Varomatech Limited v Kenya Electricity Generating Company Limited & 1 other

were proposed. That it then submitted amended designs and drawings. That, however, the 1st respondent did not approve them. 6. The applicant thereafter sent an alternative proposal for material and methodology on its own volition which did not elicit any response from the 1st respondent. 7. The applicant sent a letter dated 21st August 2023 seeking extension of the completion date and a reminder dated 21st September 2023 which were both not responded to. 8. The 1st respondent issued the applicant with a termination notice dated 25th September 2023 and demanded encashment of the performance security within 4 days. 9. The applicant requested for extension of the completion date through a letter dated 26th September 2023 and rescission of the decision to encash the performance security. 10. The applicant issued the 1st respondent with a letter dated 27th September 2023. Response 11. The 1st respondent contended that the applicant’s designs did not meet standard engineering thresholds and posed significant safety risks to human life and the environment. It claimed that the applicant misrepresented its technical capabilities during the tender process and failed to correct the errors. 12. The 1st respondent contended that: 1. The performance guarantee issued by the 2nd respondent was issued in mandatory and irrevocable terms. 2. Where a bank has given a performance guarantee it is required to honour the guarantee according to its terms regardless of the underlying contractual dispute. 3. The court lacks jurisdiction to interfere with an irrevocable bank guarantee. 4. It has the capacity to compensate the applicant in the event that it is found in breach of the contract. Analysis and Determination 13. The issue is whether the applicant has met the threshold for the interim measures of protection sought. 14. Section 7 of the Arbitration Act provides that: “ 7(1) It is not incompatible with an arbitration agreement for a party, to request from the High Court, before or during arbitral proceedings, an interim measure of protection for the high court to grant that measure. (2) 15. Where a party applies to the High Court for an injunction or other interim order and the arbitral tribunal has already ruled on any matter relevant to this application, the High Court shall treat the ruling or any finding of fact made in the course of the ruling as conclusive for the purposes of the application.” The principles for consideration in such an application include whether the subject matter of the arbitration is under threat; the appropriate measure of protection in the special circumstances and the appropriate period for the interim measures of protection to avoid encroaching on the tribunal’s https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19256/eng@2025-12-18 2

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decision-making power as intended by the parties. Safaricom Limited v Ocean View Beach Hotel Limited, Salim Sultan Moloo & Alsai (K) Limited (Civil Application 327 of 2009) [2010] KECA 346 (KLR) 16. The nature of interim measure of protection sought by the applicant is an order of temporary injunction restraining the respondents or their agents from encashing the performance guarantee no. SMEP/PG/PM/WGS/0653-22 dated 25/8/2022 for USD 24,713.34. 17. The 1st respondent’s main contention is that the 2nd respondent is required by law to honour the performance guarantee that was issued in mandatory and irrevocable terms. 18. In R.D. Harbottle (Mercantile) Ltd & Another v. National Westminster Bank Ltd & Others [1977] 2 ALL E.R. 862 cited by the Court of Appeal in Scope Telematics International Sales Limited v Stoic Company Limited & another [2017] KECA 545 (KLR), it was observed that: “ It is only in exceptional cases that the courts will interfere with the machinery of irrevocable obligations assumed by banks. They are the life-blood of international commerce. Such obligations are regarded as collateral to the underlying rights and obligations between the merchants at either end of the banking chain. Except possibly in clear cases of fraud of which the banks have notice, the courts will leave the merchants to settle their disputes under the contracts by litigation or arbitration as available to them or stipulated in the contracts. The courts are not concerned with their difficulties to enforce such claims; these are risks which the merchants take. In this case, the plaintiffs took the risk of the unconditional wording of the guarantees. The machinery and commitments of banks are on a different level. They must be allowed to be honoured, free from interference by the courts. Otherwise, trust in international commerce could be irreparably damaged.” 19. See also Sinohydro Corporation Limited v GC Retail Limited & another [2016] KEHC 5169 (KLR) where the court declined to grant interim measures of protection because the applicant has not demonstrated exceptional circumstances, that is fraud. Conclusion 20. From the above, the import is that the court cannot interfere with an irrevocable obligation assumed by a bank except in exceptional circumstances like where fraud is established. 21. The court finds that the applicant has not established the exceptional circumstances required. 22. In the upshot, the application dated 27th September 2023 is dismissed. Nevertheless, in the circumstances of this case, each party shall bear own costs. DATED, SIGNED AND DELIVERED AT NAIROBI THROUGH MICROSOFT TEAMS ONLINE APPLICATION THIS 18TH DAY OF DECEMBER, 2025 ---------------F. GIKONYO M JUDGE In the presence of: Ms. Wanja for 1st Respondent Chege for 2nd Respondent https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19256/eng@2025-12-18 3

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Muhoro for Applicant CA Kinyua https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19256/eng@2025-12-18 4

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