A sister firm of Nyoro Construction Company has suffered a setback after the High Court dismissed its case, which sought to block KCB Bank Kenya from auctioning its property over a debt of Sh861 million.
Asphalt Concrete Ltd moved to court in March seeking to block the lender from selling its property on Mombasa Road, which houses its offices and those of Nyoro Construction Company.
The civil and road construction material production firm stated that the exposure limit on the collateral was Sh400 million and the principal debtor, Nyoro Construction Company, had paid mover Sh486 million, thus discharging the guarantor’s liability.
“That if this sale is allowed to proceed, the plaintiff (Asphalt Concrete Ltd) stands to suffer irreparable damage due to loss of its real estate investment, goodwill and irredeemable repercussions to its shareholders, employees, suppliers and other stakeholders,” the firm had stated in the application.
However, Justice Aleem Visram, who had initially issued a temporary order stopping Phillips International Auctioneers from disposing of the property, lifted the order and dismissed the case, saying it was res judicata (had been decided before).
The lender advanced several loans amounting to Sh1.5 billion to Nyoro Construction Company and used several properties, including the contested one, as security.
In the application, Asphalt Concrete Ltd stated that the government had admitted to owing Nyoro Construction Company a total of Sh1.5 billion for completed projects.
“The auction will cause the company to suffer as the properties sold house its operational offices, which it shares with Nyoro Construction Company Ltd,” Mr Dickson Wahome Njoroge, a director of the firm, said in an affidavit.
He said the firm has been in existence for over 40 years, undertaking various road projects across the country.
KCB had opposed the application, saying the court had already determined the case in previous proceedings and had the right to sell the properties.
“The plaintiff’s efforts to impede the realisation of the applicant’s security have severely prejudiced the applicant (KCB),” the lender submitted.
The construction company owned by businessman Josiah Njoroge Njuguna has lost an earlier bid to stop KCB Bank from auctioning its assets.
Mr Njuguna had stated that he had repaid a total of Sh391 million through direct transfers and deductions from a performance bond, an amount exceeding the sum originally borrowed.
Court papers showed that the construction firm defaulted on loan repayment because of delayed payments by the government.
However, Justice Peter Mulwa said the firm could not evade its financial obligations, and the lender must be allowed to realise the securities.
"It is undisputed that Nyoro Construction acknowledges its indebtedness and has defaulted in repayment. The bank, as chargee, is entitled to realise the securities, and a defaulting chargor cannot seek equitable relief to prevent a lawful sale unless the full debt is settled. Equity does not aid defaulters," said the judge.
Furthermore, the judge noted that one year ago, the court granted an injunction suspending the auction, which was scheduled for August 8, 2023, conditional upon the company paying Sh200 million within 14 days and settling auctioneer charges.
In that ruling, the court further held that in the event of default, the bank was at liberty to proceed with the sale. The company defaulted, prompting the lender to return to court seeking to vacate the injunction orders. The application was allowed, and the injunction orders were set aside, paving the way for the auction.
“Given these circumstances, entertaining the instant application would be both duplicative and oppressive to the bank,” said Justice Mulwa.
In its heyday, Nyoro Construction Company bagged big-ticket contracts during the era of the late President Mwai Kibaki and Uhuru Kenyatta.
Among key multi-billion-shilling government projects undertaken by the company during the era of President Kibaki was the construction of Processional Road, Nairobi, and the repair and rehabilitation of Nakuru town roads.
Other infrastructure projects were the Mihuti-Kayu-Wanjerere-Rwathia and Githiga-Kibutha-Kanyenyaini roads in Murang'a, the Likoni Road Missing Link and Bridge, and the Nakuru-Njoro-Mau-Summit roads.
All these have a combined value of Sh6.7 billion.
Later, during President Uhuru Kenyatta's regime, the company got various contracts such as the construction of Murang’a-Gitugi and Njumbi-Mioro road, periodic maintenance of Junction A104 Nakuru-Nyahururu road, rehabilitation of selected roads in Gikomba, and rehabilitation of Mumbuni–Kathiani roads. The above had a combined value of Sh3.7 billion.
The company also did the Solai Menengai Water and Sewerage treatment facility at Kabarak University, trenching and laying the fiber optic backbone cable along the Mombasa-Nairobi road, as well as Kisumu Airport runway and Apron improvements.
