Co-op bank dealt setback in Nyali land auction plan

Co-op Bank

Co-operative Bank of Kenya branch along Parliament Road, Nairobi. High Court has stopped Co-op Bank from auctioning or selling by private treaty a parcel of land in the upmarket Nyali area in Mombasa.

Photo credit: File | Nation Media Group

The High Court has stopped Co-operative Bank from auctioning or selling by private treaty a parcel of land in the upmarket Nyali area in Mombasa over an alleged Sh155 million claim.

Justice Olga Sewe issued the temporary order pending a hearing and determination of a case filed by Jonathan Mturi, the proprietor of the land, who is challenging the claim against him by the bank.

“In the instant matter the path leading to the lower risk of injustice would be to sustain the status quo by stopping the impugned auction pending the hearing and determination of the plaintiff’s (Mr Mturi) case,” said Justice Sewe.

The judge sitting in Mombasa also ruled that Mr Mturi had made out a case to warrant the grant of the order.

Justice Sewe said that she was satisfied that the plaintiff had demonstrated on a prima facie (in the first instance) basis that he had a right in connection with the property which has allegedly been infringed by the defendants.

However, the judge rejected an argument by Mr Muturi that the charged property comprises their family residence which they have sentimental attachment, saying that property once charged becomes a commodity for sale like any other.

The bank had opposed the grant of the temporary injunction saying the plaintiff was merely out to frustrate its exercise of a statutory power of sale and yet not proposing to pay what he says he should pay.

Through its lawyer, the bank urged the court to consider that the debt continues to grow every day thus the balance of convenience was in favour of refusing the injunction.

According to Mr Mturi, he is the registered owner of the land measuring approximately 0.9 acres and a guarantor of a bank’s overdraft of Sh51.2 million advanced by the bank to Quantum Petroleum Ltd in 2013.

Mr Mturi is seeking a declaration that the claim of Sh155 million against him is an illegality as it comprises not only the bank overdraft that was secured by two charges against his title on the land but also liabilities of Quantum Petroleum Ltd to the bank which he is not a party to.

The plaintiff argues that the financial facility was secured by a charge dated March 18, 2013, for Sh40 million and a further charge dated November 8 the same year for Sh11.2 million which were registered in favour of the bank as against him on the land.

Mr Mturi says that the Co-operative Bank, in exercise of its statutory right of sale advertised the land for sale by public auction.

“The plaintiff maintains that at no time did he consent and agree or charge the land to secure all the liabilities of Quantum Petroleum Ltd as alleged in a letter dated April 5,” part of the suit documents state.

Mr Mturi argues that the proposed sale of the land by public auction remains an illegality in law and void from the start.

According to the plaintiff, he is neither a shareholder nor director of Quantum Petroleum Ltd, and his only involvement with the dealings between the bank and the company was being a guarantor to the Sh51.2 million loan.

Mr Mturi says that should the proposed auction of his land go on based on the amount of money indicated in the letter and statutory notice, he would suffer loss which includes being deprived of his property and being denied quite a possession of his land unjustly.

He also wants an order issued directing the bank to furnish him with the statement of accounts for the bank overdraft facility secured by the charges against his title in the land.

The plaintiff also wants an order of permanent injunction issued restraining the bank from selling or alienating the land to recover any debt payable to Quantum Petroleum Ltd which was not secured by the two charges against his title in the property.