The High Court has issued orders restraining the Kenya Commercial Bank (KCB) from appointing receivers to take over Proctor and Allan (EA) Limited over Sh 1.6 billion loan.
The Commercial and Tax Division court also issued orders holding in abeyance the actions and appointment of Swaroop Rao Ponangipalli and Ponangipalli Venkata Ramana Rao as receiver managers of Proctor and Allan (EA).
“In the interim, a temporary injunction be and is hereby issued holding in abeyance the actions and appointment of the 2nd and 3rd respondents as receiver managers of the applicant persuant to a debenture dated 1st November 2013 and supplemental debenture dated 28th October 2015 between the applicant and the 1st respondent……” the Deputy Registrar ruled.
The court further ordered the existing “status quo” between the parties as at the date immediately prior to the appointment of the two receivers on 24th February 2025 be maintained in order to preserve the assets of the applicant.
The orders were issued pending the hearing and determination of the said.
In addition, the respondents were restrained from denying the directors and authorized officials of Proctor and Allan unfettered access to the company’s assets, offices, security keys, all company records, emails, all funds, all bank accounts, all contracts and attendants documents and all matters pertaining to and related to the company’s business.
The loan
The Plaintiff avers that pursuant to Debenture dated 1st November 2013 and a Supplemental Debenture dated 28th October 2015 the KCB advanced credit facilities to Proctor and Allan (EA) Ltd amounting to Sh 1,676,500,000.00 to which the company has made substantial repayments to the tune of Sh 506,000,000.00 in interest payments and penalties in respect thereof and continued to service the facility as contracted.
The company claims that on 27th August 2024, following negotiations between the company and the Bank, KCB accepted a proposal of a net payment of Sh 1 billion by 30th November 2024 being a final and full settlement of the loan credit facility under the said debentures.
Through Kasimbazi & Co. Advocates, Proctor and Allan avers that KCB was well aware that it was undergoing a strategic investor process of acquisition to raise capital from investors to fully settle the outstanding credit facility.
“In a letter dared 18th June 2024 the plaintiff through their financial Consultant NISK Capital had appraised the 1st defendant of the offer valued or USD. 10,000,000.00 (approx. Sh 1,250,000,000.00) that was subject to due diligence,” the company submitted.
The applicant avers that the bank, copied in a letter dated 10th December 2024, was well aware and informed that the company had successfully completed the due diligence exercise; and of the correspondences between the company and the investors aimed at securing funding from the investors bank to finalize the USD 10 million investment in the applicant.
The court heard that vide an email dated 11th December 2024, KCB acknowledged the investors’ interest to continue with the transaction and also the request for the 30 days extension to complete the financial processes.
“At all material time the plaintiff acted with utmost good faith and ensured that the 1st Defendant was well appraised of all developments in respect to securing the USD 10 million investment that would settle the outstanding debt,” the company added.
In a letter dated 24th January 2025, KCB issued Proctor and Allan with a demand notice for final and full settlement of the agreed upon sum of Sh 1 billion by 31st January 2025.
In response, via a letter dated 27th January 2025, the company fully disclosed and appraised the bank of the reason for the slow progress of the transaction with their investor which was at an advanced stage.
Importantly, the plaintiff reiterated its corporation to ensure that the transaction was successful, in this regard the plaintiff requested the 1st Defendant for an extension of time on behalf of the investor to complete its financial programs.
Continued Commitment
The court heard that the plaintiff and the investor were still committed to the successful completion of the transaction and at all times the bank was appraised of the progress.
The Plaintiff avers that in a show of commitment to settle is outstanding debt whilst awaiting a deposit confirmation from the investor, the plaintiff explored another capital investment option interested investor who expressed their intention to purchase the applicant’s business at the sum of Sh 800 million in a letter of offer dated 18th February 2025.
Shockingly, on Friday 21 of February 2025, KCB issued the plaintiff with a demand notice for the immediate payment of Sh 4,918,591.477.71 being the outstanding loan, accrued interest and charges.
“The said amount was much more than what had been agreed upon by the plaintiff and the 1st defendant.”
Proctor and Allan claims that shortly thereafter, in a blatant display of bad faith on Monday 24th February 2025, the bank purportedly appointed the 2nd and 3rd defendants as joint receiver managers of the plaintiff to take the plaintiff, its assets and operations on account of the outstanding loan in the aforementioned demand notice dated 21st February 2025.
It was further submitted that on the same day, in a letter dated 24 February 2025 the receiver managers (Swaroop and Ramana Rao) terminated the employment of all the Proctor and Allan employees without notifying the company.
The plaintiff avers that the appointment of the two receiver managers is unprocedural, unlawful and in bad faith since no notice was issued.
The case will mentioned on 13th March 2025 for further directions.
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