Judge allows sale of Dusit hotel complex over Sh5 billion debt

A judge has allowed a prime property at Nairobi’s 14 Riverside Drive where high-end office suites and Dusit D2 Hotel stand to be auctioned over a Sh5 billion debt.

Justice Alfred Mabeya dismissed an application by I&M Bank and its administrator, seeking to stall the sale. They argued that the company that owns the building owes them $25 million (Sh2.82 billion).

The complex is owned by Cape Holdings Ltd and has been embroiled in a dispute since 2010 over a botched sale deal. Synergy Industrial Credit, which wants to auction the property, had paid Sh750 million to acquire some of the apartments but the deal fell through and the matter was referred to an arbitrator. The debt has since ballooned to Sh4.5 billion plus interest.

The judge ruled that it was not necessary for Synergy, through senior counsel Ahmednasir Abdullahi, to seek the administrator’s consent before applying to be allowed to auction the property.

Justice Mabeya said the charge placed by the lender was a moratorium for the company to enable it to evade its legal obligations.

Synergy had placed a caveat through a court order in 2011, warning the public over the property. “With such a caveat, that property was not free to be given as a security,” the judge said.

The dispute revolved around a transaction where Synergy bought two of 14 apartments that were under construction and paid Sh750 million upfront. When the property was completed, Cape Holdings refused to transfer the property and the matter was referred to arbitration.

In 2015, the arbitrator, James Ochieng Oduol, ordered the developer to refund the principal amount and interest totalling Sh1.66 billion.

Cape Holdings then sued in the High Court and convinced the court to quash the award, saying it was erroneous.

That prompted Synergy to move to the Court of Appeal and the award was restored while attempts by Cape Holdings to move to the Supreme Court and reverse the decision was dismissed by the apex court.

In an October 8 ruling, the Supreme Court held that, on the grounds of jurisdiction, it would not interfere with the judgment of the Court of Appeal that upheld the award.

“We reiterate our holding, and find the court lacks jurisdiction to entertain this appeal, having found so, we have no hesitation in declaring the application before us one for dismissal,” Supreme Court judges Martha Koome, Mohammed Ibrahim, Smoking Wanjala, Njoki Ndungu and Isaac Lenaola ruled.

I&M Bank in October appointed Mr Vruti Shantilal Shah the administrator but Synergy challenged the move, saying it was fraudulent because Cape Holdings was capable of paying its debt from rent collected from the property.

Mr Abdullahi then moved to the High Court, seeking Synergy to be allowed to auction the property and recover its money, but Mr Shah opposed the planned sale, saying the company was placed under administration.

The judge said the bank would not suffer prejudice because it has other securities whereas stopping the sale would subject Synergy to irreparable loss because its bid to recover the money would be delayed.

[email protected]