KCB Bank has defended its decision to appoint a receiver manager for Pinewood Beach Resort and Spa concerning a Sh5 billion loan for constructing a luxurious property in Mombasa associated with the Kanji family.
KCB says it validly and lawfully exercised its right to appoint Kamal Anantroy Bhatt as the receiver under Pinewood debenture and has not breached Alnoor Kanji’s rights.
Through an affidavit from the head of credit support unit Oscar Obuna, KCB says Mr Kanji has not met the legal test or threshold to warrant the court’s intervention or interference with the appointment of the receiver under the Pinewood debenture.
Mr Kanji, a director at the four-star Pinewood Beach Resort and Spa, is challenging KCB’s appointment of Mr Bhatt as the receiver manager for the hotel in Diani, Kwale County.
He wants a temporary injunction issued restraining the defendants or their agents from seizing control of, offering for sale, transferring or interfering with the land where the hotel stands or the operation, management and control of the hotel pending hearing and determination of the case.
KCB says it's right to appoint a receiver under the Pinewood debenture crystallised upon default by Pearl Beach Hotels of its repayment loan obligations under the loan facility.
“The applicant has not demonstrated that the bank has breached any alleged material representations regarding its right to appoint a receiver under the Pinewood debenture,” says Mr Obuna.
According to KCB, represented by Oraro and Co Advocates, Mr Kanji has not met the legal test or threshold to warrant the court’s intervention or interference with the appointment of the receiver.
It says that attempts by Mr Kanji to prevent the receiver from gaining entry into the Pinewood premises and from assuming its control and carrying out its receivership functions is not only unlawful but also a breach of the bank's rights.
Mr Bhatt who is represented by lawyer Paul Munyao says that he was appointed by KCB as the receiver/manager of Itco Investments Ltd which operates Pinewood Beach Resort and Spa, and where Mr Kanji is a director and shareholder.
“Upon my appointment, I assumed control of the affairs and operations of the business of Itco Investments Ltd trading as Pinewood Beach Resort and Spa by operation of the law and by virtue of the terms of debenture dated September 26 2012,” says Mr Bhatt in his affidavit.
Mr Bhatt says that the all-asset debenture is not a supplementary as alleged by Mr Kanji and that his (Mr Kanji’s) allegation that the bank ought to exhaust its options as against the borrower have no basis in law and fact.
Mr Kanji, in his suit documents, says that the bank failed to issue all the notices contemplated under the statute of debenture instruments before taking the action which he describes as draconian.
Mr Kanji is seeking a declaration that the notice of appointment of the receiver and issued by Mr Bhatt on the instructions of KCB was irregular, and unprocedural thus illegal, null and void.
He also wants a permanent injunction issued restraining the defendants or their agents from seizing control of, advertising for sale, transferring or in any manner interfering with the land where the hotel stands or the operations, management and control of Pinewood Beach Resort and Spa land equipment and assets.
The plaintiff says that KCB and Pearl Beach Hotels Ltd (PBHL), the borrower of the money, entered into a loan agreement in 2010 to facilitate the construction of the five-star English Point Marina.
Mr Kanji says that PBHL approached him requiring additional security in respect of the loan as requested by KCB.
The plaintiff says that it was agreed that the securities offered would be supplementary to the primary security offered by the borrower and on that basis together with his late mother Gulshan Kanji executed the documents.
“In effect, the material representation made to the plaintiff was that the bank would only call on their security after realizing the primary security,” part of the suit documents states.
Mr Kanji argues that because he only issued supplementary security, KCB has yet to realize the proceeds from the sale of the property and assets registered to PBHL.
This, he says, is in order to realize the debt owed to the defendant and its right to realise Pinewood Beach Resort and Spa as a supplementary security has yet to crystallize.
Justice Kizito Magare of the High Court in Mombasa has directed parties to file their submissions on the issue of grant of temporary orders, for hearing on August 29.
