KCB faces Sh1.3bn claim over botched land auction

The company claims KRC unlawfully withheld transfer consents, while KCB allegedly ignored unpaid land rates before auctioning the properties.

Court documents show that M’Big bought the land from KCB in 2017 through an auction after another borrower, Economic Housing Group Ltd— which had used the properties as collateral—defaulted on its loans.

M’Big was partly financed by KCB for the purchase, through legal charges over its four other properties in Bungoma Township.

However, the transaction collapsed when KRC—the head lessor of the land—declined to issue consent for the transfer of the auctioned properties, citing KCB’s failure to clear unpaid land rate arrears under Section 101 of the Land Act and to pay a two percent fee on the purchase price.

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M’Big says this frustrated the sale and triggered a chain reaction. It defaulted on repaying the loan facilities used to purchase the properties, prompting KCB to issue statutory notices over the Bungoma assets.

In the ongoing proceedings, M’Big is seeking a refund of the Sh95 million purchase price or, alternatively, an order compelling KRC to issue the transfer consent.

It is also seeking Sh94.8 million in loan penalties and Sh1.24 billion for lost business opportunities tied to BAT Tobacco and Kenya Breweries distributorships. Additionally, it wants compensation of Sh67 million for another lost business opportunity, special damages of Sh800,000, and an unspecified amount in general damages.

The company further seeks to block the bank from auctioning the Bungoma properties. However, the Nairobi Securities Exchange-listed lender maintains that it fulfilled its obligations under the sale agreement and blames M’Big for failing to secure registration of the Naivasha properties in its name.

KCB also argues that, having already obtained consent to charge, it did not need fresh approval from KRC before selling the parcels.

For its part, KRC insists its refusal to issue transfer consent was justified because of KCB’s unpaid rates.

Land or commercial dispute?

Midway through the hearings, Justice Mary Oundo flagged a critical issue—whether the dispute should be determined by the Environment and Land Court (ELC) or the High Court’s Commercial Division. The question hinged on whether the dispute was fundamentally about land or commercial contracts.

M’Big maintained that it was a land matter, citing previous precedents where courts ruled that the ELC has jurisdiction over sales granting enforceable land interests.
“This is about title transfer, not banking. The suit revolves purely around land, land sale, and consent to transfer, which is a preserve of the ELC, where the remedies sought are among those the court is mandated to issue under the ELC Act,” argued its lawyer.

KCB countered that the case was a “mixed grill,” involving loan defaults, statutory power of sale, and contractual breaches. It said such matters fall under the High Court’s Commercial Division since they arise from a frustrated property sale and the enforcement of financial and contractual obligations.

The bank’s position was backed by KRC, which argued that the matter was commercial and should be struck out for lack of jurisdiction.

After reviewing submissions, Justice Oundo ruled that the dispute’s primary focus was a failed land transaction and the title to land, which placed it within the ELC’s jurisdiction.

She found that the company’s alleged financial losses, refund claims, loan costs, and lost business opportunities were direct consequences of the frustrated land sale and the subsequent threat of a forced sale of the secured properties.

“I thus find that the monetary claims arising in the prayers are consequential to a failed land transaction and therefore not the primary cause of action,” she stated, applying the “predominant purpose test.”

Consequently, the judge held that the High Court’s Commercial Division lacked jurisdiction over the matter. The ruling reinforces the ELC’s authority over complex land-commercial hybrid cases.

The decision comes amid increased scrutiny of banks foreclosure practices and their impact on property buyers across Kenya’s competitive real estate market.