It is a blow to East African Cables PLC after the court dismissed its application challenging sale of its properties by Equity Bank Limited over a Sh 1.7 billion debt.
Justice Josephine Mong’are ruled that the company had failed to prove a prima facie case against the bank thereby dismissing their inquiry to an injunction order.
“Having found that the Plaintiff has failed to demonstrate a prima facie case with a probability of success, the inquiry on whether they are entitled to an injunction ends at this point,” the judge ruled.
EAC moved to court challenging Equity Bank’s intention to sell the properties after defaulting the loan.
Through lawyer Philip Nyachoti, the company contended that it has been liquidating the outstanding debt and has made all the efforts to negotiate and agree on a workable programme/time-table with the Bank in light of the hard economic situation in the country.
However, EAC claimed that the bank has rejected its numerous proposals without any justifiable cause whatsoever and now intends to completely cripple its operations and entire business investment of many years by selling the suit properties.
In response, Equity Bank stated that it is not true that the plaintiff has paid Sh 617 million as interest and that the interest that has accrued on the plaintiff’s facility so far is Sh 1,025,498,791 and the plaintiff has only paid Sh 587,276,840 on account of interest.
The Bank added that the company is still indebted to it in the sum of Sh 1,999,458,755.92 as at 3rd November 2023 and this sum continues to accrue interest.
In addition, the bank disputed claims that it is not true that the parties have been engaging with a view to reconciling the plaintiff’s account as alleged.
“While there have been discussions between the parties regarding proposals on paying the debt, the plaintiff has not made any acceptable proposal to the bank and the bank’s letter of 12th June 2023 to the plaintiff’s parent company, Transcentury PLC, did not request for any further information with respect to the debt,” the bank’s lawyer Lawson Ondieki argued.
As such the the lender contended that it is entitled to realize the securities owed to it.
Reasons for dismissal
Justice Mong’are found that EAC had not demonstrated a prima facie case for a number reason.
First, on the contention that the insolvency proceedings maintained the status quo and preserved the assets of the plaintiff including the charged properties, it is now settled law that a secured creditor, such as the bank, is entitled to exercise its rights under the security document or statute in the event of default by a borrower and that the power is not subject to insolvency proceedings commenced against the borrower by any other creditor.
“As a secured creditor, the bank is entitled to exercise its statutory power of sale without recourse to the court exercising insolvency jurisdiction,” the judge ruled
It was the court’s conclusion that the company’s application dated 17th October 2023 was without merit. “The said application is dismissed forthwith. Costs are in the cause. Any interim orders in force are hereby discharged forthwith.”
The judge added that there was no valid reason why the bank should be restrained from exercising its statutory power of sale as the same has now crystallized following service of the statutory notices.
Further, the court found that the contention that the plaintiff has paid a substantial amount and that a dispute exists as to the exact amounts owed, it is now settled that a court cannot grant an injunction restraining a chargee from exercising its statutory power of sale solely on the ground that there is a dispute as to the amount due under the charge
On the contention that the suit properties are of sentimental value, the judge said it should not be lost that once EAC offered the suit properties as security for the loan granted to it, the same became a commodity for sale and damages are foreseeable.
“There is no property, however sentimental or peculiar, that is incapable of being valued and damages awarded for it,” she concluded.
