ABC Bank in legal fight with developer over Kitisuru plot

ABC Bank is embroiled in a legal battle with a property developer over sale of a 2.5-acre plot in the upmarket Kitisuru suburb, with one of the lender’s directors accused of foul play.

Tulips Holdings wants the High Court to compel ABC to compensate it to the tune of Sh335 million, comprising value of the land and opportunity cost in terms of rental yields it would have earned from putting up residential units on it.

In the event that the bank is unable to honour the demand, Tulips wants the High Court to nullify the sale of the land to David Muthami Muthee, a transaction that was concluded in 1999.

The firm said in court papers that it discovered in 2007 that ABC had sold land without issuing it with a notice of intention to dispose of the property.

Tulips also accused the bank’s non-executive director Ashraf Savani –who once served as the property developer’s managing director— of facilitating the sale in a bid to frustrate its business interests.

Mr Savani co-founded Tulips alongside Nasir Ahmed Khan, Tulip’s current managing director.

Mr Savani, however, resigned in August 1995 following an internal dispute at the real estate firm.

Mr Khan holds that his firm bought the piece of land in a bid to put up 10 town houses for rent in August 1995, and he contributed Sh2 million while Mr Savani facilitated the remaining Sh12 million through ABC.

While Mr Khan says the Sh12 million was capital from Mr Savani, the latter insists that it was a loan extended to the real estate firm and that the bank was forced to sell the land to recover its money.

“It was my understanding that the above sum was advanced to Tulips on the agreement that it was the capital contribution of Mr Savani as a shareholder of the plaintiff (Tulips) and would be factored in final analysis once the project was complete,” Mr Khan said.

He argued that any liability should be shouldered by Mr Savani who secured the funds to meet his obligation as a shareholder in the joint venture.

The ABC director has in response told Tulips to prove the claim that the money was not a loan, and has accused the developer of raising the same issues as those in a 1997 suit, in which Mr Savani insists ABC won a Sh15 million claim.

He has also denied frustrating Tulips’ operations by placing a caveat on the land in 1995, which stopped the planned development. Mr Savani has challenged the real estate firm to submit evidence on the allegations.