1. The Plaintiff’s Notice of Motion application dated 3rd February, 2025 is expressed to be brought under Sections 1, 1A and 3A of the Civil Procedure Act, Order 40 Rule 2, 3 and 4 of the Civil Procedure Rules and Sections 103 and 104 of the Land Act seeks the following orders:
a. [Spent].
b. [Spent].
c. THAT pending the hearing and determination of this suit, this court be pleased to issue an order of temporary injunction restraining the Defendants/Respondents whether by themselves, their servants, agents and/or employees or whomsoever is acting on their behalf from selling by public auction, transferring, or disposing off Land TITLE NO.L.R. KISUMU/MUNICIPALITY BLOCK 6/2, KISUMU CITY, KISUMU COUNTY belonging to the Plaintiff/Applicant.
d. THAT this Honourable Court do grant the Plaintiff/Applicant relief under Sections 103 and 104 of the Land Act or any other appropriate relief by suspending the realization of security by way of sale by public auction of the Plaintiff’s charged property being Kisumu/Municipality Block 6/2 within Kisumu County until a determination of whether the amount being claimed by the 1st Defendant/Respondent is recoverable by operation of the law.
e. THAT this Honourable Court be pleased to make any other orders as it deems fit.
f. THAT costs of this application be provided for.
2. The grounds upon which the application is premised are set out on its face and are that the Applicant obtained various financial facilities from the 1st Respondent which were restructured from time to time, the latest restructuring having been by a letter dated 30th November, 2016, and secured the facilities by a legal charge over Title No. L.R. Kisumu/Municipality Block 6/2 situated in Kisumu City, Kisumu County.
3. The Applicant contends that whereas a total sum of Ksh.34.56 million was advanced to it and it has repaid Ksh.44.9 million, the 1st Respondent is demanding Ksh.148,848,016.08, which amount allegedly comprises excessive and unlawful interest charged after the loan became non-performing.
4. The Applicant further contends that it has identified a purchaser willing to buy the charged property at a price sufficient to settle its liabilities to the 1st Respondent, but requires time and the 1st Respondent’s approval to conclude the transaction after the lawful amount due is ascertained.
5. The Applicant avers that despite several meetings and discussions with the 1st Respondent regarding the proposed settlement, the latter failed to respond to its proposals and instead proceeded with the realization of the security. The Applicant asserts that the charged property was advertised for sale by public auction scheduled for 4th February, 2025 without the service of the requisite statutory notices and that the intended sale is therefore unlawful.
6. The Applicant apprehends that unless the orders sought are granted, the Respondents will proceed with the sale of the charged property, thereby occasioning it irreparable loss through disruption of its business operations, supplier relationships and tender opportunities.
7. The Applicant maintains that this Court has jurisdiction under Sections 103(4) and 104 of the Land Act, 2012 to postpone the realization of the security on such terms as may be just and equitable and that it is in the interests of justice that the application be allowed.
8. The application is supported by the affidavit of Keval Singh Sambi sworn on 3rd February, 2025 in which he deposes that he is a director of the Applicant and is duly authorized to swear the affidavit on its behalf, the Applicant having passed a resolution authorizing the institution of the suit and the filing of the application.
9. The deponent deposes that the Applicant has at all material times been a customer of the 1st Respondent and operates bank accounts with it and that in the year 2009, the Applicant obtained financial facilities comprising a term loan of Kshs.5,000,000 and an overdraft facility of Kshs.3,000,000, making a total of Kshs.8,000,000, which facilities were secured by a first legal charge over the property known as Kisumu/Municipality Block 6/2.
10. The deponent further deposes that the Applicant carries on the business of manufacturing, fitting and supplying furniture and related equipment and contends that the 1st Respondent has levied interest on the loan and overdraft facilities in excess of the agreed rates and contrary to the law, thereby increasing the repayment obligations and contributing to the default.
11. He avers that the Applicant wrote to the 1st Respondent seeking information regarding the loan accounts, including clarification on when the facilities allegedly became non-performing, but the 1st Respondent has failed to provide the requested information or respond to the Applicant’s correspondence.
12. He further avers that the Applicant engaged the 1st Respondent in several meetings with a view to regularizing the loan accounts and obtaining information regarding the facilities and was assured that the proposals would be forwarded to the head office for consideration, but no response was forthcoming.
