State-run miller fights auction over Sh2b loan

The corporation says Standard Chartered Bank has failed, neglected and refused to consider its proposal on how to settle the debt. [Courtesy]

The Milling Corporation of Kenya wants the High Court to stop the Standard Chartered Bank from auctioning its property.

The government-owned firm that deals in maize meal and animal feeds had used the property as security for a Sh2.2 billion loan taken between 2010 and 2015.

It managed to pay Sh1,488,400,000 of the loan but defaulted on balance of Sh731,906,759 that has remained unpaid since 2017.

The corporation now wants High Court Judge Janet Mulwa to stop the impending advertisement and public auction of its land in Nakuru Municipality/Block 8/1.

According to the corporation, Standard Chartered Bank has failed, neglected and refused to consider its proposal on how to settle the debt.

“The defendant has frustrated all the plaintiff’s attempts to redeem its securities and settle its obligation in a manner that is advantageous to both parties,” reads the plaint.

The corporation claims the bank was determined to advertise and dispose of the land without considering reasonable offers from it and its investors.

It claims that the bank has rejected an offer from an investor to buy out the land for Sh1.02 billion.

The corporation claims its efforts to get the valuation for the property have been frustrated after the bank demanded Sh2.1 million.

It also claims the forced sale undervalues the property’s market price

“The forced sale valuation of the property of Sh696,539,475 is significantly lower than a forced value of Sh711,600,000 done in 2017. Bearing in mind land appreciates, the valuation prejudices the plaintiff,” reads the plaint.

The suit states that a sale by private treaty at market price represents the most reasonable path to safeguard the bank’s debt.

“Any advertisement will collapse ongoing negotiations to sell at a significantly high price by the way of private treaty and will have ramifications on plaintiff’s business interest and reputation, which can be avoided if reasonable alternative is accepted,” submits the corporation.

It argues that the parties will come up with the best alternative solutions if the court stops the auction and gives them time for negotiations.

The bank has, however, opposed the injunction orders sought by the corporation, claiming that the complaints made have no legal or factual basis to stop the auctioning of the property.

The bank submits that the corporation has never made any proposal on how to settle the debt. 

“The defendant has powers to auction the property when a loan is defaulted and has complied with the statutory requirements to exercise its power of sale by public auction,” states the reply.

The bank also states that the corporation had not presented documents to prove there was an investor interested in the attached property.