I&M Bank allowed to sell Sh1.5bn developer’s property

I&M Bank has been allowed to transfer properties owned by a Nairobi-based housing firm over a Sh1.5 billion debt.

High Court Judge Wilfrida Okwany allowed the lender to recover the debt owed to it by Highgrove Holdings Ltd.

She also struck out a case filed by the developer in April 2019 seeking to have the sale be declared illegal, null and void.

The developer had borrowed the money in 2017 to enable it finance the construction of 24 residential town houses for sale at Highgrove Village in Lower Kabete Nairobi. Documents filed in court showed that the loan was secured by three houses in Lower Kabete.

However, the loan facility fell into arrears and the bank through its advocates issued the firm with demand letters calling for settlement of the outstanding amount of Sh1,131,458,684 and $188,637.

There being no move by the housing developer to settle the outstanding amounts, the bank proceeded to issue the firm with the requisite statutory notices of sale of the property by public auction. This prompted Highgrove Holdings Ltd to sue.

But the bank through its Legal Manager Andrew Muchina told court that it is lawfully entitled to proceed with the realization of the charged properties to recover the outstanding debt. The court also heard that the developer’s case was already overtaken following the selling of the property.

Mr Muchina said the developer duly executed the loan collateral documents for the entire debt and the same can only be lawfully discharged upon settlement of the entire debt up to the limit of its liabilities with accrued interest and costs.

“A party that pollutes the river of equity does not deserve any injunctive relief. Once property has been offered as security it becomes a commodity for sale in the event of default,” Mr Muchina told the court.

He stated that default having been admitted, the bank should be allowed to exercise its statutory power of sale, adding that a dispute to the amount owing is not a ground for grant of an injunction.

The manager argued that the court cannot interfere with the bank’s right to exercise its statutory power of sale in view of the developer’s blatant material non-disclosure and admission of default. He urged the court to strike out the case.