High Court allows CfC Stanbic take-over of Karuturi

The High Court has lifted orders stopping receiver managers appointed by CfC Stanbic from taking over debt-laden Karuturi Limited.

Justice Francis Gikonyo Thursday reversed his Tuesday directive that stopped receivers Kieran Day and Ian Small of the Business Advisory Group from taking over the Naivasha-based flower firm.

The judge in his ruling observed that Karuturi failed to disclose its agreement with the lender that allows the bank to appoint receivers in the event the flower firm defaults on loans.

The flower firm, which is associated with India’s conglomerate Karuturi Global, owed CfC Stanbic Sh383 million.

“The upshot of this is that the orders made on February 11 are set aside and the state that obtained before the issuance of the order remains,” ruled Justice Gikonyo.

On Wednesday, CfC moved to the High Court seeking to lift the order stopping receivership claiming that Karuturi’s directors had fled the country and were not remitting cash to Kenya from flower sales made abroad, putting the settlement of a Sh383 million loan in jeopardy.

READ: CfC accuses Karuturi directors of fleeing the country over debt

CfC Stanbic claimed that the Karuturi management breached an agreement that bars the flower firm from opening bank accounts with other lenders.

Karuturi argued that they opened separate accounts because CfC Stanbic was consuming a huge chunk of cash deposited on its account, leaving it with little to meet its obligations like staff and suppliers’ payments.

Karuturi Limited had promised to settle Sh82.5 million by end December and sought an extension of 15 days to sell part of its land in Naivasha.
The bank rejected the request.

The Bank said Karuturi directors have a history of alleged tax fraud and the court was told that the Indian conglomerate hired junior local managers to steer the flower firm.

The Kenya Revenue Authority (KRA) is demanding Sh962 million from Karuturi for tax evasion.

The tax man says the flower firm has been inflating the cost of patented seeds it buys from its subsidiaries and under-declaring the value of the merchandise shipped to its warehouse in Dubai.

Karuturi Global acquired Kenya-based Sher Agencies from Dutch horticulturists Gerrit & Peter Barnhoorn and renamed it Sher Karuturi in September 2007.

Karuturi Limited claimed the takeover of its business and planned sale by the receivers is in breach of an earlier court order barring the auction of the firm’s assets.

The order was issued in October following a winding up petition against the flower firm by a firm it owed called All Pack Industries Limited.