Tekangu Coffee Farmers’ Sacco received a Sh24 million loan from Root Capital Inc. in April 2013.
The debt has now accumulated interest of more than Sh12 million for non-payment.
Tekangu is opposed to the lender’s demands for repayment claiming its former managers procured the loan illegally.
An American investment firm and a coffee co-operative society in Nyeri are embroiled in a court battle over repayment of a Sh36.3 million accumulated loan.
The case pits Massachusetts-based financial lender, Root Capital Incorporated, against Tekangu Coffee Farmers’ Co-operative Society after the sacco defaulted on a Sh24 million loan obtained in April 2013 for construction of a processing plant in Mathira.
Officials of the society borrowed Sh24,069,675 million but the debt has now accumulated interest of more than Sh12 million for non-payment.
After defaulting the payments, the US lender through regional risk manager Peter Onguka, moved to court seeking orders to compel the sacco to settle the initial amount together with the accrued interest.
However, Tekangu is opposed to the lender’s demands for repayment claiming its former managers procured the loan illegally.
According to the sacco’s lawyer Wahome Gikonyo, the US financier failed to follow the Public Procurement and Disposal Act before giving out the loan.
“The purported loan was a deliberate ploy to fleece innocent, poor coffee farmers. Farmers have to authorise it (loan) in an annual general meeting. Without this authorisation, this was a deliberate violation of the law,” Mr Gikonyo says in court papers.
Root Capital, which invests in agricultural businesses in Africa and Asia, says the facility was to be used for acquisition of machinery and equipment required in coffee processing and be repaid at an interest of 11 percent annually on simple reducing balance.
But the repayment was subject to additional default interest of 5.5 percent over and above the contractual interest in the event of default.
The proceedings of the case resumed Monday after a nine-month break in September last year following Justice Jairus Ngaah’s decision to reject the society’s application to dismiss the suit.
In the application, the Society had argued that since August 19, 2016, the foreign lender had not taken any step towards prosecution of the case. The firm told the court that the delay in the prosecution of the suit was not deliberate.
The evidence in court showed that the firm’s decision-making organ is based in Massachusetts from where its various activities around the world are co-ordinated.
Mr Onguka said as far as the fate of the case is concerned, the coordination of the meetings between the corporation’s representatives in Nairobi and the decision-making organ in Massachusetts has been slow.
The case will be mentioned on September 30.
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