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Tycoon’s road construction firm fails to block auction
The High Court ruling comes a month after the Court of Appeal also refused to stop the public auction of the company's various properties charged to the bank.
A road construction company owned by businessman Josiah Njoroge Njuguna has lost a bid to stop KCB Bank from auctioning its assets over a Sh860 million defaulted loan.
Nyoro Construction Company wanted the court to block the lender and its agents from attaching, selling, or interfering with its assets pending determination of the dispute concerning debt repayment default.
The properties it wanted protected include four parcels of land. Mr Njuguna, director of the company, stated that the initial amount was Sh267 million borrowed on September 8, 2005.
Pleading with the court to halt the intended auction, Mr Njuguna said he had repaid a total of Sh391 million through direct transfers and deductions from a performance bond, an amount exceeding the sum originally borrowed. Court papers showed that the construction firm defaulted on loan repayment because of delayed payments by the government.
However, Justice Peter Mulwa said the firm could not evade its financial obligations, and the lender must be allowed to realise the securities.
"It is undisputed that Nyoro Construction acknowledges its indebtedness and has defaulted in repayment. The bank, as chargee, is entitled to realise the securities, and a defaulting chargor cannot seek equitable relief to prevent a lawful sale unless the full debt is settled. Equity does not aid defaulters," said the judge.
Furthermore, the judge noted that one year ago the court granted an injunction suspending the auction, which was scheduled for August 8, 2023, conditional upon the company paying Sh200 million within 14 days and settling auctioneer charges.
In that ruling, the court further held that in the event of default, the bank was at liberty to proceed with the sale. The company defaulted, prompting the lender to return to court seeking to vacate the injunction orders. The application was allowed the injunction orders were set aside, paving the way for the auction.
“Given these circumstances, entertaining the instant application would be both duplicative and oppressive to the bank,” said Justice Mulwa.
The bank had opposed the application asserting that despite payments totaling Sh278.4 million, Nyoro Construction remained in arrears of Sh860.4 million.
In its heyday, Nyoro Construction company bagged big ticket contracts during the era of the late President Mwai Kibaki and Uhuru Kenyatta.
Among key multi-billion-shilling government projects undertaken by the company during the era of President Kibaki was the construction of Processional Road Nairobi and the repair and rehabilitation of Nakuru town roads.
Other infrastructure projects were the Mihuti-Kayu-Wanjerere-Rwathia and Githiga-Kibutha-Kanyenyaini roads in Murang'a, the Likoni Road Missing Link and Bridge and the Nakuru-Njoro-Mau-Summit roads.
All these with a combined value of Sh6.7 billion.
The High Court ruling comes a month after the Court of Appeal also refused to stop the public auction of the company's various properties charged to the bank. It had claimed that its reputation would suffer an irreparable dent.
Court papers indicate that over time the bank advanced various banking facilities to the company amounting to almost Sh1.5 billion, as working capital for the construction of various roads, pursuant to contracts that had been awarded to the applicant by the government.
Due to various reasons, among them delay by the government in paying the contractor for the road construction projects, the company defaulted in servicing the banking facilities. As a result, the bank sought to realize its security, including by way of the sale of the company's land in Nairobi.
Later during President Uhuru Kenyatta's regime, the company got various contracts such as the construction of Murang’a-Gitugi and Njumbi-Mioro road, periodic maintenance of Junction A104 Nakuru-Nyahururu road, rehabilitation of selected roads in Gikomba and rehabilitation of Mumbuni–Kathiani roads. The above had a combined value of Sh3.7 billion.
The company also did Solai Menengai Water and Sewerage treatment facility at Kabarak University, trenching and laying the fiber optic backbone cable along the Mombasa-Nairobi road as well as Kisumu Airport runway and Apron improvements.
