Dubai Bank has been sucked into a dispute between two property developers and another lender, UBA, over six parcels of land in Kileleshwa valued at Sh720 million.
The bank has sued Chinese real estate firm Erdemann Properties for allegedly trying to arm-twist it into releasing Sh105 million that had been deposited into a joint account with another developer, Albright Holdings—to settle a land transaction.
The money is said to have been a down payment for Sh1.4 billion that Erdemann had agreed to pay for six parcels of land from Albright, only to back out of the deal and demand its money back from the bank.
Dubai Bank now claims that Erdemann recorded a malicious complaint to the Central Bank of Kenya as part of a ploy to compel the bank to release the money.
The bank further alleges that the Chinese developer threatened to release “damaging information” to the media if it did not release the money.
“By reporting to CBK unfounded allegations, Erdemann is demonstrably bent on tarnishing the image of Dubai Bank in the eyes of CBK. The nature of Dubai Bank’s business is sensitive to any bad publicity and Erdemann is taking advantage of this phenomenon to blackmail the plaintiff,” the bank says in court filings.
Dubai Bank has, however, not revealed details of the alleged threats.
Erdemann has filed an objection to the suit, arguing that it is a ploy to delay the release of the Sh40 million due to it. It has asked the court to dismiss the case.
The Chinese developer has also filed an application seeking to compel Dubai Bank to release the balance, but the bank Wednesday told Justice Eric Ogola that being a joint account, it would only release the funds after both signatories have authorised the transfer.
“The application is a mere attempt to delay the release of the monies deposited with Dubai Bank. No particulars of defamation have been provided to warrant the orders sought,” said Zeyun Yang, Erdemann’s managing director.
The money was deposited by Erdemann as a deposit for six parcels of land measuring 7.5 acres in Kileleshwa that it had agreed to buy for Sh1.4 billion from Albright Holdings.
Erdemann, however, pulled out of the deal after UBA Bank advertised an auction of the land that had been charged as security for a defaulted loan taken by Rapid Communications—a firm associated with Albright.
UBA Bank has issued a 40-day statutory notice of sale following Rapid Communication’s failure to repay a $4 million (Sh360 million) loan. The intended auction is the subject of another suit filed by Rapid and Albright against UBA Bank.
Albright has in that suit claimed that Dubai Bank had agreed to take up the Sh360 million loan, but that the deal failed to go through on UBA’s account.
Albright’s signatory to the account —Oluoch Olunya— had initially failed to sign for the release of the funds, and Erdemann instead allegedly pursued the bank using what the lender terms as blackmail.
The bank claims that Erdemann still filed the malicious complaint to CBK despite an agreement between the two developers to release the funds in two tranches of Sh35 million and Sh70 million between January and February.
After the release of Sh65 million, Erdemann allegedly wrote a letter to CBK claiming that the bank had refused to remit the remaining Sh40 million.
Dubai Bank adds that the Chinese developer threatened to “bring its experience of the fraudulent actions of the bank to the public by way of media” if the balance was not returned to Erdemann.
Justice Ogola ordered Albright’s signatory, Mr Olunya, to appear before the court today to explain why he has not signed for the release of the funds.