East Africa Cables blocks Equity Bank's bid to sell its Sh3bn assets
Equity Bank branch on Muindi Mbingu Street in Nairobi on April 1, 2021.
What you need to know:
East Africa Cables went to court after it was served with a notice by Equity Bank of plans to auction the property in 90 days.
Justice Josephine Mong'are certified the petition as urgent and directed Equity Bank to file its response within seven days.
The High Court has blocked Equity Bank from selling three properties of East Africa Cables valued at Sh3 billion to recover a loan advanced by the latter's sister company in Tanzania in 2019.
The firm, a subsidiary of TransCentury Ltd, went to court after it was served with a notice by Equity of plans to auction the property in 90 days.
Justice Josephine Mong'are certified the petition as urgent and directed Equity Bank to file its response within seven days.
"That in the interim, orders in terms of prayer two and three are granted," Justice Mong'are said.
The case will be mentioned for directions on October 23.
Evidence tabled in court showed that the lender advanced the company and its associate firm known as East Africa Cables (Tanzania) Limited a loan of Sh1.7 billion in January 2019.
According to lawyer Philip Nyachoti, the lender has acknowledged receiving substantial payment and has to date repaid Sh617 million in interest.
The loan was secured using three developed properties.
Equity had appointed Muniu Thoithi and George Weru as joint administrators on June 16 but the company challenged the decision arguing that they would distabilise its operations as a going concern.
The firm was granted temporary orders, suspending the administration pending determination of the petition, and attempts to lift the suspension were rejected by High Court judge Alfred Mabeya.
"The plaintiff further avers that in utter and total disregard of the orders aforesaid, the defendant proceeded to serve the plaintiff with the three statutory notices of its intention to sell the suit properties," Mr Nyachoti said.
According to the firm, Equity gave it 90 days to pay Sh1.95 billion, failure to which it would sell the properties.
Mr Paul Mungai, a director of the company said in an affidavit that the notice is disputed and Equity, therefore, has no basis to start the exercise of its statutory power of sale on the suit properties.
The court was informed that parties have been engaged in extensive talks to reconcile the firm's account and determine the actual outstanding amount.
The last correspondence, according to Mr Mungai, was on June 12, by EAC's holding company TransCentury requesting more information from Equity.
"As such, the statutory notices are premature, unprocedural, and in bad faith," Mr Mungai said in an affidavit.
He said the firm has been liquidating the outstanding debt and has made all the efforts to negotiate and agree on a workable programme or time-table with the bank "in light of the hard economic situation in the country".
Mr Mungai added that Equity has rejected its numerous proposals without any justifiable cause whatsoever and now intends to completely cripple the operations and entire business investment of many years by selling the properties.
