Blow to Equity Bank after Court of Appeal stays High Court order, cite bank for illegal sale of client’s land over unpaid loan

The Court of Appeal (CoA) in Kisumu has suspended the transfer of ownership of a parcel of land “illegally” sold by an auctioneer on instructions of Equity Bank after the bank’s client defaulted on payment of Sh1.5 million credit facility.

Court of Appeal ruled the Group Chief Executive Officer James Mwangi’s led bank illegally sold customer’s land over an unpaid facility.

The land located in Koru area had been placed as a security by Economy Network Limited and was sold to businesswoman Leah Gwiyo by Nyaluonyo Auctioneers, prompting the company to sue at the High Court.

Ngwiyo bought the disputed land at Sh4.6million.

The company through its directors Martha Joseph and Peres Okumu petitioned the CoA to grant an interim injunction restraining the bank, the auctioneers and Gwiyo or their agents from taking over the land or dealing with it in any way.

The company had accessed an overdraft of Sh500, 000 and an additional advance payment guarantee of Sh1million from Equity Bank which they failed to pay prompting the bank to sell the land by way of auction.

In the appeal, Joseph is faulting the High Court judge for failure to take notice that when their company fell into arrears, Equity Bank sold the land fraudulently by public auction and without serving the company the notices as required by the law.

Joseph faults the judge for failure to appreciate that no certificate of sale was issued prior to the auction; the sale was in contravention of section 99 (3) of the Land Act, the suit property was undervalued and that the bank accepted a cheque that was less than 25 percent of the bid price and drawn two days before the auction.

And CoA judges Agnes Makhandia, Amollo Omondi and Luka Kimaru agreed with her stating that her application was in compliance with the CoA rules prerequisite for granting the reliefs she sought.

“Herein, the applicant (Economy Network Limited) has succeeded in establishing the twin limbs necessary for granting relief in an application under rule 5(2) (b) of the CoA Rules. The upshot is that the application dated January 28, 2025 is with merit and is allowed,” the appellate judges ruled.

This ruling means that neither the Equity Bank nor the auctioneer or their agents can initiate the transfer of the land’s ownership to Gwiyo before the appeal is heard and determined.

The main subject of evaluation and determination by the CoA is whether Equity Bank followed the statutory requirements before the disputed land was auctioned.

The law requires that the loan defaulter be given a three months’ notice, followed by a 45 days’ notice and 14 days’ notice that must be given by the auctioneers before the property is eventually sold.

The judges said the company has raised an arguable appeal, one of the issues being the fact that the sale of the land by public auction was fraudulent and that the same violated section 99 (3) of the Land Act.

“The intended appeal is arguable – – whether the correct procedures for sale in a public auction were followed,” the judges said in a ruling of June 13, 2025.

“The position in law is that an arguable appeal is not necessarily one that must succeed, but one that is deserving of consideration by the court of appeal and a response from the opposite party. The applicants have satisfied the court that the appeal is arguable.”