Indo Africa Finance has sued ABC Bank seeking to recover more than Sh7.8 million earned in interest, alleging that the lender was unable to service its obligations. PHOTO | FILE
What you need to know:
Indo alleges that ABC failed to honour a Sh150 million bank guarantee it had signed with it to finance the Youth Enterprise Development Fund Board (YEDF) projects in 2012.
Indo says that it had agreed with YEDF that it would be granted a loan of Sh750 million to finance youth projects across the country based on the strength of the Sh150 million bank guarantee with ABC.
The court heard that ABC cancelled the bank guarantee and communicated to YEDF, thereby occasioning Indo to lose the Sh750 million loan portfolio it had arranged with the youth fund board.
A financial institution has sued ABC Bank seeking to recover more than Sh7.8 million earned in interest, alleging that the lender was unable to service its obligations.
Indo Africa Finance Limited has filed the case against African Banking Corporation Limited (ABC) claiming that it has failed to release the amount despite several demands.
Indo alleges that ABC failed to honour a Sh150 million bank guarantee it had signed with it to finance the Youth Enterprise Development Fund Board (YEDF) projects in 2012.
Indo says that it had agreed with YEDF that it would be granted a loan of Sh750 million to finance youth projects across the country based on the strength of the Sh150 million bank guarantee with ABC.
“ABC did not honour its part of the agreement to avail (sic) Sh150 million despite Indo depositing with it Sh50 million as part of the deal,” lawyer Titus Koceyo told Justice Francis Gikonyo who certified the case urgent.
Justice Gikonyo directed Mr Koceyo to serve Indo with the suit papers for hearing Friday.
Mr Koceyo told Justice Gikonyo that the Sh7.8 million is the interest earned from the Sh50 million deposited by Indo with ABC.
The court heard that ABC cancelled the bank guarantee and communicated to YEDF, thereby occasioning Indo to lose the Sh750 million loan portfolio it had arranged with the youth fund board.
Mr Koceyo said ABC caused Indo to lose a business chance due to its actions.
Mr Koceyo said ABC received instructions from Indo to transfer the Sh7.8 million to an account at the Cooperative Bank, but it has not honoured the demand.
Serious liquidity
“Indo is apprehensive that ABC may be going undergoing serious liquidity problems, giving rise to its inability to honour customers’ instructions which state of affairs is perilous,” Mr Koceyo told Justice Gikonyo, adding Indo may lose its funds held by ABC.
“Should the defendant bank (ABC) collapse it may render the present case nugatory,” said Mr Koceyo.
He urged the judge to direct the case be heard expeditiously.
The judge heard that Indo’s credit balance as at August 17, 2015 was Sh57,895,069.55. The same day Indo asked ABC to transfer Sh7,895,069.55 to an account at Co-operative Bank.
Four days later it had not credited the Co-op Bank account and when Indo asked about the delay ABC said “your request was under review and will revert back once a decision has been made.”
Indo is asking the court to compel ABC to release the Sh7.8 million and also to render accounts on interest.
Indo has also tried in vain to close the account with ABC and transfer all the obligations to Co-operative Bank.
Co-op Bank has agreed to honour all the arrangements ABC Bank had entered with Indo.
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