A food processing company stands to lose its prime estate in Kahawa Sukari over a Sh276 million loan given by the State-owned Kenya Development Corporation Limited (KDC).
The High Court refused to grant orders sought by Feast Foods Processors to stop the bank from exercising its statutory power of sale.
“At this point, I believe it is now obvious that the plaintiff has not made out a prima facie case with a probability of success... As I have already stated, any loss that is to be suffered by the plaintiff can be ameliorated by an award of damages as per section 99(4) of the Land Act," Lady Justice Freda Mugambi said in her decision on February 14.
"I have not been shown or told that the bank is not capable of paying these damages. The balance of convenience also tilts in favour of the bank [KDC] realising their security as early as possible so that the value of the suit properties is not outstripped by the ballooning debt.”
Suit properties
Feast Food Processors took out the Sh276,700,000 loan from KDC and secured it with a charge over two suit properties in Kahawa Sukari and Kwale.
The company told the court that after receiving the loan it experienced some challenges that frustrated its operations and made it difficult for it to continue meeting the loan repayments.
It accused KDC of being on a mission to enrich itself from the suit property based on its refusal to restructure the loan despite the many requests made by the company.
The company added that the bank had undervalued the property. It went to court seeking to stop the bank from exercising its statutory power of sale over the two properties that had been given as security.
KDC told the court that the processing company failed in its duty to repay the loan in instalments as was expected.
It added that as of August 2024 when the company came to court, it had an outstanding loan balance of Sh466 million with arrears of Sh402 million which continued to accrue interest. The lender said it has complied with all the legal requirements and even issued all the required notices.
While making the decision Justice Mugambi said for the court to deny KDC the opportunity to sell the properties, the company ought to show that it has a case with a probability of success and that it will suffer irreparable harm that could not be adequately compensated by damages.
Power of sale
The court concluded that the claim that the Kahawa Sukari property has been undervalued is not enough reason to stop KDC from exercising its statutory power of sale.
“It is not to be forgotten that the plaintiff has admitted even on this occasion, to being indebted to the bank. Having found that the bank issued and served the requisite statutory notices, it follows that the right to exercise its statutory power of sale has crystallised and there is no valid reason for the court to stop it from proceeding with the intended sale of the suit property,” the court said.
