Keroche faces auction over Sh45m unpaid compensation to ex-worker

Tabitha Karanja

Senator Tabitha Karanja in the dock in this past photo in a Sh14.5 billion tax evasion case.

Photo credit: File I Nation Media Group

What you need to know:

  • A difference of opinion between Keroche and KRA last year saw the taxman shut down the brewer over Sh14 billion unpaid tax
  • In the latest tribulations, former Keroche manager Sam Shollei has confiscated several items including vehicles and machinery belonging to the Keroche breweries, which will be auctioned on October 31

The woes facing Naivasha-based alcoholic beverage manufacturer Keroche Breweries are far from over, as the company now faces auctioning of its property after failing to pay a former manager Sh45 million over unfair dismissal.

In the latest tribulations, former Keroche manager Sam Shollei has confiscated several items including vehicles and machinery belonging to the Keroche breweries, which will be auctioned on October 31, in line with a judgement he obtained from the Employment and Labour Relations Court.

Mr Shollei won a case against Keroche, for unfair dismissal in 2022, where the brewing firm was ordered to pay him Sh45.5 million.

“Under instructions received from the Employment and Labour Relations Court at Nakuru, we shall sell the under-mentioned goods, vehicles, plant, machinery and accessories by public auction on Tuesday October 31, 2023 at 11am at our Head Office,” a newspaper advert read in part.

The Nation learnt that the items seized by Okuku Agencies Auctioneer include chairs, desks, drawers, computers, printers, office cabinets, plant machinery and accessories, motor vehicles registration numbers KBS 030K Lorry/Truck, KBN 129A Lorry Truck, KBY 272R Van/ Pick up, KAN 601R Lorry and KCD 860E Pick Up.

The conditions of the sale is Cash/Bankers Cheque, Electronic Funds Transfer at the fall of the hammer.

Bidders have been asked to make a refundable deposit of Sh1,000,000.

Viewing is allowed during normal working hours upon prior arrangement with the auctioneers and the sale is subject to a reserve price.

In a ruling delivered in October 2022, Employment and Labour Relations judge Hellen Wasilwa termed Mr Shollei’s sacking in November 2018, unlawful because the former MD was not given notice or reasons for his sacking.

Mr Shollei was fired hardly one year after he reported to work at the brewery.

The former MD was headhunted based on his employment record.

His sacking stemmed from an email he sent to the top management and which was deemed demeaning and disrespectful.

He was also accused of poor performance after the company’s sales dropped.

The court directed Keroche to pay him six months’ salary for failure to give him notice as stated in the contract.

He should additionally get 10 months’ salary as compensation for unfair termination, which amounts to Sh25 million and gratuity of Sh5.5 million.

He is also supposed to be paid leave pay of Sh4.5 million.

Mr Shollei was given a total of Sh52.5 million minus the Sh7 million he was paid when he was fired on November 23, 2018.

For a firm that has been fighting a bid by the KRA to shut down its factory, over a tax dispute, Keroche’s latest legal woes have compounded the situation.

Keroche, owned by the Nakuru Senator Tabitha Karanja family, is also fighting a bid to stop its winding up.

A law firm that has been defending the Naivasha-based alcohol manufacturer in cases against the Kenya Revenue Authority (KRA) in May this year petitioned the High Court to wind up the troubled brewer over a debt of Sh233.7 million.

According to a gazette notice published on May 26, 2023, the law firm - Hamilton Harrison & Mathews (HHM) Advocates sought to liquidate the Naivasha -based brewer over failure to clear the legal fees.

In the tough legal battle, the law firm wants the brewer liquidated under the Insolvency Act and an official receiver appointed as the provisional liquidator.

The top corporate law firm says Keroche has been unable to settle the legal dues that arose in the firm’s long-running fight with the Kenya Revenue Authority (KRA) that is still pending in court.

The wars between Keroche and KRA last year saw the taxman shut down the brewer over a more than Sh14 billion unpaid tax.

“In the circumstances, it is just and equitable that the company be liquidated,” the law firm says in the petition.

In the case filed by HHM, the law firm says Keroche’s debt stood at Sh233.7 million as at July 2022, for four different cases and continues to attract interest.

Keroche had sought to delay the demand of the payments or quash the amount but the plea was rejected by the High Court in March 2021. The law firm says the unpaid fees stem from legal services that it rendered the company, while fighting against KRA before the tax appeals tribunal.

According to the law firm, it served the company demanding payment in March 2022, through email and registered post, but Keroche has refused to pay, leaving them with no option but to file the insolvency case.

Last year, High Court judge John Mativo dismissed Keroche’s bid to quash the legal fees arguing that it was excessive.

Keroche argued that the taxman was wrong for basing the instruction fees against an erroneous assessment of tax demand. The brewer also said the instruction fees were excessive.

Keroche previously linked its woes to a Sh14.1billion demand, but the KRA sought to paint the brewer as a tax cheat who owes the State unpaid taxes.

The tax battle has been charged with political undertones, after its co-founder, Tabitha Karanja, opted to join politics.

Ms Karanja won the race for the Nakuru Senatorial seat in the August 9, 2022, General Election.

The KRA has demanded more than Sh14.1 billion in excise duty on the firm’s fortified wines and Vienna Ice ready-to-drink vodka.

Ms Karanja was on April 13, charged afresh in the Sh14 billion tax evasion case with KRA after the State amended the charge sheet.

The Nakuru senator appeared before Milimani Senior Principal Magistrate Esther Kimilu and denied 10 counts of tax evasion.

The court gave her 45 days to resolve the matter with KRA, failure to which the matter shall proceed to full trial.

According to the charge sheet, the accused and the company on dates between February 20, 2015, and January 20, 2016, unlawfully made incorrect statements in their excise duty returns by reducing their duty by Sh1.8 billion.

She also made incorrect statements for the January to December 2017 returns, which affected payable excise duty by Sh3.6 billion.

According to the prosecution, between February 20 and July 20 the accused unlawfully omitted from their VAT returns for January to June affecting their VAT liability by Sh196 million.

Tabitha was also accused of under declaring production volumes by 820,601 litres and misapplication of excise duty rates on Vienna Ice by using Sh27.06 instead of Sh175, thereby reducing her excise duty liability by Sh1,855,403,900 payable to the commissioner as required by the Excise Duty Act.

The defence, however, indicated to court that they seek to settle the matter out of court.

Ms Karanja has in the past claimed that Keroche suffered a loss of Sh20 billion in the closures in a period of three years due to Covid-19 and KRA.

Keroche has been eyeing more than 20 percent of the market share with a production plant that has capacity of producing 30 different brands.

The company, which has the capacity to produce 30 different brands, has enjoyed steady growth since its inception 18 years ago, but it has been in the crosshairs of the taxman in recent years, fighting tax evasion accusations.

Last year, Ms Karanja announced a plan to lay off 400 workers after the row led to the closure of the factory for months.

However, they later reached an agreement with KRA and the firm was reopened.

But amid the woes, recently, it sought to expand its wings in the South Rift region, after it opened a depot in Narok town, recently.

The brewery’s Rift Valley Regional Sales Manager Mr Francis Tallam disclosed that Keroche has so far opened depots in all the counties in the region and was ready to venture into the market full-swing.

“We have been literally out of the market for the past one year, but we are now back and visible across the country,” said Mr Tallam.