Court bars hotel from advertising petition to wind up Mombasa rival

A Mombasa court has stopped advertisements relating to a dispute between two hotels over a lease agreement.

The judge made the orders in favour of a petition by Pride Inn Group of Hotels, which said an advertisement by Tropical Hotels in one of the leading dailies and a gazette notice were killing its business.

The two establishments are entangled in a legal battle after Tropicana filed a petition to have its rival wound up for defaulting on a Sh86 million debt linked to a failed lease.

Salim Moloo, Tropicana's owner, said in court documents that he had leased Eden Rock Hotel in Malindi to PrideInn in 2011, but  the latter cancelled the contract.

His lawyer, Kamundi Kinyua, said Pride Inn had agreed to pay the debt in installments through postdated cheques but started defaulting in 2012. The debt stood at Sh69.35 million in May 2016, but carried an interest rate of 26 per cent.

"We had agreed, in the event of not honouring the cheque, that the party should take legal action," Mr Kinyua said.

However, in the latest petition, Pride Inn contested an advertisement on the winding up.

"The gazette notice and the advertisement were discussing the issues before the court and thus affecting the business of the hotel," said lawyer Natasha Ali for the hotel.

She argued that the effect has already been felt by the hotel and that social media is causing problems for them with banks, creditors and the public.

"I, therefore, ask the court to stay the advertisements until this matter has been and determined," Ali pleaded.

Justice Patrick Otieno stayed the advertisements on the matter until further orders are issued by the court.

In the case, Pride Inn has asked the court to dismiss the winding up petition, terming it defective.

Ms Ali told Justice Patrick Otieno the petition was filed under the previous Companies Act and not the Insolvency Act 2016.

"The petition is defective and the respondent is worried (that) any action arising from the petition would have been grounded on a foundation that cannot hold in law," she said.

The lawyer argued that Tropicana Hotels made their claim after a new law came into effect. "This petition is not valid before this court since it was filed under the Insolvency Act which was enacted in January 2016."

But Tropicana said the debtor has taken too long to pay the money and failed to honour its promises.

"More than five years have passed since the undertaking to pay the debt was given by the company to the petitioner and more than three months have passed since the statutory demand was issued and received, but the company has failed to satisfy the whole debt or part thereof," said Mr Kinyua.

A ruling will be made on May 26.