Court allows NBK to sell city building over Sh655m debt

The court has allowed National Bank of Kenya to auction a prestigious five-storey building at the heart of Westlands in Nairobi to recover a debt of Sh655 million.

Commercial Court judge Justice George Kimondo gave the bank a blank cheque to advertise for sale by private treaty or public auction Shimmers Plaza and recoup its outlay.

“I hold the view that when a company mortgages its property, it acknowledges it can be sold,” ruled the judge and dismissed an assertion by Shimmers directors that the building was unique and an important investment to the company.

The dispute between Shimmers and NBK relates to a loan of Sh200 million advanced to the company on December 30, 1996 and secured by the principal borrower Trade Wings Ltd, a firm associated with the directors of Shimmers.

The bank released a loan of Sh150 million, Sh30 million overdraft and local bills discounting facility of Sh20 m

llion over the property. The bank said the debt had grown to Sh655 million owing to interest on loan, overdraft and discounting bills.
The bank submitted that the parties agreed in a letter of offer tabled in court that interest on the loan would be pegged at 28 per cent per annum on monthly basis and calculated on daily basis while overdraft and discount bills would attract 30 per cent interest.

“I am thus satisfied that in the circumstances, default has occurred and the bank is entitled to call up Shimmers guarantee and the charge debt,” said Mr Justice Kimondo.

Businessman Raj Harish Devani moved to court after NBK issued a statutory notice to sell the property and was granted an injunction restraining the bank from advertising the sale of the building until the case had been determined.

But in his ruling, the judge said Shimmers cannot continue enjoying injunctive orders for 11 years arguing that it would be unfair and unjust to the bank to further grant the company another injunction.

Although he admitted owing the bank, Mr Devani told the court that according to the loan agreement, the amount advanced would not exceed Sh200 million inclusive of mortgage and interest.

Shimmers claimed the sum demanded by the bank was excessive and erroneous and challenged the statutory power of sale exercised by NBK is illegal.

He accused the bank of breaching that agreement saying the institution, without any legal notice, unilaterally opened and operated a foreign currency account belonging to the principal borrower, which changed the character of the original facilities.

Shimmers further faulted the bank for failing to obtain personal guarantees of Trade Wings as stipulated in the original letter of offer. Mr Devani argued that the bank allowed the principal debtor, Trade Wings, to exceed an overdraft limit of Sh30 million and dismissed the Sh655 million demanded by the bank as erroneous.