The Central Medical Stores Trust (CMST) has moved to recover $4.3 million (about K7.5 billion) from SADM Pharmaceuticals Limited, a company owned by David Bisnowaty, Malawi’s Chargé d’Affaires at the Embassy in Tel Aviv, Israel.
The recovery process follows a protracted legal battle that began in 2019, after SADM sued CMST for delayed payment of $340,000 (around K595 million) for medical supplies. Although the case initially went in SADM’s favour, the Malawi Supreme Court of Appeal later overturned the ruling and ordered the company to refund CMST the $4.3 million, which had been paid out as interest on the delayed settlement.
Confirming the latest development, CMST’s lawyer, Pempho Likongwe, said the trust has obtained a court order to seize and sell SADM’s assets in order to recover the money. So far, only MK180,934.74 has been recovered from SADM’s bank account through a third-party debt order.
“When SADM failed to pay the money ordered by the Supreme Court of Appeal, we followed court processes to sell SADM’s real property. The specific court order we have is for the sale of Title Number Alimaunde 29/188 in Lilongwe, which houses SADM’s factory. The Sheriff also has a Seizure and Sale Order (Warrant of Execution) to seize SADM’s assets and sell them to recover the sum of US$4.3 million,” Likongwe explained.
The case traces back to 2018/2019 when CMST, facing cash flow challenges, delayed payments to a number of suppliers, including SADM Pharmaceuticals. In 2019, SADM took CMST to court, claiming compound interest on the $340,000 owed. By June 2020, Justice Ken Manda of the High Court’s Commercial Division delivered a summary judgment in SADM’s favour, ordering CMST to pay $4.3 million as compound interest.
CMST, unhappy with the ruling, applied for a stay of execution, which was denied. The trust was then forced to pay SADM the equivalent of $4.3 million in Malawi Kwacha. But in May 2023, a nine-member panel of the Malawi Supreme Court of Appeal overturned Justice Manda’s judgment, stating that the penalty awarded was not justified. The Court set aside the ruling and ordered SADM to refund the $4.3 million to CMST within 14 days.
In addition, the Supreme Court remitted the case back to the High Court Commercial Division to be handled by another judge, allowing SADM to pursue legitimate claims for late settlement of its payment, but excluding the penalty that had already been quashed.
Despite the Supreme Court ruling, SADM failed to return the money within the stipulated timeframe. CMST has since taken enforcement measures, including targeting the company’s property and factory in Lilongwe. The Sheriff of Malawi has been authorised to seize and sell SADM’s factory and other assets to recover the full amount.
Legal experts say the case is one of the most high-profile disputes between the government’s medical procurement body and a private supplier in recent years. It highlights both the financial struggles faced by CMST and the risks suppliers face when dealing with government institutions plagued by liquidity problems.
For CMST, the recovery of the $4.3 million is seen as a crucial step in safeguarding public funds and restoring confidence in its procurement systems. For SADM, however, the ruling poses serious challenges, with the company facing the possible loss of its assets and reputation.
As the process unfolds, industry observers are watching closely to see whether the sale of SADM’s assets will cover the debt in full or if further legal complications will arise.
