KCB Group #ticker:KCB did not furnish a company with a statement of accounts before moving to auction its estate which it estimates to be worth Sh3 billion, relatives of president Uhuru Kenyatta told the Court of Appeal Monday.
In the latest twist to the 27-year-old loan dispute, Judges Roselyn Nambuye, Milton Makhandia and Kathurima M’Inoti were told that the the lender auctioned Muiri Coffee Estate Ltd in 2007 based on a fraudulent bank statement of accounts.
The judges heard that KCB proceeded to sell the land before availing a full statement of account to Benjoh Amalgamated Ltd, a firm it had advanced a Sh11.5 million loan in 1989.
Benjoh, owned by Captain (retired) Kung’u Muigai - a cousin to the president - had offered two securities in Nyandarua County as a guarantee for the land. Muiri Coffee Estate Ltd, associated with former assistant minister Ngengi Muigai, had also pledged the farm under coffee as security.
While asking the court to dismiss an appeal by the lender challenging a superior court decision that Benjoh was entitled to a full statement of accounts, lawyers Kyalo Mbobu and Kinthinji Marete said the sale of the 443 acre farm in Kiambu County was irregular.
“The late Justice Joyce Khaminwa properly ruled that the borrower was entitled to a statement of its account. To date, KCB has never availed a statement of accounts as required under the law to Benjoh,” they argued today.
Mr Mbobu said that according to the law, a bank is duty bound to inform a customer on the status of their accounts by availing statements regularly.
The lawyer claims that by the time KCB descended on Muiri Coffee Estate and sold the land to Bidii Kenya Limited for Sh70 million, Benjoh had not been informed of its loan status by the bank and availed an outstanding balance.
Judges Nambuye, Makhandia and M’Inoti heard that even the bank itself did not know the amount it was demanding from Benjoh as confirmed by its manager Mr Chris Theuri when he testified before the judge in 2009.
“A senior bank official Mr Theuri told the late Justice Joyce Khaminwa he did not know the amount the bank was demanding from Benjoh,” Mr Mbobu said.
He said the judge was left with one option to find that the bank manufactured a statement of account in respect of the amount it was demanding from Benjoh.
Mr Mbobu also refuted a consent entered between the bank and Benjoh in March 4, 1992 on which securities would be sold.
He said the court of appeal had pointed that the securities which would be sold in case of a default are two properties in Nyandarua and not Muiri Coffee Estate. Muiri says it has paid the bank the money it pledged as security and that its 443 acres should not be sold at all.
The judges were asked to dismiss an appeal by KCB seeking to quash the judgement of Justice Khaminwa that the company was entitled to a statement of accounts.
Benjoh had been advanced the loan to invest in a flower project in Nyandarua. It alleges the bank flouted the loan terms and the project collapsed.
However, KCB's lawyer Philip Nyachoti urged the judges to allow its appeal and find that the late judge erred in her finding that the lender did not keep a proper record of its customer's account.
Mr Nyachoti and lawyer Issa Mansur for Bidii Kenya said the bank was entitled to sell the pledged securities to recover its money.
Mr Nyachoti said the issue of accounts had been determined by both the Court of Appeal and the Supreme Court and that “ it can’t be re-opened.”
Mr Mansur said the case has been pending in court over two decades and that the litigation must come to an end.
Benjoh say the Sh3 billion coffee estate was sold away by KCB in September 19, 2007 to Bidii Kenya Limited for only Sh70 million.
KCB says it was given the power to exercise its statutory duty over the property through a consent that was entered between the parties in 1992 and which has been contested vigorously by Benjoh and Muiri.
The court will deliver a judgement on November 17 this year.