Dubai Based Company Sues Cipla over Shs2b Debt in ARVs Deal

A Dubai-based brokerage company has dragged drug manufacturer Cipla Quality Chemical Industries Ltd to court over non-payment of brokerage fees worth $620,000 (about Shs 2.2b) over a deal involving the supply of Anti-Retroviral Drugs (ARVs) to the Government of Zambia.

The case before Justice Asiimwe Kahigi in the Commercial Court arose out of a Contract signed between Cipla Quality Chemical Industries Ltd and Car Commercial Brokers, a Dubai-based brokerage firm, on 17th November 2017.

In documents submitted before court, it is indicated that CarCommercial Brokers was entitled to 5% payment that accrued to Cipla Quality Chemicals Ltd from all payments arising out of supply of ARVs to the Government of Zambia as part of its brokerage fees.

Clause 2 of the Contract filed before Court indicates that: “The Principal [Cipla Quality Chemical Industries Ltd] shall pay to the Agent [Car Commercial Brokers] a commission of 5%on total sales value of all  business realized from the territory[ Zambia] as a result of the Agent’s efforts”.

In fulfillment of its contractual obligations, Car Commercial argues that it connected Cipla Quality Chemicals Ltd to sign contracts with the Government of Zambia to supply ARVs worth $ 19m but payments to the brokerage company fall short by $620,000 (about Shs 2.2b).

Car Commercial Brokers now contends that Cipla Quality Chemicals Ltd breached the agreement when it supplied drugs worth $19m to the Government of Zambia between 2017 and 2019 but failed to honour the contract by paying its brokerage fees.

Car Commercial Brokers is represented by Mr Agaba Simon from M/S Mark Mwesigye & Co Advocates while Cipla is defended by by lawyer Esau Isingoma from K&K Advocates.

Car Commercial Brokers wants Court to order Cipla Quality Chemicals Ltd to pay the $620,000 (about Shs 2.2b) in brokerage fees and additional monies in damages.

In its defence filed, Cipla Quality Chemicals Ltd contends that Car Commercial Brokers did not fulfil its obligations of sourcing markets from the Government of Zambia, failed to secure the approval of the establishment of a pharmaceuticalplant in Zambia and failed to help the drugs manufacturer to increase its market share in Zambia.

Quality Chemicals Ltd submitted in its defence that: “The Plaintiff [ Car Commercial Brokers] realized payment of only $ 6.3m despite the Defendant [Quality Chemicals] having made supplies of over $ 19m. The Defendant paid 5% of the $6.3m.”

This Court case will further send alarm and discomfort to shareholders of Quality Chemicals who have been anxiously waiting for a buyout of the struggling firm by Africa Capital Works. 

The buyout that is estimated to be between $25m and $ 30m was expected to have been concluded by the end of May 31 but collapsed, with a notice filed by Africa  Capital Works through Capital Markets Authority (CMA) warning “shareholders and the public to exercise caution when dealing with shares of the company[ Cipla Quality Chemicals Ltd].”