Court stops bank from selling Eastleigh land in debt dispute

The High Court has issued orders stopping Equity Bank from selling a land in a debt dispute.

Delivering the decision, High Court Judge Peter Mulwa said the 40 days issued as notification of the sale was defective.

This is because it was based on a default in a statutory notice that had already been rectified.

"The court grants an interlocutory injunction halting the sale of the suit property until and/or unless the defendant issues fresh notifications of sale as stipulated under section 91 and 96 of the Land Act," Justice Mulwa ruled.

Peter Karanja Muiru had moved to the court seeking to have Equity Bank temporarily restrained from advertising for sale, selling, leasing or entering into the land in Eastleigh, pending determination of the case.

He told the court that on or about April 2021, he obtained a loan from the bank and the land was charged to secure a principal amount of Sh46,700,000.

A further charge dated March 28, 2022, was registered against the land as security to secure Sh25,100,000.

Karanja told the court that he entered into a Deed of Assignment with the bank whereby rental income from the land would be paid to the bank.

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another.

Following the transfer of rent income, the court heard that the bank had been collecting Sh280,000 per month, and that Karanja had been religiously making payments towards settlement of the loan.

He however stated that despite his best efforts, he fell short in certain instances in payment of the monthly instalments due to various reasons including the Covid 19 pandemic.

On February 10, 2023, Equity issued the man with a three months' notice stating that he was in arrears of Sh4,676,327 in payments.

At the court, he argued that the notice was defective as the amount claimed was not due and owing for a period of one month as required before issuing a statutory notice under the Land Act.

He further stated that despite the defective notice, he paid Sh5,501,415 towards the demanded amounts in good faith and also continued making payments towards settlement of the amount.

Karanja told the court that despite making the above payments, the bank issued 40 days’ notice to sell the suit property dated June 14,2023, which stated that he was in arrears of Sh3,222,101.96.

His case was that Equity Bank did not abide by the law in issuing the statutory notices and that it was its intention to sell his property without adherence to the law.

The bank however opposed Karanja's application and told the court that Karanja was inconsistent in servicing the loan and as at February 7,2023, he was in arrears of Sh4,676,327.70.

It said it had a right under the loan agreements, the charge instruments and the law to demand for payment of any amount that is due and owing.

Equity further told the court that it had issued the requisite statutory notices under the Land Act and if the orders sought in the application were granted, it would be deprived of an opportunity to exercise its legally protected and guaranteed right to payment of its debts.

Further, it averred that it had remained willing to negotiate to reach an amicable settlement but Karanja had failed to meet its promises.

Upon determination of the case, Justice Mulwa stated that the three months' statutory notice issued by the bank was still valid and within the confines of the law.

He noted that the notice expired when Karanja  paid the amount demanded in it.

"This means that the 40 days notification to sell issued by the defendant(bank) was defective as it was based on a statutory notice that was already rectified,"his ruling dated February 8, reads.

He emphasised that the notification to sell was not issued in accordance with the law.

Further, the Judge said Karanja would suffer irreparable losses if the order sought was not granted as damages would not adequately compensate him for the loss.

"Unless the orders are granted, the plaintiff would lose his property on the basis of an unlawful notice to sell. The loss of property would be a violation of the law and amount to irreparable injury," he said.

Noting that the bank is entitled to exercise its statutory power of sale where a charge has been in default of its loan obligations, he added that this has to be exercised in accordance with the procedures set out in the Land Act.

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