The Nairobi High Court has sanctioned the auction of the Dusit D2 Hotel Complex located at Nairobi’s 14 Riverside Drive.
This is in relation to a 11-year debt the company that owns the hotel owes Synergy Industrial Credit.
High Court Judge Alfred Mabeya gave a nod to Synergy Industrial Credit to auction the property on which Dusit D2 stands after dismissing an application by I&M Bank and its administrator seeking to obstruct the sale.
In its argument, the bank argued that Cape Holdings Limited, the company that owns the building owes them Sh2.82 billion.
Cape holdings Limited and Synergy Industrial Credit have had a 11-year dispute since 2010 over failed sale deal.
Synergy Industrial Credit wanted to acquire part of the apartments and paid a total of Sh750 billion. However, the deal came to nothing leading to the referral of the matter to an arbitrator.
It later led to the awarding of Sh1.6 billion which has since swollen to Sh4.9 billion inclusive of the interest.
I&M Bank disputed the sale of the property, citing its being attached as security for a loan of Sh2.82 billion
However, I&M Bank was accused by Synergy Industrial Credit of negligence.
Synergy Industrial Credit argued that it had placed a caveat on dealings with the property because it was under dispute.
The court said Synergy Industrial Credit placed a caveat in 2011, issuing a warning against the sale of the property.
The caveat, therefore, restricted the property to be attached as security.
The court, through Justice Mabeya agreed with the applicant’s contention citing the timing of the administration was not meant for the purpose under the act while considering the forgoing of the property.
“Taking into consideration the foregoing, the court can but only agree with the applicant’s contention that the timing of the administration was not meant for the purpose known under the Act,” Mabeya said.
The contention started when Synergy Industrial Credit Limited bought two blocks that were still under construction at a cost of Sh750 million.
However, Cape Holdings declined to transfer the property to Synergy upon completion, and the matter was referred to an arbitrator.
Arbitrator Ochieng’ Oduol ordered the developer to refund the investment amount and interest that amounted to Sh1.66 billion.
Cape Holdings Limited moved to court and had the arbitrator's order thrown out on account of being erroneous.
Later on, the matter was taken to the Appellate Court which reinstated the arbitrator’s order for the refund.
Attempts by Cape Holdings Limited to have the Supreme Court reverse the Court of Appeal’s ruling crashed after the Supreme court said it will not interfere with the Appellate court’s ruling on grounds of jurisdiction.
“We reiterate our holding, and find the court lacks jurisdiction to entertain this appeal, having found so, we have no hesitation in declaring the application before us one for dismissal,” the Supreme Court ruled.
The administrator appointed by the lender Vruti Shah opposed the sale of property claiming that the company was under administration after Ahmednasir moved to the High Court to seek orders allowing him to recover his money by auctioning the property.
Mabeya said I&M Bank will not suffer prejudice since it has other securities. While stopping the sale of the property would delay Synergy Industrial Credit Limited from recovering its investment, therefore, putting the company at a loss.
The judge also said the amount to be realised from the sale of the property still would not settle the debt.
“The court has considered the foregoing and the fact that it has not been shown that the amount to be realized from the sale of the suit property would not be enough to offset both the decretal amount and a substantial amount part thereof remain for the bank,” Mabeya said.