Karrymart supermarket owner George Kariithi has failed to stop the auction of his land over a Sh107.3 million Co-operative Bank of Kenya loan.
Mr Kariithi, who drew the first tranche of the loan in November 2011 and defaulted on payment, had used 12 pieces of land in Ngong, one in Naivasha and another one in Limuru as collateral.
He moved to the High Court seeking to stop Co-op Bank from auctioning the Sh45 million Naivasha property, arguing that the land in question is of “greatest sentimental value” to him since his parents are buried there.
Justice David Majanja, has, however, dismissed his prayers, agreeing with the bank which argued that Mr Kariithi gave out the Naivasha property as security with full knowledge of the consequences of defaulting and it is irrelevant that he may have such attachment.
“I find and hold that the plaintiffs have failed to demonstrate a prima facie case with a probability of success as long as the 1st plaintiff (Karrymart) is indebted, the bank is entitled to choose which security or combination of securities it should realise,” said the judge.
The bank had told the court that it was at liberty to realise any of the securities available to it and it was not for the borrowers to tell it which one to start with.
Mr Kariithi alleged that the Limuru and Naivasha properties were grossly undervalued and the valuations given by the auctioneers were more than two years old with the intention of disposing of the assets at a loss.
Co-op Bank told the court that if Mr Kariithi insists that only the Ngong properties should be sold, he could have done so and presented the funds to the bank and it could not have gone for the Naivasha or Limuru properties if the debt was fully settled.
He also accuses the bank of undervaluation, arguing that the Sh107.3 million demand is contrary to the Banking Act’s in duplum rule that limits interest accrual to not more than the principal amount outstanding when a loan becomes non-performing.
Co-op Bank told the court the plaintiffs — Mr Kariithi, Karrymart and Lenana Hospital — defaulted on both the term loan and Sh10 million overdraft facility and both were restructured as one facility valued at Sh66.5 million in September 2016.
The lender added that going by the contractual figures in the facility and restructure letters, it has not violated the in duplum rule unless it demands more than Sh133 million.
It said the outstanding balance by February was Sh107.3 million.
The judge said issues around valuation and whether the loan has violated the said rule will be settled at the trial and cannot be the basis for the court to issue an injunction.
He added that Mr Kariithi has room to seek damages in case the property is sold at an undervalued price.