Bank withdraws bankruptcy suit against Kambi after Sh305m loan deal
Former Labour secretary Kazungu Kambi. Mr Kambi and his business associates have agreed to pay the Sh305 million owed by their company, Riva Oils, on condition that the Development Bank withdraws bankruptcy proceedings against them. PHOTO | FILE
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Kazungu Kambi, Ezekiel Kitsao and David Tuitoek have agreed to pay the amount they borrowed for their company, Riva Oils, on condition that the Development Bank withdraws bankruptcy proceedings against them.
The parties have been negotiating out of court since last year in a bid to settle the dispute amicably.
Development Bank of Kenya has dropped a bankruptcy suit filed against former Labour secretary Kazungu Kambi after the politician and his business associates agreed to settle a Sh305 million loan they defaulted in 2013.
Mr Kambi, Ezekiel Kitsao and David Tuitoek have agreed to pay the amount they borrowed for their company, Riva Oils, in two installments within six months on condition that the Development Bank withdraws bankruptcy proceedings against them.
The lender filed the bankruptcy proceedings against Mr Kambi and his business associates last year after the High Court gave it the greenlight to pursue the Riva Oils directors individually for the loan default.
The parties have been negotiating out of court since last year in a bid to settle the dispute amicably.
“Riva Oils, Samuel Kazungu Kambi, David Tuitoek and Ezekiel Kitsao do pay Development Bank of Kenya the sum of Sh305 million in the following installments; Sh30 million on or before execution of this consent, Sh275 million to be paid in full within six months of execution and filing of this consent,” the out-of-court deal reads.
Riva Oils borrowed Sh250 million in 2007. The sum had accrued to Sh304 million in 2010, which the bank is demanding with interest of 17 per cent yearly, pushing the debt to Sh390 million.
The lender in April 2013 obtained a judgment from the High Court after Mr Kambi and his associates failed to defend a suit filed against Riva Oils and its directors.
But Mr Kambi last year insisted that the lender made no effort to notify him of the judgment since 2013, and only showed up two years later seeking to attach his property.
The deal with Development Bank comes two months after the Ethics and Anti-Corruption Commission dropped an inquiry against Mr Kambi for his alleged involvement in corruption that saw President Uhuru Kenyatta suspend him from the Cabinet last March.
The lender last year wanted the Sh305 million paid at an annual interest of 17 per cent, which would have pushed its claim to over Sh400 million inclusive of legal costs incurred.
The three Riva Oils directors had signed on as guarantors for the loan, leaving them personally liable for any default by their firm. Their company borrowed the funds to support its businesses in Kenya, Uganda and Tanzania.
The out-of-court settlement will see each of the parties in the suit bear their own legal costs for the duration of the dispute.
As part of the deal, Development Bank will be allowed to attach assets owned by the Riva Oils directors in the event that they default on the agreed payment timelines.
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