The Nairobi County government will now pay Sh4.3 billion to the Kenya Commercial Bank (KCB) after the court cleared the lender to auction the county’s assets arising from a longstanding loan dispute KCB took over from Equity Bank.
Justice Chacha Mwita dismissed the county government’s application challenging the amount awarded by an arbitrator in November 2019.
The judge said there was no dispute that parties agreed to go for arbitration, settled on the sole arbitrator and proceeded before him.
“In the circumstance, therefore, having considered the application, the response and submissions as well as the law and the decisions relied on by parties, and upon giving due consideration to all those, the conclusion I come to is that the application dated 2nd October 2020 has merit,” the judge said.
The lender moved to court in 2020 seeking recognition of the award by Phillip Bliss Aliker, an arbitrator who was chosen by both parties.
KCB wanted the court to recognize the award as a judgment and compel the county government to pay the money.
However, the county government through lawyer Steve Mogaka pleaded for more time to file an objection and also enlist the National Treasury and the Controller of Budget in the case.
The county government was directed to pay KCB Sh4.2 billion in November 2019 after the matter was referred to Phillip Bliss Aliker, an arbitrator.
“Leave be and is hereby granted to the applicant to enforce both the third interim award and the final award as a decree of this honourable court,” KCB had pleaded through Mohammed Muigai.
Evidence presented before the court showed that Equity Bank loaned the defunct City Council Sh5 billion in 2011, a debt subsequently inherited by Nairobi City County.
In 2014, Equity said City Hall owed it more than Sh3.3 billion and an overdraft of Sh1.45 billion.
In another agreement dated September 2014, KCB later bought over the loan and interests. KCB bought out the loan, giving the county more time to repay the debt by increasing the maturity period to eight years at a lending rate of 13 per cent.
City Hall has, however, continued to default on the loan even after an arbitrator confirmed KCB’s claims and directed the Nairobi County government to settle the debt.
Justice Mwita said the law demands that an arbitral award be recognised as binding and enforced after court’s approval.
City Hall runs a budget that is dominated by payment of salaries to its bloated workforce, leaving little for payment of debt and key projects like building roads and hospitals.
Its budget woes have been worsened by the transfer of Nairobi’s key functions and cash to the Nairobi Metropolitan Services (NMS) under Major-General Mohammed Badi.