A court has barred a bank from disposing of a property in Riruta, Nairobi, in a Sh246 million loan dispute with a real estate developer and referred the matter for arbitration.
Commercial court judge Grace Ngenye ordered First Community Bank and Isaac’s Investments Company Limited to look for arbitrator who understands Sharia law to settle the dispute.
“The dispute herein between the plaintiff and the defendant is referred to arbitration. An order be and is hereby issued that the parties shall agree on an arbitrator knowledgeable and competent with Shariah Law in view of the unique nature of the Finance Agreement signed between both parties within 60 days,” Justice Ngenye ruled.
At the heart of the dispute is a property hosting more than 90 apartments.
Isaac's Investment told the court its directors, who are Muslims by faith, approached the lender and applied for Musharaka-Ending-With-Ownership financing in order to develop the property.
Ali Isaac, a director, said First Community initially gave him a loan of Sh36 million to construct phase one of the project.
It then increased the amount in 2013 to Sh210 million.
Ali argued that according to the offer letter, the bank was to share equally the profit or losses arising from the project.
He argued that in 2015, the lender gave him another letter of offer, this time increasing its shareholding in the security from 80 to 86 per cent while his company’s share reduced from 20 to 14 per cent.
The judge heard that the bank advertised the property, seeking to auction it on the basis that he had not honored his end of the bargain. He rushed to court to block the sale of 19 apartments, which were remaining.
According to him, the bank has recovered Sh380 million out of a loan of Sh245 million. Ali asserted that he has fully repaid the loan.
First Community’s legal officer Claris Ogombo told the court that Ali had not disclosed the full information about the loan.
She explained that Ali had offered to pay Sh120 million from yet another loan ofSh500 million which he proposed to construct 560 units in a separate piece of land. She argued the bank rejected the proposal.
The lender asserted that the case was an abuse of court process as the firm had withdrawn another case it had filed before the court.
Justice Ngenye noted that the bank had not produced evidence showing the firm owed it.
“Having regard to the fact that the loan was taken from "a no-interest" account and bearing in mind that the applicant has already lost most of his property towards repayment of the loan is a pointer that more than was advanced or close to the advanced loan has already been recovered,” she ruled.
“It is only then fair and just to allow that parties settle the dispute in the manner agreed upon whilst in the meantime the remaining units are preserved.”