A judge has backed a bid by ABC Bank to recover a Sh36 million loan from the directors of a liquefied petroleum gas dealer, City Gas Limited, which defaulted on servicing the debt.
This is after the proceeds from an auctioned land, which had been offered as the loan security, failed to offset the debt entirely.
Justice Rhoda Rutto allowed the bank to get the repayment of the amount from the company’s directors - Mohamed Adan Bare, Hamdi Abdi Nur, and Abdikadir Abdi Sheikh.
The bank is going for them since they signed the loan documents as guarantors.
The company had borrowed Sh30 million in 2012 and offered Mr Bare’s land title as security for the loan. Mr Bare, together with Mr Nur and Mr Sheikh, who were the company’s directors, also executed personal guarantees for the payment of the facility.
However, the loan fell into arrears, prompting the lender to sell the land by private treaty for Sh16.5 million in 2016. The sale was with the consent and at the request of Mr Bare, the court noted.
Justice Rutto, while ruling on the bank’s application for judgment against the company and its directors, said the deed of guarantee executed by the three directors was valid and enforceable.
“Based on the pleadings, evidence, and submissions, the court finds that the Deeds of Guarantee executed by the three defendants constitute valid and enforceable continuing security for the outstanding liabilities of City Gas Limited,” said Justice Rutto.
She found that the guarantee was a continuing security and that the guarantors remained liable for the principal debtor’s obligations from time to time until full settlement of the debt or proper termination of the guarantees.
Although the directors challenged the validity of the guarantees, the court said that they merely denied their enforceability without affirmatively pleading specific grounds of invalidity or raising any substantive defence.
“They failed to plead specific grounds of invalidity or present substantive evidence beyond the issue of late stamping and whether they were of a continuing nature upon restructure of the initial loan. This court finds that the guarantees were duly executed and produced in evidence and are valid and enforceable,” said the judge.
The court also noted that in their defence, the defendants did not identify and demonstrate specific errors or omissions in the bank statements. papers.
