Corruption Watch has filed papers in the high court seeking the reversal of a payment of R317m to Net1 UEPS Technologies subsidiary Cash Paymaster Services (CPS) by the South African Social Security Agency (Sassa), the organisation responsible for paying social grants.

Net1 revealed in a statement to shareholders late on Thursday that Corruption Watch, which is a nonprofit organisation created to fight corruption in South Africa, has filed a notice of motion seeking the review and setting aside of Sassa’s decision a year ago to approve payment of the money to CPS.

According to Net1, Corruption Watch claims that there was no lawful basis for the Sassa decision, that it was “unreasonable and irrational” and that the decision did not comply with South African legislation.

In a statement published on its website, Corruption Watch said the reasons Sassa provided it to explain the payment to CPS were “unfathomable to say the least”.

The court application is the latest setback for Net1 and CPS, whose R10bn contract with Sassa was found to be invalid by the constitutional court in 2013. This followed an ultimately successful legal challenge by losing bidder AllPay, a subsidiary of Absa.

AllPay argued that the tender process was riddled with irregularities and that the terms of the tender were changed before the process closed to ensure CPS would win.

The massive tender was originally awarded to CPS for the administration of social grants over a five-year period. An estimated 15m South Africans draw social grants monthly. The court later ordered that a new tender be issued but that its order that the CPS contract was invalid be suspended until such time as this happened.

Net1 told shareholders on Thursday that it had received about R275m from Sassa in 2014 for the “recovery of additional implementation costs incurred during the beneficiary re-registration process in fiscal 2012 and 2013”.

This was a result of Sassa asking Net1 to register all social grant beneficiaries using biometric technologies and to issue them with Sassa-branded smart cards. As a result, Net1 performed 11m additional registrations that did not form part of its monthly service fee and claimed a cost recovery from Sassa, it said. This was supported by a “factual findings certificate” from an independent auditing firm, and Sassa agreed to pay the R275m in full, the company added.

But Corruption Watch’s David Lewis said the initial contract between Sassa and CPS “clearly provided for the registration of all beneficiaries but not for a re-registration process”.

“We were unable to find any contractual basis for the payment and no new contract had been concluded between the parties which could have justified the payment,” Lewis said.

“When Corruption Watch approached Sassa for an explanation for the payment to CPS, their response was that this was in lieu of services rendered for the re-registration of beneficiaries, citing various reasons justifying the payment and the re-registration process.

“Corruption Watch’s further engagement with Sassa, including an on-site inspection, revealed that there were serious irregularities surrounding both the payment and the re-registration process,” he said.