The High Court has saved Transcentury from being placed in receivership over a Sh6 billion loan dispute with Equity Bank.
Justice Alfred Mabeya issued the order suspending a decision by the bank to appoint two receiver managers to take over the company until the dispute is heard and determined.
“The bank is hereby restrained from appointing receiver managers, administrators or exercising its powers to take over the company pending determination of the suit. The status quo between the parties must be maintained as before the appointment of the receiver managers,” ruled Mabeya.
He further restrained Equity Bank from denying the company’s directors and its officials from accessing their premises which were taken over by the bank last Friday.
Following the injunction, TransCentury Group Chairman Shaka Kariuki said they were happy that the court had "seen the irregularity" in the receivership process.
"We viewed the bank as a partner and have been in what we saw as positive discussions to arrive at an amicable agreement just a day before the receiver was appointed by the bank,” he said.
“TransCentury is a significant business in Kenya’s economic landscape, we are committed to meeting our obligation, and hence the reason why we embarked on a rights issue transaction at the beginning of the year.
"Despite the challenging economic environment that Kenya and the world at large faces, we raised money from our shareholders and were preparing to settle on an agreement favourable to the business and the bank,” he added.
Transcentury filed the urgent suit through lawyer Philip Nyachoti claiming that the bank illegally took over their premises and appointed George Weru and Muniu Thoithi of PricewaterhouseCoopers (PwC) as receiver managers to manage its affairs over the disputed loan.
Nyachoti told the court that the forceful takeover had prejudiced and destabilised the company’s operations even after discussing with the bank a road map for repaying the loan.
“The company informed the bank that they are in the final stages of finalising rights issues to the tune of Sh2 billion for purposes of injecting capital into the business and have enough to offset the outstanding loan balance but they declined,” said Nyachoti.
The dispute dates back to 2013 when the bank advanced a loan facility amounting to $87 million (Sh12.1 billion) to the company between June 2013 and November 2014.
According to the company, they have paid a substantial amount of the loan and have been repaying faithfully until June 12, 2023 when the bank demanded that they settle all the outstanding balance.
Nyachoti argued that the bank did not calculate the correct figure owed to them by demanding a balance of Sh6 billion which is way above what the company is supposed to repay.
“Despite assurance from the company that they had made clear plans to repay the loan, the bank irregularly and unprocedurally went ahead to appoint the receiver managers on Friday last week without issuing a demand as required in law,” argued Nyachoti.
He claimed that the receiver managers were appointed on the same day the company was issued with a notice which showed bad faith and ill motive to take over the company through illegal means.
The lawyer stated that the company is still disputing the figures being quoted by the bank and still negotiating to have all the records and accounts put straight.
“In addition, the appointment of receiver managers will completely cripple the company’s operations, particularly the ongoing massive projects including the ones being carried out by its subsidies,” said Nyachoti.
He added that the company has made all efforts to negotiate with the bank in light of the current hard economic situation facing the country but they have refused to listen.
Justice Mabeya directed the bank to respond to the suit within 14 days and scheduled the hearing on July 3.