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Medical firm fails bid to block asset auction over Sh1.4bn KCB loan
The court found that the hospital had admitted its failure to make the agreed-upon monthly deposits, which formed a crucial part of the loan agreement.
The High Court has dismissed an application by Savannah Healthcare Services seeking to restrain KCB Bank Kenya from auctioning its property over a Sh1.4 billion loan default.
The healthcare firm had sought an injunction from the court to prevent KCB from selling its parcel of land, arguing that the bank had acted unlawfully in enforcing its statutory power of sale.
“Based on the foregoing, I do not find that the plaintiffs have established a prima facie case with a probability of success, as they are truly indebted to the bank. In the upshot, I find no merit in the application dated 29/5/2023 and the same is dismissed with costs,” Justice Alfred Mabeya ruled on February 3, 2024.
The dispute arose from a financial arrangement between Savannah Healthcare and KCB, in which the hospital had been granted various credit facilities amounting to Sh1.1856 billion. These included an overdraft facility of Sh20 million, asset-based financing, and a term loan of Sh1.001 billion.
The hospital told court that the bank failed to disburse Sh21 million from the term loan and that KCB’s demand for Sh89.3 million in arrears, was based on an invalid statutory notice.
The hospital added that the property auction would lead it into insolvency, a factor that would adversely affect the public interest.
KCB opposed the application and told court that the hospital had defaulted on its loan obligations, necessitating the issuance of a statutory notice. The bank argued that the plaintiffs had failed to make the required monthly deposits of Sh3 million into an escrow account as stipulated in the loan agreement.
The bank maintained that it had followed due legal procedure by issuing a 90-day statutory demand notice, a 40-day auction notice and a 45-day redemption notice.
The bank also said that a valuation of the property had been conducted in compliance with the Land Act before taking steps to recover the outstanding debt, which had accumulated to Sh1.416 billion.
Justice Mabeya ruled that the plaintiffs had not demonstrated any legal grounds to halt the auction. The court found that the bank was within its right to enforce the loan agreement and that the plaintiffs had failed to fulfil their repayment obligations.
“The statutory power of sale is a contractual right that is activated upon default,” Justice Mabeya ruled, adding that any dispute over the loan balance did not prevent the bank from exercising its right to recover the debt.
The court also found that the hospital had admitted its failure to make the agreed-upon monthly deposits, which formed a crucial part of the loan agreement.