13. According to the deponent, the Respondents did not serve the Applicant with the statutory notices required by law before exercising the statutory power of sale and instead only served what was described as a “21 days courtesy notice”, which, in his view, does not satisfy the requirements of Sections 90 and 96 of the Land Act.
14. He states that despite the ongoing engagements between the parties and the Applicant’s efforts to resolve the matter, the 1st Respondent instructed the 2nd Respondent to advertise the charged property for sale by public auction scheduled for 4th February, 2025, a development that came to the Applicant’s attention through a newspaper advertisement.
15. The deponent contends that unless the orders sought are granted, the 2nd Respondent will proceed with the sale of the charged property, thereby occasioning the Applicant irreparable loss and damage, whereas the Applicant only requires additional time to resolve the matter.
16. He further deposes that the 1st Respondent has charged illegal interest and levies not sanctioned by law and that the subsequent restructuring of the facilities was intended to conceal those unlawful charges.
17. He accuses the 1st Respondent of acting in bad faith and being intent on disposing of the charged property at an undervalue, contrary to its obligation to act fairly and in the Applicant’s best interests and to avoid causing unnecessary loss where such loss can reasonably be avoided.
18. Lastly, he deposes that this Court has jurisdiction under Sections 103(4) and 104 of the Land Act, 2012 to grant relief by postponing the realization of the security on such terms as may be just, that the application has been brought in good faith, and that it is in the interests of justice that the orders sought be granted.
19. The application is opposed and to that end the Respondents filed a replying affidavit sworn on by Deborah Muthoka sworn on 21st March, 2025 in which she deposes that she is the Recoveries Manager of the 1st Respondent and is duly authorized to swear the affidavit on behalf of the Respondents, the 2nd Respondent having acted as the 1st Respondent’s agent in the events leading to the filing of the suit.
20. The deponent deposes that pursuant to a letter of offer dated 21st March, 2009, the 1st Respondent advanced to the Applicant an overdraft facility of Kshs.3,000,000 and a term loan facility of Kshs.5,000,000, making an aggregate sum of Kshs.8,000,000. Copies of the letter of offer and the Applicant’s board resolution authorizing the borrowing are annexed to the affidavit as DM-1a and DM-1b.
21. The deponent avers that the facilities were secured by, among other securities, a legal charge over Title No. Kisumu Municipality/Block 6/2, directors’ guarantees and indemnities, a demand promissory note and board resolutions and that the Applicant’s directors executed the relevant security documents, including personal and corporate guarantees, copies of which are annexed as DM-2(a) to DM-2(c), while a copy of the charge dated 24th July, 2009 is annexed as DM-3.
22. It is deposed that between 2009 and 2016 the Applicant repeatedly sought and obtained additional facilities, restructurings, renewals and enhancements of its borrowing. These facilities were approved through various board resolutions and letters of offer annexed as DM-4(a) and DM-4(b), DM-5(a) and DM-5(b), DM-6, DM-7, DM-8(a) and DM-8(b), DM-9(a) to DM-9(d), DM-10(a) to DM-10(c), DM-11(a) and DM-11(b), and DM-12(a) and DM-12(b).
23. According to the deponent, the successive facilities were secured through the existing charge and subsequent further charges over the suit property, increasing the secured amount from Kshs.10,000,000 to Kshs.65,000,000, together with personal guarantees executed by the Applicant’s directors.
24. The deponent contends that the Applicant fell into arrears and defaulted in repayment of the facilities, prompting the issuance of a 30-day demand notice dated 2nd March, 2018 and a further 14-day demand notice dated 12th June, 2018. Copies thereof are annexed as DM-13 and DM-14 respectively.
25. It is the contention of the deponent that upon the Applicant’s continued default, the 1st Respondent commenced the statutory realization process by issuing a 90-day statutory notice dated 15th May, 2019 and a 40-day notice to sell dated 28th August, 2019 through its advocates. Copies of the notices together with certificates of postage are annexed to the affidavit as DM-15(a) and DM-15(b), and DM-16(a) and DM-16(b) respectively.
26. She asserts that following the lapse of the statutory notices, the 1st Respondent instructed auctioneers who served the Applicant with a 45-day redemption notice and notification of sale, copies of which are annexed as DM-17(a) to DM-17(c).
