Mr Raphael Tuju's Dari Restaurant grounds.
Former Cabinet Secretary Raphael Tuju has gone to court to stop a regional lender from auctioning his two prime properties in Karen, where two hotels are located, over a disputed debt of $35,057,622 (about Sh4.5 billion) arising from a botched loan deal in 2015.
Mr Tuju moved to the High Court under a certificate of urgency stating that the East African Development Bank (EADB) had instructed Garam Investments Auctioneers to sell the properties to recover the debt.
According to the former CS, the auction is scheduled to take place on October 1, 2024, but the auctioneer had not complied with the law on forced sale.
He has also argued that the amount demanded from him and the interest accrued is higher than the principal loan.
“Unless the orders sought in this application are granted, there is an imminent risk that the plaintiffs/applicants' property will be disposed of by way of public auction on October 1, 2024 without due process of law being adhered to,” he said.
The auctioneer invited buyers to the properties, which include the Entim Sidai Wellness Sanctuary, Tamarind Karen and Dari Business Park, both in Karen.
The properties were charged as security for the loan Mr Tuju took out in 2015.
Mr Tuju also alleged that the auctioneer did not issue a statutory notice as required under Section 90 of the Land Act, which should have stated the amount payable.
“The defendants/respondents have further not conducted any forced valuation on the suit properties prior to advertising the same for sale by way of a public auction for purposes of establishing the reserved price, the amount the defendant would recover from the sale, and the amount payable to the plaintiffs after the defendant recovers the amount allegedly owed,” he said.
Mr Tuju and the lender have been fighting over the properties over a loan agreement entered into in 2015.
The matter has gone all the way to the Supreme Court, where Mr Tuju is challenging the enforcement of a UK judgment, which found that the former CS had breached the loan agreement.
Meanwhile, High Court Judge Alfred Mabeya has dismissed an application by Mr Tuju to refer the dispute to arbitration, saying the court is prohibited from pronouncing itself on the matter, as it had been addressed by another judge.
“In light of the foregoing, the court is precluded from considering the merits of the issues raised in the referral application,” said the judge.
Justice Mabeya said the issues raised by Mr Tuju should have been dealt with by the English court and since the UK judgment has been recognised and registered, “it was a no-go zone for this court”.
Justice Mabeya also dismissed an application by the lender seeking to attach rental income from one of the hotels being managed by Tamarind Management Limited, saying that the court could not determine the term of the lease, the amount payable each month, and therefore the extent of the amount sought.
“Further, it is not clear whether the garnishee (Tamarind) was served with the application to appear and admit or deny the debt,” said the judge.
While seeking to refer the matter to arbitration, Mr Tuju said he was ready to pay the amount.
In the dispute, his firms Dari Ltd and SAM Company Ltd entered into a facility agreement with the lender for a loan of $9.3 million in 2015 to expand his business.
The loan was secured by several forms of collaterals, including an indemnity and guarantee agreement on April 10, 2015.
However, Mr Tuju accused the bank of failing to disburse the full amount, thereby causing cash flow difficulties for the principal debtor.
This allegedly hindered its ability to fulfil its obligations under the agreement. He said negotiations between the parties ensued in a bid to resolve the dispute and although a settlement agreement was drafted, the bank moved to a UK court and obtained a judgment against him.
