Economy

Billionaire Munga in Sh150m TransCentury shares dispute

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Equity Bank chairman Peter Munga. He is accused of refusing to pay for assets he acquired 4 years ago.Photo/FILE

Billionaire businessman Peter Munga is facing a multi-million shilling court battle over his alleged failure to pay for three million TransCentury shares he bought from a long-time associate four years ago.

Mr Munga, who is the Equity Bank chairman, is accused of taking possession of the shares then valued at Sh150 million without paying Joseph Muturi Kamau the amount as stipulated in a sale agreement.

Mr Kamau, who describes himself as a long-time friend of the Equity Bank chairman, says in court papers that proceeds of the said sale have not been credited to his account nearly four years after Mr Munga took possession of the shares without his knowledge.

Mr Kamau says he had deposited the shares in a holding account at Equity Bank as security for a Sh40 million loan he took from the bank but in 2011 struck a deal with Mr Munga to buy the shares at a price of Sh50 each.

Equity Bank, which is enjoined in the case as the first defendant, was to transfer the shares to Mr Munga upon receiving the full payment and using part of the sales proceeds (Sh150m) to settle Mr Kamau’s loan arrears then amounting to Sh33.3 million.

The remaining amount was to be credited to the account of Bethany Vineyards Limited — a company owned by Mr Kamau.

Mr Kamau says in the court papers that the bank went on to settle the debt as provided for in the agreement but secretly
transferred the shares to Mr Munga without his knowledge and without paying him for the same.

“The second defendant (Equity Nominees Limited) has never accounted for how and why he transferred my shares to the third defendant (Mr Munga) without receiving proceeds of the sale and paying it into my account with the first defendant (Equity Bank),” Mr Kamau says.

The businessman wants the court to compel Mr Munga and Equity Bank to pay him proceeds of the shares sale with interest accruing since November 2011.

Mr Munga says in his defence that Mr Kamau offered to sell him the three million TransCentury shares on a friendly basis to which he agreed in order to help him raise cash for a pressing financial need.

The billionaire businessman insists that the agreement was purely between him and Mr Kamau and did not involve Equity Bank as the petitioner has alleged.

Mr Munga says he paid Mr Kamau Sh2.4 million and an additional Sh33.5 million to Equity Nominees Limited to settle the plaintiff’s debt with the bank. There was no time limit as to when he should have paid the remaining amount, he says.

“The said cash payments were to be treated as part payment of the purchase price, with the balance payable later as and when the said balance of the money was available and without any limitation as to time and/or other conditions,” Mr Munga says.

Mr Kamau has sued Mr Munga alongside Equity Bank and Equity Nominees Limited in the case that was heard in a Nairobi court on Wednesday.

Mr Munga further argues that he never received notice of intention to sue and that the suit is in bad faith, meant to unfairly embarrass and scandalise him.

Mr Kamau, through his company Bethany Vineyards Limited, had borrowed Sh40 million from Equity in September 2010 and secured the loan using the three million TransCentury shares.

The shares were held in lien by Equity Nominees Limited on behalf of Equity Bank together with a personal guarantee and legal charge on assets provided by George Charles Mburu Kariithi — a business partner.

The bank and the businessmen in June 2011 agreed that the outstanding arrears of Sh33.3 million together with interest would be settled through the sale of the three million shares held in the escrow account.

Meanwhile, in September 2011, Equity bank wrote to Bethany Vineyards Limited notifying it that failure to pay the outstanding arrears of Sh34.2 million within seven days would result in ‘possible action to recover the outstanding amount’.

Interest

Mr Kamau and his company moved to court in November 2011 seeking to restrain Equity from auctioning the charged assets.

Mr Kamau argued in the application that having authorised the sale of three million shares worth Sh150 million to settle the debt, it was unfair for the bank to threaten to auction his property.

Equity and the businessman then agreed to record consent in court in December in 2011 to use the assets charged to settle the debt.

Mr Kamau, however, claims that the bank did not reveal how the loan was settled, and alleges that his enquiries on the status of the TransCentury shares he charged with the bank went unanswered.

“Despite numerous demands by the plaintiffs for the defendants to render the true statement of accounts and make good the plaintiffs’ claim they have neglected and/or refused to do so,” the court papers say.

Meanwhile on December 19, a day before his consent with Equity was recorded, Mr Kamau applied for default judgment in the absence of the defence, which the court granted and issued orders directing Mr Munga and the bank to settle the Sh150 million with interest, less the loan arrears.

Mr Munga and Equity Bank have opposed the directive, arguing that the decision was made despite evidence that they had attended court and even entered consent.

The duo insisted that part of the consent order was that the suit be withdrawn and sought to be allowed to defend the case.

Justice Jonathan Havelock in December 2012 set aside the judgment, noting that the court entered judgment on the mere say-so of a letter from an advocate.

Since there was evidence of consent in record, the court should have not entered the judgment, he said.

Meanwhile Equity Bank has asked the court to strike it off the suit, arguing that having recorded the consent with the petitioner and discharged the assets, there are no longer sustainable claims against it.

The bank argues that the suit emanated from the fact that there was a creditor-debtor relationship it says ended when the amount with it was settled, collapsing the case in process.

Mr Kamau opposes this application arguing that Equity is party to the transaction subject of the suit and wants them retained as defendants.