The High Court has allowed KCB Group and Absa Bank to seize assets of Savanna Cement Ltd over a debt running into hundreds of millions of shillings.
Justice Wilfrida Okwany declined the application by Savanna Cement, seeking to block the two lenders from appointing an administrator or liquidating its assets to recover the debt.
Court filings show the cement maker has defaulted on the loan repayment and KCB said interest alone stands at Sh297 million plus a penalty of Sh13.5 million.
The judge said Savanna admitted the debt, which is quite substantial and banks are the parties on the receiving end as they are likely to suffer losses.
She said the case tilts in favour of the banks because Savana did not show that the lenders will not be able to compensate the firm, in case it eventually wins the case.
“It is trite that parties to a contract are bound by the terms of their agreement and the court cannot rewrite the terms of the contract,” she said in the ruling delivered last month.
The firm sought a temporary injunction to block KCB Group from appointing an administrator or liquidator or selling its assets.
Its director Benson Sande Ndeta said the case it intends to file has a high chance of success. Mr Ndeta admitted that the company borrowed several loans from KCB and has been repaying.
He said the company was working on clearing the debt and even asked KCB to restructure the loan repayment terms.
But in the process, KCB allegedly increased the amount in breach of the in duplum rule, which bars banks from charging interest that exceeds the principal amount.
Mr Ndeta said Savanna asked KCB to provide it with a statement of account to ascertain how the balances reached the ‘astronomical levels’ but the lender allegedly threatened to seize its assets.
He said the company was coerced to repay loans of Sh5 billion by the two banks to forestall the seizure.
Mr Ndeta said the planned recovery was in breach of the company’s rights and a bid by the banks to unjustly enrich itself at the expense of its shareholders.
The company said it will suffer losses that cannot be compensated as the assets to be seized include machinery and land, which might never be recovered.
The firm said it has entered into several contracts to supply cement to various government projects, which will automatically be terminated if the bank made good the threat.
He further said the firm is working to complete the funding of its clinker project, which will allow it to get all the funds necessary to clear the debts.
On the other hand, seizing its assets will jeopardise the process and employees will lose their jobs.
Mr Ndeta said the company has proposed to pay the balance after it is given the statement for verification.
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