terms pursuant to Section 31(1) of the Arbitration Act and urged the Court to dismiss the application with costs. 21.Both applications were canvassed by way of written submissions. Analysis and determination 22.I have considered the two applications, the affidavits in support and in opposition thereto, together with the rival submissions by counsel. The following issues arise for determination:SUBPARA a.Whether the application dated 27th June 2025 seeking to set aside the arbitral award is time-barred under Section 35(3) of the Arbitration Act.SUBPARA b.Whether the Applicant has established grounds for setting aside the arbitral award dated 9th December 2024.SUBPARA c.Whether the Final Award dated 9th December 2024 ought to be recognized and enforced under Section 36 of the Arbitration Act; andSUBPARA d.Who should bear the costs of the applications. 23.I shall begin with the issue of limitation, as it goes to the jurisdiction of the Court. The Respondents contend that the application to set aside the award is statute-barred under Section 35(3) of the Arbitration Act because the Applicant became aware of the Award on 9th August 2021 when the Arbitrator notified the parties that the Award was ready for collection. The Applicant, on the other hand, argues that the Award was only published and supplied to it on 2nd April 2025 and that the present application was filed within the statutory period. 24.Section 35(3) of the Arbitration Act provides:“An application for setting aside the arbitral award may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or if a request had been made under Section 34 from the date on which that request had been disposed of by the arbitral award.” 25.In Mahican Investments Limited & 3 others v Giovanni Gaida & 80 others [2005] eKLR, Ransley J was happy to identify with Nyamu J, when he stated:“…I would like to reiterate that the word delivery and receipt in Section 32(5) and section 35 must be given the same meaning as above, a notice to the parties that an award is ready is sufficient delivery. The interpretation of communication under Section 9 of the Arbitration Act reinforces this view. Any other construction would introduce unnecessary delays in the arbitral process and deny it the virtue of finality.” 26.The effect of the foregoing authorities is that actual physical collection of the arbitral award is not a prerequisite for purposes of computation of time under Section 35(3) of the Arbitration Act. Once a party is notified that the award is ready for collection, time begins to run irrespective of whether the party subsequently elects to collect the award or not. 27.The jurisprudence on the strictness of timelines under Section 35(3) of the Arbitration Act is now settled. In Kenyatta International Convention Centre (KICC) v Greenstar Systems Ltd [2018] eKLR it was held that:“Thus, there being no provision in the Arbitration Act for extension of time, it is to be understood that strict compliance with the timeline set out in Section 35 (3) of the Act is imperative, and comports well with the principle of finality in arbitration. In deed in the Ann Mumbi Hinga case, the Court of Appeal proceeded to hold, in no uncertain terms, that Section 35 of the Arbitration Act bars any challenge even for a valid reason after 3 months from delivery of the award.” 28.Section 35 of the Arbitration Act bars any challenge to an arbitral award after the lapse of three months from the date of delivery of the award, even where valid reasons may exist. 29.Applying the foregoing principles to the present case, the material before Court demonstrates that the Arbitrator notified the parties on 9th August 2021 that the Award was ready for collection. That communication, in light of the authorities cited above, constituted sufficient notice and delivery for purposes of Section 35(3) of the Arbitration Act. 30.I am therefore unable to agree with the Applicant’s contention that time only began to run upon physical receipt of the Award on 2nd April 2025. To adopt such an interpretation would defeat the principle of finality in arbitration and permit parties to circumvent statutory timelines merely by delaying collection of awards. 31.In my view, once the Applicant was notified on 9th August 2021 that the Award was ready for collection, time began to run for purposes of Section 35(3) of the Arbitration Act. The present application, having been filed on 27th June 2025, nearly four years later, was clearly filed outside the mandatory statutory period prescribed by law. 32.Consequently, I find and hold that the application dated 27th June 2025 seeking to set aside the arbitral award is statute-barred and incompetent before this Court. This Court therefore lacks jurisdiction to entertain the same. 33.Having so found, it follows that the Award dated 9th December 2024 remains valid, binding, and enforceable unless set aside in accordance with the provisions of the Arbitration Act. 34.The Court’s role in an application for recognition and enforcement of an arbitral award is circumscribed by Sections 36 and 37 of the Arbitration Act. Section 36(1) of the Act provides that:“A domestic arbitral award shall be recognized as binding and upon application in writing to the High Court, shall be enforced subject to this section and Section 37.” 35.Further, Section 10 of the Arbitration Act limits court intervention in arbitral proceedings. 36.The effect of the foregoing provisions is that once an arbitral award has been made, the Court is obliged to recognize and enforce it unless any of the grounds set out under Section 37 of the Arbitration Act are established. 37.In the present case, the Respondent sought to challenge the Award through the application dated 27th June 2025. However, having found that the said application was filed outside the mandatory timelines prescribed under Section 35(3) of the Arbitration Act, there exists no competent challenge to the Award before this Court. 38.The court's intervention in arbitral proceedings must remain minimal so as to preserve the autonomy and finality of the arbitral process. 39.The Respondent has urged this Court to decline enforcement on the grounds that the Award is contrary to public policy and exposes public funds to double payment. However, such arguments properly fall within the ambit of a setting aside application under Section 35 of the Arbitration Act. Having failed to mount a competent challenge within the timelines prescribed by law, the Respondent cannot indirectly impeach the Award at the enforcement stage. 40.This Court is therefore not persuaded that any of the grounds contemplated under Section 37 of the Arbitration Act have been established so as to warrant refusal of recognition and enforcement of the Award. 41.Arbitration is intended to provide parties with a final and binding mechanism for resolution of disputes. Courts must therefore guard against unnecessary intrusion into the arbitral process lest the objectives of arbitration be defeated. To decline enforcement of the Award in the circumstances of this case would undermine the principle of finality which lies at the heart of arbitration. 42.Accordingly, I find merit in the Chamber Summons dated 12th June 2025 seeking recognition and enforcement of the arbitral award dated 9th December 2024. 43.In the premises, I make the following orders:i.The Notice of Motion dated 27th June 2025 is hereby struck out for being statute-barred under Section 35(3) of the Arbitration Act.ii.The Chamber Summons dated 12th June 2025 is hereby allowed.iii.The Final Award dated 9th December 2024 issued by Hon. Justice E. Torgbor is hereby recognized as binding and enforceable as a decree of this Court pursuant to Section 36 of the Arbitration Act.iv.The Applicants in the Chamber Summons shall have the costs of both applications.It is so ordered. RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 28TH DAY OF MAY 2026.P.M. MULWAJUDGEIn the presence of:Ms. Miima h/b for Dr. Ojiambo, SC & Ms. Onyango for Applicant (Respondent in ARB/054/2025)Ms. Mutua h/b for Mr. Mbaluto for Respondent (Applicant in ARB/054/2025)Court Assistant: Lispa