Ill-fated Dusit complex deal that led to Sh5 billion debt, auctioneer’s hammer
The court has allowed the sale of prime property at Nairobi’s 14 Riverside Drive where DusitD2 hotel sits to help recover a debt of Sh5 billion.
On Friday, Justice Alfred Mabeya gave Synergy Industrial Credit the greenlight to auction the business complex when he dismissed an application by I&M Bank that sought to derail the sale.
The bank had opposed the auction arguing that Cape Holdings Ltd, which owns 14 Riverside Drive, owes the lender roughly Kes2.82 billion.
The roiling dispute arose started in 2010 when Cape Holdings entered into an ill-fated sale agreement for two of the 14 blocks in the complex with Synergy.
On completion of the construction, however, Cape Holdings regened on its legal obligation to transfer the ownership of the purchased blocks to Synergy.
Aggrieved by the turn of events, Synergy took the matter before an arbitration panel led by Mr Ochieng Oduol in 2015.
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In his determination, Mr Oduol ordered Cape Holdings to refund the principal amount invested by Synergy plus interest, which amounted to Kes1.6 billion at the time.
Dissatisfied with the outcome, Cape Holdings proceeded to the High Court and saw the Kes1.6 billion compensation award dismissed.
Further, the matter went to the Court of Appeal where Synergy managed to get their award restored.
An attempt by Cape Holdings to pursue the matter in the Supreme Court failed.
“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 CJ Martha Koome, Mohammed Ibrahim, Smoking Wanjala, Njoki Ndungu, and Isaac Lenaola ruled.
Lawyer Ahmednasir Abdulahi for Synergy then proceeded to the High Court seeking nod to action the property a move that was opposed by I&M Bank property administrator Vruti Shantilal Shah, who said that the complex was charged.
I&M Bank countered the application saying 14 Riverside Drive was used by Cape Holdings as collateral in securing a loan of Kes2.82 billion and therefore it cannot be sold.
High Court Judge Alfred Mabeya, however, said that the charge placed by the lender was designed to give Cape Holdings the leeway to dodge its legal obligations to Synergy.
“The court can but only agree with the applicant’s contention that the timing of the administration was not meant for the purpose known under the Act,” Mr Justice Mabeya said.
Court filings noted that Synergy had placed a caveat through a 2011 court order, effectively sending a warning to all parties over transactions touching on the business complex.
“With such a caveat, that property was not free to be given as a security,” the judge ruled.
“The court has considered the foregoing and the fact that it has not been shown that the amount to be realized from the sale of the suit property would not be enough to offset both the decretal amount and a substantial amount part thereof remain for the bank,” Justice Mabeya ruled.
