Court throws out IPTL suit against government over Tegeta escrow saga

In the original case (Civil Case No. 90 of 2018), the government had demanded IPTL refund more than $198.879 million (approximately Sh536.5 billion) it had received from the Tegeta Escrow Account, jointly held by the Bank of Tanzania, Tanesco, and IPTL.

To settle the dispute, both parties signed a settlement agreement on March 1, 2021, officially concluding the case by March 19, 2021.

However, three years later, IPTL filed a new lawsuit (Civil Case No. 14259 of 2024), arguing the agreement was invalid. The company claimed its chairman and CEO, Harbinder Singh Sethi, was coerced into signing the deal while in remand at Ukonga Prison. IPTL also sought Sh100 billion in compensation for alleged damages.

In a ruling delivered on May 16, 2025, Justice Awamu Mbagwa dismissed the case, describing the claims as unsubstantiated and the agreement as lawfully binding.

“Based on the above, the plaintiff has failed to prove its claims on the balance of probabilities. I hereby dismiss this suit for lack of legal standing. The defendants are entitled to recover legal costs,” said Justice Mbagwa.

Background to the case

The dispute stems from funds held in the Tegeta Escrow Account, created to resolve payment disagreements between Tanesco and IPTL over electricity tariffs. The funds were to remain in escrow pending resolution of the matter through international arbitration at the International Centre for Settlement of Investment Disputes (ICSID).

In 2013, the High Court of Tanzania approved a change in IPTL ownership, transferring control to Sethi through his company, Pan Africa Power Solutions (T) Ltd (PAP). Sethi claimed that PAP had acquired shares from VIP Engineering (30 percent) and Mechmar Corporation (Malaysia) (70 percent).

Following this, IPTL signed a Funds Delivery Agreement with the government in October 2013, instructing the Bank of Tanzania to release all escrowed funds to the company. To safeguard itself, the government also signed an Indemnity Deed with IPTL, in which IPTL accepted full liability for any future claims related to the funds' transfer.

But complications arose when Standard Chartered Bank Hong Kong (SCB-HK)—a creditor to IPTL—successfully sued the Tanzanian government at ICSID, winning an award of $198.88 million. The government then turned to IPTL for reimbursement under the indemnity agreement.

The 2021 settlement and 2024 lawsuit

While the government's case for reimbursement was ongoing, both parties entered into negotiations, leading to the March 2021 settlement. Despite being in custody at the time for a related economic sabotage case, Sethi authorized Manjit Singh Sethi to represent him, with legal representation from advocates Omar and Alex Balomi.

Later, however, IPTL claimed the agreement was signed under duress. Sethi testified that on March 1, 2021, he was called from his remand cell to a private room where he met then-Attorney General Prof. Adelardus Kilangi, then-DPP Biswalo Mganga, and two armed men. He alleged he was pressured to sign the settlement.

“The claim that he was coerced into signing the settlement on March 1, 2021, is fabricated and baseless,” said Justice Mbagwa, adding that available evidence suggested Sethi was ready to settle the matter even before the signing date.

The judge also questioned IPTL’s decision not to call its own legal representatives as witnesses.

 “In my view, excluding these three individuals was a tactic to avoid evidence that would refute the plaintiff’s claims,” he stated.

Justice Mbagwa concluded by upholding the validity of the 2021 settlement, stating:

 “Based on the above, I conclude that the settlement agreement is valid, voluntarily signed by both parties, and legally binding under Section 10 of the Contract Act.”

The ruling closes another chapter in the protracted and controversial Tegeta Escrow saga, which has drawn public scrutiny and implicated several top officials and private sector players over the years.