Owners of Eden Rock Hotel got a reprieve after a court stopped a bank from auctioning the renown Malindi facility over a Sh64 million loan.
SBM Bank, previously called Fidelity Commercial Bank, was barred from auctioning the hotel owned by Tropicana Hotels after the court heard that a statutory notice for sale was sent to an address different from the one indicated in a charge executed by the parties.
Environment and Land Court Judge James Olola, however, said the bank will be free to start the recovery process afresh and issue proper notices as required by law should Tropicana Hotels remain in default.
“For avoidance of doubt, save for the failure by the defendant (bank) to serve a proper Statutory Notice, I find the plaintiff’s (Tropicana) suit to be misconceived and untenable in its entirety,” said Justice Olola.
Justice Olola said that it was evident that even though there was a dispute as to the extent of liability, Tropicana Hotels admitted they were not servicing the loan regularly especially after fire destroyed the hotel.
He further ruled that the lender was under a legal obligation to report the performance of Tropicana Hotel’s loan to the credit reference bureau (CRB).
In his decision, the judge also said that it was clear that Tropicana executed contracts with the bank whereby money was advanced to it.
“In its own admission, Tropicana Hotels fell in arrears leading to the demand from the bank,” said the judge.
He noted that it was admitted that since the case was filed and an order of injunction obtained on May 6, 2016, Tropicana stopped servicing the loan hence the sum due may have accumulated through interests.
Tropicana went to court seeking among other orders a declaration that the bank charged excessive and illegal interest over and above contractual rates.
It also sought for a declaration that the bank ought not to have threatened to report it to CRB before the ‘illegal’ interest and other charges on the its accounts were reversed.
Tropicana also sought a permanent injunction restraining the bank from reporting it to CRB until the amount due was determined by court.