The former Nakumatt Chief Executive Officer, Atul Shah has lost his assets to Kenya Commercial Bank(KCB) Group and three other banks over debts worth sh4 billion.
KCB Group was seeking to auction the former Nakumatt CEO prime property over a sh2 million debt.
High Court judge Alfred Mabeya on Tuesday allowed KCB to complete the sale of the property in Industrial Area, Nairobi that is also charged at Bank of Africa, DTB Bank and Standard Chartered.
“If the court was in doubt, which is not the case here, the balance of convenience tilts in favour of allowing the defendant (KCB) to recover its outlay. The court was invited to consider that the sale by the defendant would injure and prejudice the rights of the other lenders who have the suit property as their only security. While this court sympathises with the said lenders, it defeats logic how prudent bankers would extend facilities amounting to over Sh4 billion on a single security whose value is less than Sh2 billion,” said Justice Mabeya.
The banks offered Nakumatt billions of shillings on the strength of the retail chain’s cash flow but Atul used his company Collogne Investments, which owned the Sh2 billion property in Nairobi, as Nakumatt’s guarantor to offer the multiple bank loans.
The judge questioned the credit appraisal of the lenders, wondering how multiple banks would offer loans worth sh4 billion based on a single security valued at less than sh2 billion.
The banks have been battling to seize assets linked to the former boss Atul and his family to recover the billions of shillings lent to Nakumatt.
In January, Nakumatt closed with debts estimated at Sh30 billion including Sh18 billion to suppliers, Sh4 billion to commercial paper holders and the rest to banks, who are more aggressive in pursuing their unpaid loans.
Regulatory filings indicate that Nakumatt owed DTB Bank Sh3.6 billion, Stanchart Sh900 million, KCB Sh1.9 billion, Bank of Africa Sh328 million, UBA Sh126 million and GT Bank Sh104 million.
In August, Bank of Africa got the court’s go-ahead to auction Atul’s personal property over loans offered to the collapsed retailer, but the former Nakumatt boss blocked the sale at the Court of Appeal.
KCB argues that it was not part of the Court of Appeal proceedings and that its absence in the case does not block it from selling the land.
However, the former Nakumatt CEO had sought orders stopping the auction after KCB revealed that it had already entered into a sale deal with a third party and the transaction would be frustrated if the application was not determined before November 25.
In an affidavit Atul’s son, Ankoor Shah, told the court that KCB had undervalued the property, arguing that it had found a buyer who would purchase the land and office block for Sh2 billion.
He added that there was an undertaking by KCB’s lawyer to freeze the auction, pending the determination of its application.
The bank sold the property to Furniture Palace International Ltd for Sh1.04 billion, taking a loss of about Sh1 billion.
The sale deal was set to be completed on Wednesday 25.
By Joy Kyalo