A Kenyan engineering firm has accused construction company Zakhem International of using insolvency proceedings to frustrate its efforts to recover Sh2.26 billion from the multinational in the form of unpaid dues. The debt arises from the replacement of the Mombasa-Nairobi oil pipeline.
Oilfields Engineering & Supplies Limited says Zakhem is seeking to liquidate it over an alleged debt of Sh75.86 million, despite an arbitral award in favour of the Kenyan firm of $17.41 million (about Sh2.26 billion), excluding interest, taxes and arbitration fees.
In an application challenging the liquidation petition, Oilfields argues that the proceedings are malicious and intended to cripple its ability to pursue the much larger claim against Zakhem in separate but related court proceedings.
“The petition, dated 15th September 2025, is a gross attempt by the petitioner, who has been embroiled with the respondent in litigation for years, to settle a commercial score and thus cripple the latter from claiming against the petitioner in separate but related proceedings before the commercial court,” the company says.
Oilfields Engineering & Supplies Ltd further accuses Zakhem of concealing material facts about the dispute, including the arbitral award and court orders issued to preserve funds due to the construction company.
The dispute stems from a subcontract agreement dated November 17, 2015, under which Oilfields was engaged by Zakhem to undertake civil works during the replacement of the 450-kilometre Mombasa-Nairobi oil pipeline. Zakhem had been contracted by Kenya Pipeline Company (KPC) to execute the project.
The parties fell out and the dispute over payments was referred to arbitration culminating in a final award published on June 30, 2021, in favour of Oilfields.
The award directed Zakhem to pay Oilfields $17,410,391.47. Oilfields subsequently moved to the High Court seeking adoption of the award, while Zakhem filed an application seeking to have it set aside.
It also points to a ruling delivered by the High Court on August 31, 2023, restraining KPC from releasing $31.3 million held in favour of Zakhem under the pipeline contract pending determination of the applications concerning the arbitral award.
According to Oilfields, the preservation orders were intended to secure funds against which it could pursue its claim.
John Huba Waka, a director of Oilfields, says the company is solvent and that its assets, including its entitlement under the arbitral award, exceed its liabilities.
He argues that Zakhem has not demonstrated that Oilfields is unable to pay its debts as required under Section 384 of the Insolvency Act, 2015.
The company further says it was never served with the statutory demand, liquidation petition or hearing notice, either at its registered office or through its lawyers.
It disputes Zakhem’s claim that a statutory demand was delivered to its registered postal address on June 11, 2025, arguing that the alleged service did not comply with the law.
Oilfields says it only learnt of the liquidation proceedings after obtaining pleadings filed by Zakhem through the court portal.
It warns that a liquidation order would irreversibly prejudice its interests and undermine its ability to recover the arbitral award.
Zakhem, however, maintains that Oilfields owes it Sh75,866,678.67 arising from a certificate of costs issued following taxation proceedings.
The construction company says the costs were awarded by the High Court in an order issued on February 8, 2023, and subsequently taxed at Sh75.86 million, as confirmed by a certificate dated April 29, 2025.
Zakhem says it demanded payment on June 21, 2025, but Oilfields failed to settle the amount.
It further claims that it served the engineering firm with a statutory demand dated June 4, 2025, requiring payment of the outstanding amount.
According to Zakhem, more than 21 days elapsed without payment, making the company eligible for liquidation under the Insolvency Act.
The company has asked the court to liquidate Oilfields, appoint an authorised insolvency practitioner as provisional liquidator, and direct that the firm’s net assets be used to settle the debt.
Ibrahim Zakhem, a director of the construction company, says the two firms have been involved in litigation for more than five years arising from the subcontract agreement.
He acknowledges the arbitral award but says the dispute over its adoption and setting aside remains before the court.
Oilfields, in its application, wants the liquidation proceedings stayed pending the hearing and determination of its challenge. It also wants the petition dismissed on grounds that it has a genuine and substantial cross-claim against Zakhem that exceeds the alleged debt.
Alternatively, it wants Zakhem, a company incorporated in Cyprus, ordered to deposit $31.3 million as security for costs within 14 days, arguing that the amount is covered by the preservation orders issued in the related proceedings.
