Court bars Equity Bank receivers in Sh6b case

Court halts Equity Bank-appointed receivers in Sh6 billion TransCentury dispute pending case hearing. [File, Standard]

The Commercial Court in Nairobi has handed an investment holding company, TransCentury PLC, a major reprieve after barring receiver managers appointed by Equity Bank to recoup its Sh6 billion debt from the company.

High Court Judge Peter Mulwa directed that George Weru and Muniu Thoithi should not represent themselves or act as TransCentury receiver managers until the case filed by the Consumer Federation of Kenya (Cofek) is heard and determined.

“ Pending further directions on June 2, 2026, a temporary injunction andor order of suspension is hereby issued restraining the 1st and 2nd defendants or respondents, whether acting in their personal capacities or through any firm, company, partnership, agent or any other person acting under their direction or authority, from acting, continuing to act, or holding themselves out as receiver ranagers of the 3rd defendant or respondent, and staying and or suspending, with effect from the date of this order, all actions, decisions, transactions, disposals, transfers, alienations, encumbrances, and or dealings of whatsoever nature carried out or purported to be carried out by the 1st and or 2nd defendants or respondents in such capacity,” ruled Justice Mulwa.

Equity Bank appointed Thoithi and Weru as the receiver managers.

However, Consumer Federation of Kenya (Cofek), in its case filed before the Commercial High Court, want the two thrown out.

According to the consumers lobby, Weru and Thoithi have allegedly failed to factor in that Transcentury had unpaid taxes, which made KRA also a creditor.

Cofek sued the two receiver managers, Kenya Revenue Authority (KRA), the National Assembly and the Attorney General.

It also listed Equity and the National Taxpayers Association (NTA) as interested parties.

Cofek accused the receiver managers of failing to balance Equity’s interests against those of the government.

“ The first and second defendants, by reason of the circumstances of their appointment and the manner in which they have conducted the receivership, have demonstrated a clear and apparent bias in favour of the first interested party (Equity) and have failed to discharge their duties as quasi-officers of the court with the degree of impartiality, independence and fairness required by law,” the lobby’s court papers read in part.

In total, Cofek claimed that Transcentury and its subsidiaries owe KRA Sh1.6 billion. It accused the taxman of failing to pursue the company for the owed amount aggressively.

“The quantum, magnitude and persistent non‑discharge of these statutory obligations place beyond any doubt the fact that these are not mere private commercial claims, but monies owed to the State for the benefit of the Kenyan public, and they therefore cannot lawfully be subordinated to, extinguished by, or relegated beneath the claims of the first interested party in the course of the receivership.”

“The appointment of a privately instructed Receiver Manager, in circumstances where there are unresolved tax claims by the State, allegations of bias and professional conduct concerns, does not adequately serve the public interest,” argued Cofek.

Transcentury is embroiled in a separate case with Equity over the same two receiver managers.

It filed its case claiming that the bank illegally took over their premises and appointed the administrators without due process.

Its lawyer Philip 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 of 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 loan amounts totalling USD87 million (Sh12.1 billion) to the company between June 2013 and November 2014.

According to the company, they have paid a substantial amount to repay 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 pay.

He added that the company has made all efforts to negotiate with the bank in light of the ongoing hard economic situation facing the country, but they have refused to listen.

Equity Bank, through lawyer Kiragu Kimani, in its response, told the court that the company is likely to dispose of its assets unless they are frozen.

According to the lawyer, the bank stood to lose a substantial amount of the unsettled loan if the company went ahead to manage and dispose of some of the properties which were used as guarantees to secure the loan.

He stated that the company did not disclose to the court all facts when it obtained orders from the court on June 20 this year.

Kimani argued that Equity had, on June 8, 2023, demanded the amount owed by the firm. However, he stated that TransCentury requested a 24-month moratorium.

“The plaintiff was under a duty to make full and frank disclosure when approaching the court ex parte. As the plaintiff failed to disclose the information set out above, the plaintiff did not approach the court with utmost good faith and the interim orders of June 20, 2023, should be set aside,” the senior lawyer argued.

Nyachoti, however, told the court that since most of the assets were charged to the bank, there is no risk of the company selling them without the bank’s knowledge.