Nyachae bank faces Sh2.3bn vandalism claim in loan row
Credit Bank Limited chairman Simeon Nyachae addresses guests during the Credit Bank Limited brand identity launch cocktail at Sankara hotel on September 07 2010. The bank faces a potential Sh2.3 billion bill after a High Court judge observed an aggrieved borrower had a strong case. Photo/FILE
What you need to know:
Commercial judge says borrower has a strong case against Credit Bank
The bank, chaired by politician Simeon Nyachae, faces a potential Sh2.3 billion bill
Credit Bank Ltd, chaired by politician Simeon Nyachae, faces a potential Sh2.3 billion bill after a High Court judge observed an aggrieved borrower had a strong case.
Commercial Division Judge Jonathan Havelock made the observation in a ruling where he rejected the bank’s application asking that Nyanza Spinning and Weaving Mills Ltd deposit security for the costs of the suit.
“All these facts lead to my conclusion; that I consider the plaintiff to have strong case against the defendants (the bank and receiver managers),” said Justice Havelock.
The textile firm moved to court last year seeking the hefty compensation claiming its factory in Nanyuki, under receivership by the bank, had been vandalised.
“The plaintiff prays for judgment against the defendants jointly and severally for Sh2, 316,914,936, interest and cost of the suit,” seeks Nyanza Spinning in the suit filed last year.
The bank is being sued alongside Vipul Shah and Kamal Shah, the two receiver managers appointed by the lender to take over the running of the factory after it allegedly defaulted repaying a loan.
Credit Bank and the receiver managers jointly filed an application seeking to compel the petitioner to provide Sh63 million as security for the cost of the suit.
Credit Bank argued the petitioner is no longer operating and its only known asset was charged in favour of the loan.
The bank claimed if it wins, it would be difficult to recover costs.
But Mr Justice Havelock declined to order Nyanza Spinning and Weaving Mills to make the deposit on the grounds the bank is holding onto an asset enough to settle the cost in such a scenario.
The judge referred to a report by a team from the bank, the managers and a security firm which visited the property at Nanyuki. It noted that the buildings are neglected and the general state was that of massive vandalism.
The dispute dates back to January 2005 when the bank appointed Mr Vipul and Kamal as receiver managers.
The company moved to court contesting the decision and in 2007 finally reached consent with the lender. It agreed to pay Sh60 million with interest to get back the property. Nyanza Spinning started scouting for a potential buyer of the property to settle the loan.
The company claims the bank initially denied it access to the property but when it finally did, it realised the magnitude of vandalism.
The High Court in 2010 lifted the consent order, requiring Nyanza Spinning to pay the bank. Credit Bank has since appealed this decision. The company returned to court seeking compensation for the damages.
