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Equity Bank fights suit blocking seizure of tea firm Swafi Foods
In its case, Swafi Foods said Equity has at all material times provided it with financial services, including loan and overdraft facilities and that it has not defaulted.
Equity Bank Kenya Limited has filed a notice of objection to a case against it by a tea exporting company, which resulted in the suspension of its joint administrators from taking over the operations of the borrower.
The bank says it will seek to have a case against it by Swafi Foods Ltd struck out. The tea firm took credit facilities from Equity.
In its notice of preliminary objection, the bank said the case by Swafi Foods amounts to an illegality as it offends the Insolvency Act 2015.
Swafi Foods has sued Equity, Kamal Anatroy Bhatt and Jamal Kamal Bhatt (administrators) and Anant Bhatt LLP, accusing them of unprocedurally issuing the notices of appointment of joint administrators.
Equity also argues that all disputes relating to the appointment of Kamal Anatroy Bhatt as an administrator must be determined in an insolvency petition it has filed against Swafi Foods and not by a different case.
Notices suspended
The High Court has since suspended the execution of notices of appointment of joint administrators of Swafi Foods.
On their part, Kamal Anatroy Bhatt, Jamal Kamal Bhatt and Anant Bhatt LLP, who are also respondents in the case, say that Swafi Foods is under administration and the law requires it to disclose its legal status as a company under administration in the heading of every document.
Through an affidavit of Kamal Bhatt, they state that Swafi Foods created securities in favour of Equity, which included a debenture of $1 million dated March 2, 2018, and $450,000 dated January 2020 over all the company assets and duly registered at the firm’s registry.
“It was an express term of the debentures executed by both the company and the bank that in the event of default in repayment of the borrowed money, the bank would be entitled to exercise its rights under the debentures, including the right to appoint an administrator over all the assets of the company,” said Mr Kamal in response to the application by Swafi Foods.
Overdraft facilities
In its case, Swafi Foods said Equity has at all material times provided it with financial services, including loan and overdraft facilities and that it has not defaulted.
Swafi Foods said on or about January 23 2018, May 17, 2021 and June 29 2022, it entered into a financial arrangement with Equity for a loan facility, which was secured by all asset debentures and corporate guarantee.
The tea exporting company says that the purpose of the credit facilities was for financing working capital to facilitate purchase, packaging and shipment of teas for export and would be liquidated with income generated from tea export.
According to the company, it observed its obligations under the existing letters of offer and fulfilled each one of them.
It said that on or about August, the defendants capriciously issued notices of appointment of administrators while the loan was still performing.
“The plaintiff avers that no event has arisen or occurred to warrant the appointment of administrators, and no notices were issued in accordance with the law,” the company argues.
