Indian bank loses Karuturi takeover bid in loan dispute

The High Court has stopped India’s ICICI Bank from taking over management of Naivasha-based flower farm Karuturi over a multibillion-shilling loan repayment dispute.

Justice Francis Gikonyo last week ruled that ICICI’s appointment of a receiver manager to run Karuturi was malicious, as the bank was the first to breach the loan contract.

He held that the lender’s failure to release $25 million (Sh2.5 billion) to Karuturi in full stalled the flower firm’s operations and made repayment difficult.

Karuturi is, however, still under receivership by CfC Stanbic over a separate debt that the agricultural firm owes to the Kenyan bank.

“As I have found ICICI did not disburse the entire sum as agreed, the right to appoint a receiver is put in doubt. Such course is not only against the law but will destroy the enterprise and will benefit no one,” ruled Justice Gikonyo.

“Where two or more persons are entitled to appoint a receiver over the same property, the appointment should be made as joint receivers.

Accordingly, I issue an injunction restraining Mr Satry or ICICI from in any way alienating Karuturi’s moveable and immoveable assets,” the judge added.

The Indian bank had intended to sell the flower firm’s land valued at Sh8 billion to recover its cash.

READ: Karuturi fights off Indian bank's bid to sell Sh8bn land

ICICI appointed Kolluri Kama Satry as receiver manager in June last year, four months after CfC had appointed Ian Small and Kieran Day as receivers.

Karuturi has challenged both takeovers, and has accused the two lenders of colluding to run down its operations in what it sees as a scheme aimed at selling off its property worth billions of shillings.

The judge added that ICICI did not consult CfC Stanbic before placing Karuturi under receivership as required by law in cases where two banks hold the same assets as security for separate loans. Mr Justice Gikonyo said the two banks were required to appoint a joint receiver in such situations.

Karuturi borrowed $40 million (Sh4.04 billion) from the Indian bank between 2010 and 2011, which was to be disbursed in installments of $15 million and $25 million. The firm received and repaid the first tranche of $15 million.

The judge also found that ICICI had defied an order stopping the sale or transfer of Karuturi’s property that he issued in a suit the flower firm has filed against CfC’s takeover.

Karuturi in March filed an application seeking to jail Mr Satry for destroying its managing director’s lakeside house worth $3 million (Sh303 million). The application is still pending before Justice Gikonyo.

The judge also faulted ICIC’s decision to transfer part of Karuturi’s operations to one of its own subsidiaries, Twiga Roses.

“The actions by Mr Satry on hive-down were also done in bad faith as he was aware of the court order issued on June 11, 2014 and that there were two other receiver managers on the suit property and business,” he added.

In a separate ruling, the judge has ordered CfC Stanbic to allow Karuturi’s owners access to the enterprise’s financial records for them to seek investors willing to take over the Kenyan lender’s debt.

CfC placed Karuturi under receivership for defaulting on a $4 million (Sh404 million) loan. The flower firm owners had told the judge that Mr Small and Mr Day have denied them access to financial records, which has left them in the dark over how much is still owed.