Malawi Supreme Court Orders SADM Pharmaceuticals to Repay $4.3 Million Penalty to CMST

The Malawi Supreme Court of Appeal has issued a ruling directing SADM Pharmaceuticals to reimburse Central Medical Stores Trust (CMST) with a penalty of $4.3 million (approximately K4.5 billion). This decision comes as a result of the late settlement of a $340,000 (about K340 million) debt by SADM Pharmaceuticals. The judgment, delivered in Lilongwe, also mandates SADM to fulfill the payment within 14 days from the date of the ruling, in addition to covering the costs of the proceedings.

The Supreme Court panel, consisting of nine judges, not only ordered the repayment but also overturned the summary judgment issued by High Court Commercial Division Judge Ken Manda in June 2020. The earlier ruling had required CMST to pay the penalty, but the Supreme Court’s decision now allows SADM Pharmaceuticals to file claims for the late settlement of payment before a different judge in the same court.

In response to the judgment, Pempho Likongwe, the lawyer representing CMST, expressed relief, stating that the ruling provides respite for CMST, which was burdened with unreasonable interest charges on top of the original debt.

Relief for CMST and Clarification of Calculation

Likongwe expressed dissatisfaction with the High Court’s decision, which imposed a $4.3 million interest charge on a $340,000 debt that had been settled. He explained that the Supreme Court’s ruling brings relief to CMST, highlighting that the interests were incorrectly calculated.

The lawyer argued that it was illogical to apply Malawian interest rates to the dollar amount, as the interest rates are specifically applicable to the Malawian kwacha. Likongwe’s submission to the Supreme Court emphasized the need for intelligible calculations that consider the appropriate currency and applicable interest rates.

Moreover, Likongwe contended that the interest charges had incorporated other delayed payments beyond the matters contested in court. He maintained that the interest should have been limited to the debt amount based on the invoices.

Background and Legal Proceedings

During the 2018/19 financial year, SADM Pharmaceuticals, like several other local suppliers, experienced difficulties due to CMST’s poor cash flow, resulting in delayed payments. In 2019, SADM took legal action against CMST for the outstanding payment of $340,000 after supplying medicines.

Following the initial High Court judgment, CMST fulfilled both the debt and the interest charges. However, CMST appealed the judgment, which has now been set aside by the Supreme Court’s recent ruling. Attempts to reach SADM Pharmaceuticals for comment on the court’s decision have been unsuccessful thus far.