The Presbyterian Foundation, part of the Presbyterian Church of East Africa (PCEA), has sued the National Bank of Kenya (NBK) challenging the issuance of a statutory notice to sell its properties over a Sh811 million loan.
The loan had been advanced for the construction of luxury apartments at the Milele Beach Hotel in Mombasa.
In its suit at the High Court, the Foundation is seeking a declaration that the statutory notice issued by NBK is illegal. It also wants a permanent injunction restraining the bank from dealing or interfering with the properties comprising parcels of land in Mombasa.
The Foundation is incorporated to manage properties owned by the more than four million members of the PCEA.
According to the plaintiff, while no money was released to it directly, it was required to maintain loan accounts with the bank, where it was to pay back the loan together with interest.
“To date, the plaintiff maintains that the facility that was received for the construction against the certificates of payments raised, has never surpassed the agreed limit of Sh811 million,” the Foundation says in its case documents.
It argues that it has consistently been paying an average of Sh13 million per month for the last 14 years towards the repayment of the money released through drawdowns.
“The plaintiff opines that it has paid over Sh2.3 billion yet according to the defendant the loan is not yet fully paid back,” argues the Foundation.
It also says that the statutory notice is defective in substance, form, and text and intended to deny it an opportunity to have a reconciliation of accounts done.
The Foundation says that it does not owe NBK Sh892.8 million to warrant the issuance of the statutory notice.
It claims that the bank is being dishonest and unconscionable by making a blanket demand for the entire aggregate principal loan as if the Foundation had never paid any money to settle the debt.
“All the illegalities, breaches of contract, and bad faith actions or inactions of the defendant are actuated by malicious intentions to dispose of the charged properties that were recently valued at Sh1.6 billion as at December 29, 2023,” says the Foundation.
It is also seeking a refund of all monies paid in excess of the loan taken with interest.
But NBK, through an affidavit by its official Moris Tiema, says that the Foundation was obliged to repay the loan until it was fully repaid.
“However, shortly after disbursement of the loan, the plaintiff loan account fell into serious arrears,” states Mr Tiema, a remedial analyst at the bank.
He explains that after a long period of indulgence and fruitless negotiations, NBK commenced the process of realising its securities in order to recover the outstanding loan amount.
Mr Tiema says that as a result of the default by the Foundation, the bank was entitled to realise its securities by exercising its statutory power of sale over charged property, to appoint a receiver over the charged properties, and to sue for recovery of the debt.
He says that the Foundation failed to honour its obligation under a consent order to make good its proposal to settle the outstanding debt.
This, he says, gave the bank the right to realise its security by selling the charged properties or appointing a receiver for the income from the properties, to sue for recovery or to appoint a receiver and manager and to operate the assets of the Foundation.
NBK says that the plaintiffs took the loan to construct luxury apartments for sale and that it is aware that the construction of the apartments at Milele Beach Hotel has completely stalled and even the superstructure of the apartments has never been completed.
“The so-called luxury apartments have remained a sore sight wasting away along the Mombasa-Malindi road which have not been completed for the last 12 years,” states Mr Tiema.
At the same time, the bank filed an application seeking, among other things, orders to have the case struck out on the grounds of being scandalous, vexatious, and an abuse of the court process.
It says that some issues were raised, or should have been raised, by the plaintiff in a civil case it (plaintiff) filed in 2015.
The bank says there is a separate case filed by the plaintiff against it in the High Court in Nairobi, involving the same loan, the same series of securities and the same dealings between the parties.
High Court Judge Jairus Ngaah has directed the case file to be transferred to the High Court Commercial Division in Nairobi. The case will be mentioned on February 3 for further directions.
