CfC Bank stopped from auctioning Karuturi property
Karuturi receiver manager Ian Small. Photo/FILE
What you need to know:
The flower farm and its sister companies have petitioned the court to lift the receivership imposed by CfC after the exporter fell behind in repayment of the loan.
The High Court has stopped CfC Stanbic Bank from selling flower exporter Karuturi’s land, pending the hearing and determination of a case challenging the receivership and intended auction.
Justice Francis Gikonyo Wednesday ruled that it was in the interest of justice to preserve the property pending determination of the suit, especially as the receivers have reported that the business is recovering.
Surya Holdings and RHEA Holdings Limited — Karuturi’s sister companies — moved to court arguing that they own all assets and land on which Karuturi does its farming, which were pledged as security for CfC’s Sh383 million loan.
The assets are also used as collateral for another Sh3.4 billion loan owed to India’s ICICI Bank.
The flower farm and its sister companies have petitioned the court to lift the receivership imposed by CfC after the exporter fell behind in repayment of the loan.
“In exercising their mandate in accordance with the terms of the debentures herein and the charges thereto, the receivers and managers herein are, however, restrained from selling the charged properties herein… or the enterprise consisting in the third plaintiff company until the determination of this case,” ordered Justice Gikonyo. CfC placed Karuturi under receivership in February.
The bank disclosed in court papers that it intends to sell off Karuturi once valuation of its assets is completed.
CfC Stanbic in its defence said it had communicated with ICICI Bank on the decision to place Karuturi Limited under receivership.
Justice Gikonyo in his ruling said the document produced by Karuturi to support its allegation of shared security is not admissible in court since it is not signed and has no company seal of the firm that issued it.
The flower firm borrowed Sh222.7 million from CfC Bank in December 2012, to be repaid in 60 equal monthly installments of Sh4.5 million each.
The bank says Karuturi only honoured the first instalment of January 2013, and defaulted on the subsequent months prompting it to issue a statutory notice.
But Karuturi said the lender stopped disbursing agreed banking facilities last year making it difficult for the flower firm to pay its debts. This, it said, was meant to push it to financial difficulties so CfC could take over its assets.
The flower firm says the financial difficulties occasioned by stoppage of the loan facility led to one of the suppliers, Allpack Industries Limited, filing a winding up case that is still pending in court.
The judge, however, dismissed an allegation by Karuturi that CfC breached on terms of the loan, noting that the lender declined to advance further credit after the flower exporter defaulted its monthly repayment.
Justice Gikonyo said CfC was in order to appoint the receivers after the default.
The judge rejected the argument advanced by Karuturi that the receivers had no expertise to run the company, noting that he was satisfied with their experience and expertise.
The judge also dismissed an allegation by Karuturi that the receivers are running down the flower farm.
Karuturi, through its lawyer Ahmednassir Abdullahi, told the court it is dissatisfied with the ruling and will appeal the decision.
