Bank of Baroda ordered to pay firm Sh155m over land sale

The Bank of Baroda has been ordered to pay a company more than Sh155 million for selling its one-acre piece of land at an undervalued price to recover a loan default.

Justice Luka Kimaru has found that the bank was negligent when it sold the Industrial Area piece of land owned by Komassai Plantations Limited for Sh37.5 million in October 2006, when it was valued at Sh62 million.

The judge ruled that the bank failed to do its due diligence in establishing the true market value of the property before auctioning it. His decision was guided by a government assessment of the property, which also placed its value at Sh62 million.

He ordered that the lender to reimburse Komassai the Sh24.5 million difference plus interest at the rate of 22.75 per cent interest from October 2006, handing Bank of Baroda a Sh155 million debt burden.

“The valuation commissioned by Bank of Baroda prior to the sale was not reflective of the true market value. Komassai shall therefore be paid the sum of Sh24.5 million plus interest at the rate of 22.75 per cent from October 2006 until payment,” the judge ruled.

The bank said its assessors found that the land could only be sold at Sh32 million on a quick sale, and that the Sh37 million it got was the best possible deal.

But Komassai insisted that it had paid two assessors to value the property and that R R Oswald & Company placed it at Sh62 million while N W Realite did at Sh62.5 million.

Justice Kimaru found that the Bank of Baroda’s valuation read almost identical to another assessment done two years earlier. He agreed with Komassai’s argument that the land could not have dipped in value since 1999.

The judge also ruled that Bank of Baroda had relied on a valuation done by R R Oswald & Company to advance Komassai the loan hence could not renounce the subsequent assessment done by the same firm.

“This court noted that the valuation made by Crystal Valuers was more or less similar to the report made by Mwaka Musau Consultants two years prior with the sole objective of enabling the bank to sell the property at a value that did not reflect the true market and force sale value,” the judge added.

Komassai had said that there were two buyers willing to purchase the property at Sh150 million, which proved that the bank undersold.

Bank of Baroda had held that R R Oswald’s assessment had been prepared by an employee who was then not registered as a valuer in Kenya.