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Court orders audit of firm's loan account in bank row
Although Akshar acknowledged an outstanding debt exceeding Sh260 million as of January 2023, the court ruled that penalty interest resulting from the bank’s misconduct should be waived.
The High Court has ordered Mayfair CIB Bank to provide one of its customers, Akshar Industries, with a full and accurate statement of accounts following allegations of predatory lending practices on a Sh260 million loan dispute.
The court stopped the planned auction of Akshar’s assets, demanded a full accounting of loan repayments, and criticised the lender's “improper banking practices” for harming the borrower’s business.
Among cited irregularities were the dishonouring of cheques, unauthorised loan approvals, refusal to permit the sale of securities, and poor communication.
Under the ruling, the bank must submit a detailed statement of account within 30 days, outlining all loan facilities, payments, the allocation of a Sh140 million lump sum, and a clear breakdown of principal, interest, penalties, and charges.
Additionally, the bank is barred from selling Akshar’s pledged assets—four land parcels and seven motor vehicles—for 90 days after submitting the required documents.
The court also mandated strict adherence to statutory notice and valuation procedures before any future sale.
The dispute draws from a lending relationship between the firm and the bank that began in 2019 and involved multiple facilities such as overdrafts, working capital loans, revolving credit, term loans, and asset financing, secured by land, movable assets, and deposits.
Akshar claimed it repaid significant amounts but was driven into financial distress due to the bank’s actions.
The company accused Mayfair of dishonouring cheques despite sufficient funds, processing unauthorised transactions, approving loans without consent, and delaying approvals for asset sales intended to reduce debt.
Akshar sought the bank’s permission to sell its motor vehicles, land parcels, and liquidate a fixed deposit account tied to the loan securities, intending to use the proceeds to settle arrears. However, the bank refused the request.
Mayfair denied any wrongdoing, arguing that Akshar defaulted, justifying lawful recovery efforts.
The court framed the case around the fiduciary duty between banks and customers, emphasising that lenders must exercise “reasonable care and skill” and act in “utmost good faith.”
“A bank has a duty under its contract with its customer to exercise reasonable care and skill,” said the court, adding that the relationship is grounded in “utmost good faith.”
While the court declined to rule the bank’s actions as fraud, it found that Mayfair’s conduct fell below acceptable banking standards.
The judgment highlighted repeated instances where cheques were dishonored despite available funds, severely damaging Akshar’s supplier relationships and its ability to generate income for repayments.
“The evidence shows that the bank contributed significantly to the Plaintiff's inability to service the loan through its improper conduct. The dishonoring of cheques destroyed the Plaintiff's supplier relationships, which were essential to generating the income needed to repay the loan,” said the court.
The court also questioned a Sh15.5 million facility issued in September 2022 without Akshar’s application, which was used to cover interest arrears.
A bank representative admitted that some facilities were approved without customer consent—a violation of contractual principles requiring mutual agreement.
“A bank cannot unilaterally create loan facilities for a customer without their knowledge or consent and then charge interest on those facilities. Such conduct violates the fundamental principle that a contract requires mutual consent,” the court ruled.
Although Akshar acknowledged an outstanding debt exceeding Sh260 million as of January 2023, the court ruled that penalty interest resulting from the bank’s misconduct should be waived.
The Sh140 million from Akshar’s land sale must first be applied to the principal and standard interest before penalties.
Furthermore, no asset sale may proceed until full disclosure is made, the 90-day period elapses, and statutory requirements are met.
The court dismissed Akshar’s claim for compensation over business losses due to insufficient evidence and rejected its request for a fraud declaration.
