Collapsed flower firm Karuturi owners want Stanbic Bank and receiver managers to pay them Sh1.2 billion for demolition of a hotel on the property.
Anitha Karuturi and Sai Ramakrishna Karuturi have sued the bank and receiver managers for the demolition of Masdam House, which stood on Plot No. 9352/3 Naivasha. They argue the hotel was not part of the securities offered.
They want compensation for the 2015 demolition, noting that the hotel was utilized as a wildlife and bird watching lodge and was patronized by high profile and high value individuals. The owners cite invaluable arts, artefacts, Persian carpets, jewellery, home ornaments and crockery as among the material losses they suffered.
“The Plaintiffs (owners) claim of $614,536.75 which is slightly over Sh1,261,000,000.00 is not an insubstantial sum,”judge David Majanja said in court papers.
In their defence, Cfc Stanbic Bank Limited, ICICI Bank Limited, Ian Small, Kierian Day And Kolluri Ventaka Subbaraya Kamasastry said the hotel was located on riparian land and was brought down under instructions of the government.
They said the property which belonged to Karuturi and not the directors had been built on riparian land without necessary approvals prompting an order from Water Resources Management Authority (Warma) for its demolition.
“The issue of Masdam House having been erected on riparian land and having been constructed without Naivasha Municipal Council approval were raised. That in light of those proceedings there is sufficient evidence to support their contention that the demolition order was issued by Warma,” Justice Majanja said.
The two directors suffered a blow when the court ordered that they should each deposit Sh10 million to the three defendants meaning they would need to raise Sh60 million as security before proceeding with the case.
The security to be deposited in the next 60 days may be in the form of a cash in court custody or a joint account in the names of the respective advocates or in the form of a bank guarantee from a reputable bank agreed upon by the parties.
The defendants had successfully argued that the two directors were foreign nationals who reside in Bangalore, India and it would be in the interests of justice that they be ordered to furnish security for costs as they do not have any assets to attach if they lost the case.
Karuturi, was one of the world’s top growers of roses and whose exports topped a million stems every year, before it came crashing under the weight of debt.
It was put under receivership in 2014 after failing to service a Sh383 million loan from CfC Stanbic.
The firm’s debt has increased to Sh1.8 billion after factoring in the expense incurred by the bank to run the property during the receivership period.
The management of the flower farm Karuturi Limited in March 2018 announced it has secured an investor to inject funds into the business as they fight to save their prized asset from being auctioned.
Karuturi said then that it had reached an agreement with Phoenix Group for a “blend of debt and equity” that would help it to meet its current debt obligations and restart its operations.
However, in 2019 its owners through Surya Holdings and RHEA Holdings lost the flower farm to a Stanbic over a Sh1.8 billion loan that sparked a lengthy court fight to auction the property.