A court could trigger a fight between lenders that are still owed huge amounts of money by the fallen Nakumatt Holdings and its owner Atul Shah.
On Thursday, High Court judge Alfred Mabeya directed Bank of Africa to auction property belonging to Mr Shah so as to recover Sh460 million on condition that they notify other lenders of the forced sale.
Justice Mabeya said the lender was free to auction the prime property as both Nakumatt and Mr Shah’s firm, Collogne Investments, had admitted to defaulting on the loan.
“For avoidance of doubt, no new notice of sale ought to be issued since all the other parties, including Nakumatt and Collogne Investments, have acknowledged receipt of the same. All that the bank has to do is to serve the other charges (lenders) with the said notice,” Justice Mabeya ruled.
Interestingly, the same court had in November 2020, given KCB the green light to sell the same property over a Sh2 billion debt.
In a speedy move aimed at evading a tussle between lenders, KCB sold the property to Furniture Palace International Ltd for Sh1.04 billion, taking a loss of about Sh1 billion.
Judge Mabeya then wondered how several banks were duped into offering loans amounting to over Sh4 billion for property that was not worth the amount as security.
“If the court was in doubt, which is not the case here, the balance of convenience tilts in favour of allowing the defendant (KCB) to recover its outlay,” said Justice Mabeya.
“The court was invited to consider that the sale by the defendant would injure and prejudice the rights of the other lenders who have the suit property as their only security. While this court sympathises with the said lenders, it defeats logic how prudent bankers would extend facilities amounting to over Ksh4 billion on a single security whose value is less than Ksh2 billion.”
Standard Chartered and DTB Bank, who were eyeing the same property, are owed a combined debt of Sh4.5 billion.