A court has allowed the auction of a prime piece of land where the Dusit D2 Hotel complex is located to be auctioned over a Ksh5 billion debt.
This is after Justice Alfred Mabeya dismissed an application by I&M Bank and its administrator who sought to delay the sale. The bank argued that the company that owns the building owed them $25 million (Ksh2.82 billion).
The complex is owned by Cape Holdings Ltd. The company has been locked in a fierce battle for the property with Synergy Industrial Credit which wants to auction the land.
File image of Dusit D2 Hotel building. |Photo| Courtesy|
According to a report by Nation, Synergy acquired several apartments within the complex and paid Ksh750 million in 2010. The deal fell through.
The debt has since ballooned to Ksh4.5 billion plus interest.
Justice Mabeya in his ruling stated that it was unnecessary for Synergy to seek the administrator's approval before applying to auction the property.
Synergy is represented by Senior Counsel Ahmednasir Abdullahi.
The judge said that 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,” Justice Mabeya said.
Synergy bought 2 of 14 apartments that were under construction at the complex and paid Ksh750 million upfront. After completion, Cape Holdings failed to transfer the property and the matter was referred to arbitration.
In 2015, James Ochieng Oduol who was the arbitrator ordered Cape Holdings Ltd to refund a total of Ksh1.6 billion. This amount was inclusive of interest accrued.
Cape moved to the High Court and the award was voided on account that it was erroneous.
Synergy moved 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.
In October, I&M Bank appointed Vruti Shantilal Shah the administrator. Synergy challenged the move, citing fraud. The company argued that Cape Holdings was capable of paying its debt from rent collected from the property.
SC Abdullahi then moved to the High Court, seeking Synergy to be allowed to auction the property and recover its money, but Shah opposed the planned sale, saying the company was placed under administration.
Justice Mabeya ruled that 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.
