Court of Appeal clears Equity to sell East Africa Cable's land, but...

Equity Bank can sell four properties used as security by a cable maker, but with the caution that it may have to pay damages if the Court of Appeal finds it has breached the law in a dispute over a Sh2.2 billion loan. Justices Jamila Mohammed, Francis Tuiyott and Pauline Nyamweya said East Africa Cables had an arguable case after it raised questions that needed further interrogation. In their ruling, the judges observed that when the cables manufacturer offered land as security, it must have considered the possibility that the bank could decide to sell it, even in an unauthorised or irregular manner. According to the judges, the cables manufacturer must also have factored in that the only solution for any violation was to be awarded compensation. They unanimously agreed that it was not disputed that the lender was moneyed enough to afford any award by the court. For this, they lifted the orders they had initially issued barring Equity from selling off the properties as the case is ongoing. "The ability of the lender, a 'tier 1 bank', to pay any damages is not doubted and there can be no reason to hold it back from exercising its statutory power of sale even in circumstances where the debt is contested," the bench headed by Justice Mohammed ruled. The three judges nevertheless held that the private company's case raised questions that needed further interrogation. They said that East Africa Cables' argument that the orders issued barring Equity Bank from appointing receiver managers George Weru and Muniu Thoithi also bound it from selling the security could not be wished away. On its part, the cable manufacturer and the holding company, TransCentury, have insisted that finalising settlement with the bank is its priority. East Africa Cables moved to the Court of Appeal after High Court Judge Wayua Mong'are declined to stop the sale but barred the receiver managers from taking over the firm. Its managing director, Paul Muigai, argued that the appeal would be useless if the bank was allowed to sell the property. On the other hand, Equity's legal officer, Kariuki King'ori, said that Muigai had admitted the firm owed it Sh2.2 billion. He indicated that three notices had been issued to the company, informing it of the intention to liquidate the outstanding amount. Equity said that the appeal is not arguable, adding that in case it succeeded, then the appropriate remedy was in awarding damages. The lender has been in a running dispute with East Africa Cables and investment firm TransCentury over a Sh4.8 billion loan dispute. In a separate case at the High Court, Justice Francis Gikonyo barred Equity bank from either appointing a receiver manager or seeking to liquidate both the cable maker and the investment company for 90 days to allow them to pay the debt. At the same time, the judge blocked Weru and Thoithi, who were the appointed receiver managers, from taking over the two firms. The judge agreed with the companies' lawyer Philip Nyachoti that they were willing to set off the debt after securing funding from TLG Africa Growth Impact Fund Corporate Management Solutions (Cayman) Ltd, registered in Cayman Islands, United Kingdom. In the case, Nyachoti argued that efforts had been made to ensure the debt was fully paid. He explained that his clients had approached various financial institutions, including Access Bank (Kenya) Plc, Nexis Africa, Kuramo Capital and Benchmark International. Nyachoti argued that TLG eventually came on board on February 3, 2025, and agreed to shoulder all the responsibilities of paying off all debts owed to the tune of $8 million (Sh1.034 billion). He added that his clients had, however, repaid Sh618 million. Equity had placed the two firms under receivership over a Sh2.8 billion debt owed by TransCentury and a further Sh2.2 billion owed by East Africa Cables. According to Nyachoti, efforts to negotiate with the lender had hit a dead end. "The appointment (of receivers) would completely cripple the applicant's operations especially the massive projects. The court should issue an order to prevent the respondents from denying the directors and authorised officials access to the applicant's assets, offices and security keys," he argued. TransCentury is an infrastructure investment holding company with interests in energy, transport, water, agriculture technology and industrial sectors. East Africa Cables is a major manufacturer of electrical cables. In its argument, Equity urged the court not to intervene. It said that the more time the two firms were given to foot the loan, the more interest the loan accumulated. It claimed that the debt stood at Sh5.5 billion as of January 7, 2025.

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