The High Court of Kenya has issued a decisive ruling, preventing Equity Bank from proceeding with the sale of three valuable properties owned by East Africa Cables, which are collectively valued at Sh3 billion.
The bank had initiated the auction process to recover a loan that had been extended to East Africa Cables by its sister company in Tanzania back in 2019.
The subsidiary of TransCentury Ltd, East Africa Cables, swiftly resorted to the legal route when it received a notice from Equity Bank indicating the bank's intention to auction the properties within a 90-day timeframe.
In response to East Africa Cables' petition, Justice Josephine Mong'are certified the matter as urgent and ordered Equity Bank to submit its response within seven days.
Justice Mong'are issued a crucial interim order, stating, "That in the interim, orders in terms of prayer two and three are granted."
This temporary injunction has effectively halted the bank's auction proceedings and provided some breathing room for East Africa Cables.
The court has scheduled a mention of the case for further directions on October 23, highlighting the gravity of the legal dispute between the parties.
The dispute revolves around a loan transaction in which Equity Bank advanced a total of Sh1.7 billion to East Africa Cables and its associated entity, East Africa Cables (Tanzania) Limited, in January 2019.
According to the company's legal representative, Philip Nyachoti, the bank has acknowledged receiving a substantial repayment, with an interest amount of Sh617 million being repaid to date.
The loan was secured with the three developed properties in question.
Earlier this year, Equity Bank had appointed joint administrators, Muniu Thoithi and George Weru, for East Africa Cables.
However, East Africa Cables contested this move, asserting that it would severely disrupt its ongoing business operations.
The company was granted temporary orders by the court, suspending the administration process until a final determination is reached on the petition.
Attempts to lift this suspension were subsequently denied by High Court Judge Alfred Mabeya.
The legal dispute escalated as East Africa Cables claimed that Equity Bank had disregarded the court's orders by serving the company with statutory notices indicating the bank's intention to sell the properties.
East Africa Cables disclosed that Equity Bank had given them a 90-day ultimatum to repay Sh1.95 billion, failing which the bank would proceed with the sale of the properties.
In response, Paul Mungai, a director of the company, submitted an affidavit disputing the notice's validity and arguing that Equity Bank had no legitimate basis to exercise its statutory power of property sale.
Mungai informed the court that both parties had been actively engaged in discussions aimed at reconciling the company's financial accounts and ascertaining the precise outstanding amount.
The last communication on this matter occurred on June 12, when East Africa Cables' parent company, TransCentury, requested further information from Equity Bank.
Mungai contended, "As such, the statutory notices are premature, unprocedural, and in bad faith," emphasizing the company's commitment to settling the outstanding debt in the context of challenging economic conditions.
He expressed concerns that Equity Bank had rejected numerous proposals without justifiable cause and appeared to be determined to severely impact the company's long-standing business investments by proceeding with the sale of the properties.