- In January, the firm accused I & M Bank of inflating interest payment to Sh53 million after pricing its loan above the legal cap of four percentage points above the Central Bank Rate
The High court has restrained I&M Bank from selling Hi-Plast company’s property pending the hearing and determination of a suit filed in court.
This is after the insolvent plastic bag maker moved to court to oppose the planned auction of the prime land slated tomorrow as advertised by the lender.
I&M Bank, which is a secured creditor had been authorized by the court to sell the companies L.R NO.209/8611/2 to recover its an outstanding loan of more than Sh 300 million but instead advertised another property owned by the firm.
“An order has been issued stopping Secured Creditor I&M Bank from dealing, trespassing or selling the suit property pending the hearing and determination of this application,” ordered deputy registrar commercial division courts
Through lawyer Eddy Orinda, Hi-Plast argued that it was illegal under the insolvency Act for the lender to substitute attached property for another it deemed suitable.
In court documents Orinda claims that on July 31, a ruling was delivered which allowed the petition and placed Hi-Plast limited under administration and appointed official receiver as the administrator.
According to him, the court allowed I&M to exercise its statutory power of sale and only sell L.R NO 209/8611/2 and not L.R no 1870/X1159(I.R NO 57684).
Court documents indicated that a charge instrument was registered in favor of the secured creditor over L.R NO.209/8611/2 as security for a loan Sh300 million.
To further secure the principal loan, the directors of Hi Plast offered L.R NO 1870/X11159, registered in their personal names as a guarantee to the principal loan.
“Contrary to the ruling, the secured creditor has proceeded to advertise the suit property for sale, which sale the bank intends to conduct on August 20,2019,” Orinda states in the affidavits.
He said the order of the court unequivocally prevents the bank from selling or interfering with the property in any manner whatsoever.
Orinda added that unless the orders sought are granted, the secured creditor will proceed to unlawfully, irregularly and without any colour of right sell the suit property in contempt of the ruling and his client will suffer irreparable harm and damage that cannot be compensated by the damages or otherwise.
This is the second time the court is stopping I&M Bank from auctioning a company's property to recover an outstanding, pending determination of the actual amount owed. It was barred in June.
Hi-Plast ran into financial trouble after the government banned the use, manufacture and importation of plastic bags for household and commercial packaging. It borrowed Sh300 million from the bank in 2015.
In January, accused I & M Bank of inflating interest payment to Sh53 million after pricing its loan above the legal cap of four percentage points above the central bank rate that currently stands at nine per cent.
In recent orders, judge Margaret Muigai asked the bank to submit to the court a report on the reconciliation of Hi Plast Limited's accounts before exercising power to auction the securities it offered.