Court allows bank to sell Nakumatt CEO’s property
By Kamau Muthoni | April 30th 2021
The Court of Appeal has declined to stop Nakumatt CEO Atul Shah’s property in Nairobi from being auctioned.
This is despite his complaint that KCB Bank had given an undertaking that it would not auction the property.
Court of Appeal Judges William Ouko, Roselyn Nambuye and Asike Makhandia declined to issue orders barring the bank from auctioning the property to recoup a loan, noting that Nakumatt’s holding company, Collogne, has no arguable appeal.
The judges said Collogne did not disclose to the court that the property had been sold to Furniture Palace International (Kenya) Limited for Sh1.4 billion and did not join the company in the case.
They observed that the retail firm had not denied owing KCB money.
“We are not satisfied that the applicant has an arguable appeal. Since it is a requirement that both limbs of arguability and nugatory aspect should be demonstrated before an order can be granted under rule 5(2) (b) of this court’s rules and the applicant having failed to establish the arguability of the intended appeal, we need not consider the nugatory aspect,” they ruled.
Collogne first moved to the High Court seeking to block the lender from selling its property. Justice Mary Kasango directed that parties maintain the status quo until December 18, 2020.
KCB then filed an application before Justice Alfred Mabeya who lifted the orders, clearing KCB to finalise the sale. Aggrieved, Collogne appealed, arguing that Justice Mabeya ignored the fact that there was a guarantee by the bank not to sell the property, and that the court record went missing.
According to Nakumatt, the property had been charged to other lenders and there were tenants. It argued that it would suffer if the sale was completed. But the bank opposed the application arguing that if it was in fault, it would compensate Collogne.
Nakumatt is also faced with another debt battle with Bank of Africa (BOA).
KCB issued a notice late last year seeking to recover Sh467 million advanced to the now-defunct retailer. By then, the retailer owed creditors between Sh30 billion and Sh40 billion in secured and unsecured debt.
Most of the dissenting voices accused the retail chain of not making full disclosure of its asset position. However, the firm asserted that it kept the details close to its chest so as not to jeopardise share buyout talks with its rival Tuskys.
Those owed money include BOA, KCB, Diamond Trust Bank and Standard Chartered.
In a separate case heard by the same judge, BOA’s senior legal officer Kenneth Mawira explained that the sale was being coordinated by the four banks and with the knowledge of Nakumatt. It accused the firm of concealing information to the court that it had received the notices and that all the banks were claiming more than Sh4 billion.
“The notice would have shown that all the other chargees had been served with the same. There was a syndicated inter-lenders agreement dated April 5, 2013, by which all the lenders of Nakumatt had agreed to join in the exercise of each chargees’ statutory powers of sale and share the proceeds of the sale of the suit property in accordance with the terms and conditions of the said agreement,” Mawira argued.
Collogne disputed the claim, arguing there was no agreement between BOA and the other lenders. It asserted that if the sale would happen, then the other three would come after it for their pound of flesh.
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