A Gulf African Bank customer has sued the lender accusing it of violating Sharia banking principles and failing to release a title deed charged to the lender despite repaying its loan.
Tye Rod Communications Ltd, in a suit before the Milimani Commercial Court, accuses the lender of refusing to release the title deed despite repaying the loan in full.
The company further says Gulf African Bank of unilaterally and illegally charging interest on the pretext of providing Islamic financial products based on Islamic principles.
Tye Rod Communications director Brenda Wanjiku Muchiri said the company entered a contract with the lender for a loan totalling Sh21 million on various dates between April 2014 and last year based on Islamic Diminishing Musharakah.
“The first defendant has exploited and continues to exploit the plaintiff on the pretest of providing Islamic financial product based on Islamic principles,” says Ms Muchiri in a statement filed at the court.
She says the lender charged increasing instalment repayment amounts and the product offered was not Islamic as agreed but the company was deceived into believing it was one.
Under Islamic Law, Musharaka refers to a joint partnership where two or more persons combine either their capital or labour forming a business in which all partners share profits according to a specific ratio, while loss is shared according to the ratio of the contribution.
Ms Muchiri says the company serviced the loan and completed the repayment but the lender allegedly refused to discharge the property.
She says in January, the lender unleashed Phillips auctioneers to sell the property and debited auctioneers' fees amounting to Sh679,140 into the company’s account.
“The plaintiff has fully paid back the Diminishing Musharaka property finance facility as charged and yet the 1st defendant had refused to issue a discharge but instead the 1st defendant has stipulated for a collateral advantage that is unfair and inconsistent with the right to discharge,” she said.
The company wants the bank compelled to discharge the property, ordered to repay the auctioneer's fees, and recover Sh295,012 allegedly debited in its account.
The court is also being asked to direct the lender to pay Sh9.8 million for the loss suffered.
