High Court judge Alfred Mabeya on Tuesday gave a nod to Kenya Commercial Bank (KCB) to auction property owned by fallen Nakumatt CEO Atul Shah over a Ksh2 billion debt.
In a speedy move aimed at evading a tussle between lenders, KCB sold the property to Furniture Palace International Ltd for Ksh1.04 billion, taking a loss of about Ksh1 billion. The sale was supposed to be closed on Wednesday.
Making the ruling on Tuesday, the Judge wondered how several banks were duped into offering loans amounting to over Ksh4 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 Banks, who were eyeing the same property, are owed combined debt of Ksh4.5 billion.
Nakumatt owed DTB Bank Sh3.6 billion, Stanchart Sh900 million, KCB Sh1.9 billion, Bank of Africa Sh328 million, UBA Sh126 million and GT Bank Sh104 million.
The High Court in August had allowed Bank of Africa to auction Shah’s property, but the former CEO moved to the Court of Appeal to block the auction.
He later withdrew the case, opening a battlefield for banks over the property.
By the time Nakumatt closed completely in January 2020, it owed creditors over Ksh30 billion including Ksh18 billion to suppliers, Ksh4 billion to commercial paper holders and the rest to banks.
Nakumatt had over 60 outlets in the East African region which have been reduced to nothing.