Owners of English Point Marina had offered KCB Bank personal guarantees of up to Sh1 billion each to secure the Sh4.8 billion loan that is now in default.
Court papers show the directors used the suit property, rental income from English Point facilities, private land, corporate and personal guarantees to secure the facility.
The directors including Nazir Mohamed, Nafisa Kanji, Alnoor Kanji, Leila Kanji and Amyn Kanji had given personal guarantees to secure the loan.
Although KCB Group has only placed English Point under receivership, the lender could go after the directors’ personal property if they do not realise their loan.
“Securities to be taken include directors guarantees and indemnities for $10 million,” court papers show.
English Point directors are trying to block KCB’s appointed receiver-manager, Kamal Anatroy Bhatt, from taking over the luxurious hotel, pending the determination of the case filed by the real estate firm.
The owners have accused KCB Group of overcharging them by more than Sh893 million on loans advanced to the firm and hurriedly taking over the establishment for defaulting in repayment.
Pearl Beach Hotels, the holding firm that owns the hotel, says in a case filed under a certificate of urgency that it has been engaging the lender with a view to addressing the loan repayment and that KCB admitted an overcharge of Sh893.7 million on its books.
The lender appointed Kamal Anatroy Bhatt as the receiver-manager last week, who moved in immediately, provoking the court case. The directors also accused the receiver-manager of denying them access to the building where they reside with their families.
“The applicant and the 1st respondent have been engaging amicably on how best to address the overcharge and the most strategic manner of disposing of the business as a going concern given the depressed market during the Covid-19 pandemic and the slow return to normalcy,” lawyer Nick Ndeda said in the application.
Justice Dora Chepkwony issued temporary orders, blocking the receiver-manager from taking over the firm, pending the determination of the case.
Mr Nazir Jinnah says in an affidavit that the firm borrowed loans of up to Sh4.8 billion on diverse dates between 2011 and 2018.
“The 1st defendant conduct has been unconscionable in that they have been in long negotiations over the exact outstanding amount if any, and at all times the 1st respondent caused the applicant to believe, on which belief they placed reliance, that they would come to an understanding only for the defendant to irregularly appoint a receiver,” Mr Ndeda said.
He says that the firm has paid Sh3.35 billion and receives revenue from the building to service the loan.
According to Mr Jinnah, the appointment of the receiver was made without notice and justification as it places the risk on the assets the bank purports to protect and will doubtlessly only result in wasting away of the facility and the value of the unsold units.
He says the firm is a specialised luxury hotel offering five-star services to its customers and guests and has developed and curated unique tradecraft for that purpose and benefits from the individualised historical memory of its directors, as well as attending to the needs of the purchaser’s sub-leased.
He further says the directors including himself and Alnoor Kanji as well as their families permanently reside in penthouses within the building but were denied access by the receiver.
“That the 2nd respondent had evicted the directors of the applicant from the residential homes which are located on the premises rendering them destitute and denying them their fundamental rights as protected in the constitution,” he said.
Justice Chepkwony ordered the parties to maintain the status quo, pending the determination of an application.
“That pending the hearing and determination of this application, a temporary order of injunction be and is hereby issued restraining the 1st Respondent from appointing a receiver or receiver managers, administrators or exercising its power under the debenture,” the judge said.
Mr Ndeda also pleaded with the court to allow the firm’s directors unfettered access to the penthouses named D1 and D2, where they permanently reside.
The firm also sought to bar KCB from selling or subdividing any of the property or any part of the building or development and its assets, pending the determination of the application.
Pearl Beach Hotels has been struggling to meet its obligations to the bank over the years and the lender took over English Point Marina came after failed attempts to restructure the loan but the owners were still unable to meet the payments.
In the application, the firm says the debenture and the charge instruments have not been registered as required under the Companies Act.
English Point Marina is owned by Amin Kanji, his wife Leila, brother Alnoor, sister-in-law Nafisa and Nazir Jinnah. The luxury property is located by the harbour and consists of 96 apartments, eight penthouses and a 26-room hotel.
It is one of the few private projects granted the Vision 2030 Private Sector Flagship status.
The property has been sold to several people and those who have purchased units will not be affected by the KCB takeover.
The court directed the case to be mentioned on June 13 for further directions.