Court stops I&M bank from selling company's property

The High Court has issued orders restraining Secured Creditor, I&M Bank from selling a company’s property to an outstanding loan of more than Sh300million since they area under administration.

Through lawyer Eddy Orinda, Hi Plast limited moved to court seeking orders to restrain the bank from selling the properties saying that it is illegal under the insolvency Act.

 “An order is hereby issued restraining the Secured Creditor I&M Bank, its servants, employees or any person acting through them from dealing, trespassing or selling the properties pending the hearing and determination of this application,” said deputy registrar commercial division courts.

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 an official receiver as the administrator.

Orinda states that the court allowed I&M to exercise its statutory power of sale and only sell L.R NO 209/8611/2.

He said that a charge instrument was registered in favour of the secured creditor over L.R NO.209/8611/2 as security for a loan Sh300million. To further securitize 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”, Orinda states in the affidavits.

The lawyer says that the secured creditor has no colour of right to interfere with or dispose of the suit property.

He says that the order of the court unequivocally deters the secured creditor from selling or interfering with the property in any manner whatsoever.

Orinda said 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

In June court has barred I&M Bank from auctioning a company's property to recover an outstanding loan of more than Sh300 million, pending the determination of the actual amount owed.

In a ruling on Tuesday, justice 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.