27. The deponent further states that despite being afforded more than two years within which to redeem the property, the Applicant failed to settle the debt and instead requested permission to sell the charged property by private treaty through letters dated 9th October, 2024 and 30th October, 2024 (annextures DM-18 and DM-19), and requested for time to conclude the sale.
28. It is averred by the deponent that the 1st Respondent engaged the Applicant regarding the proposed private treaty sale and sought particulars of the intended purchaser, the proposed purchase price, the deposit payable and a draft sale agreement. The correspondence exchanged between the parties is annexed as DM-20.
29. The deponent contends that the Applicant failed to provide the requested information and continued delaying the proposed transaction, whereupon the 1st Respondent instructed the auctioneer to issue a 21-day courtesy notice dated 20th December, 2024 before advertising the property for sale by public auction which was scheduled for 4th February, 2025. (Annextures DM-21(a) to DM-21(d).
30. It is further deposed that before the property was advertised for sale, a valuation was undertaken and a valuation report dated 1st March, 2024 prepared (annexture DM-22), which indicated that the property had a market value of Kshs.158,650,000 and a forced sale value of Kshs.119,000,000.
31. According to the deponent, as at 18th March, 2025 the loan account reflected an outstanding balance of Kshs.97,769,535 while the current account reflected an outstanding balance of Kshs.60,236,094.08, bringing the total indebtedness to Kshs.158,005,629.08. She has annexed statements of account as DM-23(a) and DM-23(b).
32. The Respondents, through the deponent’s replying affidavit, maintain that all statutory notices required by law were duly issued and served and that the statutory power of sale had therefore crystallized and the allegation that only a 21-day courtesy notice was issued is denied, the position being that the courtesy notice was merely an additional reminder issued after completion of the statutory process.
33. The deponent denies the Applicant’s allegations that unlawful interest, illegal levies or fraudulent charges were imposed or concealed through loan restructurings, contending that all restructurings were undertaken at the Applicant’s request and were supported by duly executed board resolutions, letters of offer and security documents.
34. The deponent contends that all interest charged was in accordance with the contractual terms governing the facilities and that the Applicant has not produced any audit report or other evidence demonstrating the existence of unlawful charges, fraud or illegality.
35. She contends that the Applicant has admitted its indebtedness and does not challenge the validity of the charge instruments, and therefore has not established a prima facie case or demonstrated any irreparable injury incapable of compensation by damages.
36. Lastly, the deponent asserts that the suit and application are intended to delay and frustrate the 1st Respondent’s lawful realization of the security, whereas the 1st Respondent continues to suffer prejudice as the outstanding indebtedness has exceeded the forced sale value of the property. In the alternative, it is urged that any preservatory orders granted should be conditional upon the Applicant making a substantial payment towards the outstanding debt.
37. In its submissions, the Applicant contends that the 1st Respondent has been levying interest on both the loan and overdraft facilities in excess of the agreed contractual rates and contrary to the law, thereby inflating the repayment obligations and contributing to the alleged default.
38. The Applicant further submits that despite repeated efforts to obtain information from the 1st Respondent, including clarification on when the loan accounts allegedly became non-performing, no responses were forthcoming. It is also the Applicant’s position that although several meetings were held with representatives of the 1st Respondent in an attempt to regularize the accounts and obtain necessary information, the Applicant was only assured that the matter would be escalated to head office and that feedback would be communicated, which was never done.
39. The Applicant avers that the 1st Respondent proceeded to instruct the 2nd Respondent to dispose of the charged property known as Kisumu Municipality/Block 6/2 despite the alleged imposition of unlawful interest and levies. It is contended that the intended sale is unlawful and ought to be restrained pending determination of the dispute.
40. On the issue of whether a prima facie case has been established, the Applicant relies on the principles set out in Giella v Cassman Brown & Co. Ltd [1973] E.A. 358 and as restated in Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others [2016] eKLR, and submits that an applicant must demonstrate a prima facie case with a probability of success, irreparable harm, and, where in doubt, the balance of convenience. Further reliance is placed on Nguruman Limited v Jan Bonde Nielsen & 2 others [2014] eKLR.
41. The Applicant submits that a prima facie case has been established on the basis that although a total of Kshs.34.56 million was disbursed, it has repaid Kshs.44.9 million, yet the 1st Respondent now demands Kshs.148,848,016.08, the difference allegedly representing excessive and unlawful interest amounting to Kshs.114,288,018.08.
