Malawi Supreme Court of Appeal has ordered SADM Pharmaceuticals to pay back a $4.3 million (about K4.5 billion) penalty to Central Medical Stores Trust (CMST) for late settlement of a $340 000 (about K340 million) debt.

In its judgement delivered in Lilongwe yesterday, the nine-judge Supreme Court panel further ordered SADM Pharmaceuticals to honour the judgement within 14 days from yesterday as well as pay costs of the proceedings.

The court has also set aside the summary judgement High Court Commercial Division Judge Ken Manda delivered in June 2020, which ordered CMST to pay the penalty, but allowed SADM to go back to the same court, under a different judge, to file for claims for late settlement of payment.

In an interview yesterday after the judgement, lawyer representing CMST Pempho Likongwe said the judgement is a relief to CMST which was forced to pay unreasonable interests on top of the debt.

Said the lawyer: “We were not satisfied with the decision of the High Court (commercial decision) which ordered us to pay $4.3 million in interest over a $340 000 debt which was settled. So, this judgement is a relief to CMST.”

Among the arguments before the Supreme Court, Likongwe argued that the interests were erroneously calculated.

He further argued that it was not making sense to have the interests determined in kwacha when the bill was in dollars.

“The Malawian interest rates are applicable to Malawian kwacha only. They cannot be used to calculate the dollar sum. Neither can interest rate for US dollar be used to calculate the Malawian kwacha sum. Such an exercise is unintelligible” reads Likongwe’s submission to the Supreme Court.

The lawyer further argued that interest had taken on board other delayed payments outside what was contested in court, saying the interest ought to have been limited to the debt amount based on invoices.

In the 2018/19 financial year, SADM was among many local suppliers owed by CMST due to poor cash flow.

SADM took CMST to court in 2019 for delayed payment of $340 000 after supplying medicines. 

Based on an earlier High Court judgement, CMST paid both the debt and interest, but appealed against the judgement which was set aside yesterday by the Supreme Court.

We have not been able to hear the reaction of SADM on the direction of the court as their lawyer did not pick up our calls. 

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