Capital Markets

Nothing rosy for Karuturi as world marks lovers’ day

The management has fought vicious legal wars to rescue the farm
The management has fought vicious legal wars to rescue the farm, accusing receivers appointed by the bank of suppressing the sale, and has filed a counter-claim. FILE PHOTO | NMG 

As the world marks Valentine’s Day on Thursday, flower farm Karuturi owners are staring at losing their property after a long legal battle, unless they find ways of settling a Sh1.8 billion Stanbic Bank loan.

The management has fought vicious legal wars to rescue the farm, accusing receivers appointed by the bank of suppressing the sale, and has filed a counter-claim.

The High Court in March last year gave Stanbic the green light to auction Karuturi’s assets should it fail to settle the debt within 90 days, prompting owners to file appeal.

The Court of Appeal on January 25 dismissed the appeal, a decision that gave Stanbic the go-ahead to auction the property in the event owners fail to pay what is being demanded.

“In the result, we do not, in the foregoing circumstances, consider that the appellants have demonstrated the orders granted by the learnt judge in his ruling given on January 19, 2018 constitute a wrong exercise of jurisdiction,” ruled the three-judge bench comprising Justices William Ouko, Stephen Gatembu Kairu and Daniel Musinga.


The appellate judges were referring to the decision by High Court Judge Francis Tuiyott that directed owners Surya Holdings Limited and RHEA Holdings Limited to settle the Sh1.8 billion loan to Stanbic in three months or face auction in default.

Karuturi Ltd, which was once one of the world’s top growers of roses, exporting more than one million stems annually, was put under receivership in 2014 after failing to service a Sh383 million loan from CfC Stanbic.

The firm’s debt has since increased to Sh1.8 billion after factoring in the expense incurred by the bank to run the property during the receivership period.

But Karuturi owners were unhappy with the decision. After the High Court decision they changed law firms and brought in lawyer Fred Ngatia to lead their fight at the Court of Appeal.

The company claimed the order asking them to settle post-receivership debt was based on an audit report by Deloitte which it claimed has been contested.

They argued that the judge erred when he ordered them to pay the debt before their challenge against the audit report is determined.

But the Court of Appeal agreed with the High Court judge, noting that the auditors were appointed by the consent of both parties and, therefore, owners contesting it does not make the debt invalid.

Lawyer Kamau Karori represented receivers while Mr George Oraro led a team of three lawyers for the bank showing the high stake the bank placed on the case judging by the calibre of the defence.

On the day the ruling was read, some of the owners of the farm were in court alongside representative of former Karuturi workers numbering about a dozen.

Shortly, after the Court of Appeal decision, the bank and receivers sent out a statement welcoming the ruling noting that ‘the receivers now resume the process of disposing of the assets of Karuturi covered by the bank’s debenture, with the bank concurrently progressing the disposal of the land under legal charges’.

“The decision of the court will allow for the conclusion of the sale process that had commenced before the filing of the appeal,” said Muniu Thoithi, one of the joint receivers.

The former workers, who have largely sided with the owners throughout the legal battle, also sent out their statement, and vowed to avert any attempt by Stanbic Bank to auction the firm’s assets until they receive a clear proposal on how their dues will be paid.

The workers’ representative, Mr Samson Auda, faulted the judges for not considering a worker’s union affidavit filed in support of the case. The union through Mr Auda had filed an affidavit in court in support of the case.

He detailed the wrong doings of the receivership, which has laid to waste the once prosperous township with state-of-the-art heath care, housing, education and the once famous Karuturi premier league football team.

But it’s not clear which measures they will take to stop the bank, which had started the process of auctioning some properties but had been restrained by Court of Appeal.

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.

Outside the court, owners have also been seeking ways to salvage their property.

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 has reached an agreement with Phoenix Group for a “blend of debt and equity” that will help it to meet its current debt obligations and restart its operations. The firm has been under receivership for the past four years.

The owners did not, however, indicate the value of the expected investment.

Phoenix Group is said to be worth Sh200 billion. The Singaporean company is among the world’s leading rice producers.

For now, the fight goes on.