42. It is argued that this contravenes Section 44A of the Banking Act, Cap 488, and the in duplum rule, which limits recovery on a non-performing loan to the principal, interest not exceeding the principal, and recovery expenses. The Applicant contends that the sums demanded exceed the permissible statutory threshold and therefore raise a triable issue as to the legality of the amount claimed and the Applicant’s right not to be subjected to unlawful charges.
43. On whether irreparable harm would be suffered, the Applicant submits that if the injunction is not granted, the 2nd Respondent will proceed with the sale of the charged property, resulting in loss of land, disruption of business operations and cancellation of supplier and tender arrangements, which cannot be adequately compensated by damages. Reliance is placed on the passage in Halsbury’s Laws of England on irreparable injury, to the effect that such injury is substantial and not adequately compensable by damages, particularly where the subject matter may be destroyed or lost.
44. The Applicant further contends that the imposition of allegedly unconscionable and unlawful interest would in itself occasion irreparable harm. It is therefore urged that the Court grants an injunction suspending the realization of the security pending determination of the legality of the amounts claimed and the rights of the parties.
45. On the balance of convenience, the Applicant submits that it tilts in its favour as it stands to suffer greater prejudice through loss of its property, business relationships and alleged financial exploitation through excessive interest charges.
46. It is argued that the 1st Respondent would not suffer prejudice if the injunction is granted, and reliance is placed on Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others [2016] eKLR for the proposition that where doubt exists, the Court considers which party would suffer greater harm and seeks to preserve the status quo.
47. Finally, the Applicant submits that it has a protectable interest in the suit property and has in fact secured a willing purchaser capable of settling the outstanding liability, requiring only time and confirmation of the lawful amount due. It is contended that Sections 103 and 104 of the Land Act empower the Court to grant relief to facilitate redemption, and that the application has been brought in good faith and in the interests of justice.
48. In its further submissions, which are to a large extent repetitive of its initial submissions, the Applicant asserts that the Respondents’ case amounts to a repetition of their earlier pleadings and does not address the substantive illegality and disputed issues raised regarding the loan account and enforcement process.
49. On the issue of whether the Applicant has established a prima facie case with a likelihood of success, the Appellant relies on the definition of a prima facie case as set out in Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125, where the Court stated that a prima facie case exists where on the material presented, a court properly directing itself would conclude that there exists a right apparently infringed requiring rebuttal.
50. The Applicant submits that it has established a prima facie case on the basis that the interest and charges levied by the 1st Respondent exceed the permissible legal threshold under Section 44A(2) of the Banking Act, which limits recoverable amounts on a non-performing loan to the principal owing at the time of default, together with contractual interest not exceeding the principal and recoverable enforcement expenses.
51. It contends that despite repaying approximately Kshs.44.9 million, the Respondents are demanding a sum of about Kshs.158 million, which it argues demonstrates that the interest and charges have exceeded the lawful limits and amount to more than 300% of the original loan.
52. The Applicant further submits that the statutory framework gives effect to the in duplum rule, which was explained in Kenya Hotels Limited v Oriental Commercial Bank Ltd (Formerly Delphis Bank Limited) [2019] eKLR, where the Court of Appeal held that interest ceases to accrue once it equals the principal amount, the rule having been consistently applied since its introduction in 2007. It argues that in the present case, the Respondents are demanding interest beyond twice the principal amount, contrary to the in duplum principle and Section 44A of the Banking Act.
53. The Applicant further challenges the Respondents’ computation under Section 44A, particularly the assertion that recovery costs estimated at Kshs.10,000,000 at the time of default should be included in determining the in duplum ceiling. It submits that although Section 44A(2)(c) allows inclusion of recovery expenses, the Respondents bear the evidential burden to prove such expenses with proper documentation such as receipts or audited accounts. In the absence of any itemized or verified proof of such costs, the Applicant contends that the figures advanced by the Respondents are speculative and incapable of justifying the inflated ceiling of approximately Kshs.160 million.
54. On irreparable harm, the Applicant again relies on the definition of irreparable injury in Halsbury’s Laws of England, which describes it as injury that cannot be adequately remedied by damages, or where damages are not an adequate remedy, including situations where the subject matter of the dispute may be destroyed. The Applicant submits that the intended sale of the suit property, Kisumu/Municipality Block 6/2, would permanently deprive it of a critical commercial asset essential to its operations, business continuity and contractual engagements.
