Cape Holdings Ltd, which owns the complex has been embroiled in a dispute with Synergy since 2010 over a botched sale deal.
Synergy paid Sh750 million to acquire part of the apartments but the deal fell through and the matter was referred to an arbitrator, leading to an award of Sh1.6 billion that has ballooned to Sh4.9 billion plus interest.
A judge has sanctioned the auction of a property at Nairobi’s 14 Riverside Drive over a debt of Sh5 billion arising from a long-running court dispute.
Justice Alfred Mabeya on Friday allowed Synergy Industrial Credit to auction the complex in which DusitD2 hotel stands after dismissing an application by I&M Bank and its administrator, seeking to stall the sale arguing that the company, which owns the building owes them a debt of $25 million (Sh2.82 billion).
Cape Holdings Ltd, which owns the complex has been embroiled in a dispute with Synergy since 2010 over a botched sale deal.
Synergy paid Sh750 million to acquire part of the apartments but the deal fell through and the matter was referred to an arbitrator, leading to an award of Sh1.6 billion that has ballooned to Sh4.9 billion plus interest.
I&M Bank opposed the sale of 14 Riverside Drive, saying the property was used as security for a Sh2.82 billion loan.
But Synergy Industrial accused the bank of negligence, arguing it had placed a legal restriction or caveat on dealings with property because it was subject to a dispute.
Justice Mabeya said the charge placed by the lender was designed to allow Cape Holdings evade its legal obligations.
“Taking into consideration the foregoing, the court can but only agree with the applicant’s contention that the timing of the administration was not meant for the purpose known under the Act,” said the judge.
According to the court, Synergy had placed a caveat through a court order in 2011, warning over the property.
“With such a caveat, that property was not free to be given as a security,” he said.
The dispute revolved around a transaction in which Synergy bought two of the blocks out of 14, which were under construction and paid Sh750 million upfront. When the property was completed, Cape Holdings refused to transfer the property and the matter was referred to arbitration.
In 2015, the arbitrator, Ochieng Oduol ordered the developer to refund the principal amount and interest totalling Sh1.66 billion. Cape Holdings then moved to the High Court and the award was quashed as it was erroneous.
The matter proceeded to the Court of Appeal, which restored the award while bid by Cape Holdings to reverse the decision at the Supreme Court failed.
In a ruling delivered on October 8, the Supreme Court held that it will not interfere with the judgment of the Court of appeal that upheld the award on grounds of jurisdiction.
“We reiterate our holding, and find the court lacks jurisdiction to entertain this appeal, having found so, we have no hesitation in declaring the application before us one for dismissal,” the Supreme Court judges CJ Martha Koome, Mohammed Ibrahim, Smoking Wanjala, Njoki Ndungu and Isaac Lenaola ruled.
Mr Ahmednasir then moved to the High Court seeking to be allowed to auction the property and recover its money but Mr Vruti Shantilal Shah, who was appointed the administrator by the lender opposed the planned sale saying the company was placed under administration.
The Judge said the bank would not suffer prejudice because it has other securities whereas stopping the sale would subject Synergy to irreparable loss since its bid to recover the money would be delayed.
“The court has considered the foregoing and the fact that it has not been shown that the amount to be realized from the sale of the suit property would not be enough to offset both the decretal amount and a substantial amount part thereof remain for the bank,” Justice Mabeya said.