55. The Applicant further submits that loss of the suit property would have a cascading “domino effect” on its business operations, including loss of suppliers, tenders and commercial reputation, and that such losses cannot be adequately quantified in monetary terms. It argues that once the property is sold, restoration to its original position would be impossible even if it ultimately succeeds in the main suit.
56. The Applicant relies on Nguruman Ltd v Jan Bonde Nielsen & 2 Others [2014] eKLR, where the Court of Appeal held that irreparable injury must be actual, substantial, and not merely speculative, and that damages must not be an adequate remedy. It submits that its case meets this threshold because the sale of the charged property would render the suit nugatory.
57. The Applicant also cites Jelangat & another v Mwananchi Credit Limited & another (Civil Case 374 of 2018) [2023] KEHC 19922 (KLR), where the Court held that courts will intervene where contractual terms are illegal, unconscionable, oppressive, fraudulent or amount to unjust enrichment, particularly where a borrower is placed in a vulnerable position. It submits that the Respondents’ conduct in imposing allegedly excessive and unconscionable interest falls within this category.
58. On the balance of convenience, the Applicant submits that it lies in its favour because it stands to suffer significantly greater harm if the injunction is denied compared to the Respondents, who are a financial institution whose rights to recover the debt will remain intact. It relies on Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 Others [2016] KEHC 7263 (KLR), where the Court emphasized that in determining the balance of convenience, the court considers comparative injury to both parties and seeks to preserve the status quo pending determination of the dispute.
59. The Applicant further submits that it has demonstrated good faith by securing a third-party purchaser willing to purchase the property at a price sufficient to clear the outstanding debt, and that allowing time for a private treaty sale would serve the interests of both parties by settling the debt without resorting to a public auction that may result in undervaluation and residual debt.
60. The Applicant also relies on Sections 103 and 104 of the Land Act, 2012, submitting that these provisions preserve a chargor’s redemption rights and allow opportunity to regularize the default before sale is completed. It argues that these statutory protections would be defeated if the Respondents are allowed to proceed with the auction.
61. The Applicant concludes that it has satisfied all three limbs for the grant of an interlocutory injunction and therefore prays that the injunction be granted with costs.
62. On their part, the Respondents submit that the Applicant’s case lacks merit and is an attempt to frustrate the statutory process of realizing securities over a loan facility that has been outstanding and in default for a considerable period. They contend that the Applicant freely entered into multiple loan agreements and subsequent restructures with the 1st Respondent bank, all of which were duly approved through formal board resolutions and supported by executed security documents, including a legal charge over LR No. Kisumu Municipality/Block 6/2 and personal guarantees by the directors of the borrowing entity.
63. The Respondents further submit that the initial facility was granted pursuant to an offer letter dated 21st March, 2009, comprising an overdraft of Kshs.3,000,000 and a term loan of Kshs.5,000,000, secured by inter alia a legal charge over the suit property, personal guarantees and other standard banking securities.
64. They state that subsequent restructures and additional facilities were issued in 2010, 2011, 2012, 2013, 2016 and thereafter, each time at the request of the borrower, culminating in a consolidated facility of Kshs.65,000,000 secured by a 3rd further charge over the suit property and continuing personal guarantees.
65. The Respondents submit that the Applicant persistently defaulted on repayment obligations, prompting the bank to issue the requisite statutory notices in accordance with the law. These included a 30-day demand notice issued through L.G. Menezes & Co. Advocates dated 21st March, 2018, a 14-day demand notice dated 12th June, 2018, a 90-day statutory notice dated 15th May, 2019, a 40-day notice to sell dated 28th August, 2019 and a 45-day redemption notice served through Igare Auctioneers together with notification of sale. They rely on proof of service by registered post and affidavits of service, submitting that the notices were properly served at the borrower’s last known address in compliance with Section 3(5) of the Interpretation and General Provisions Act.
66. In support of the validity of service, the Respondents rely on the decision in Nyagilo Ochieng & Another v Phanuel B. Ochieng & 2 Others [1996] eKLR, where the Court of Appeal held that where service by registered post is proved, a presumption of service arises and the burden shifts to the addressee to prove non-receipt.
67. The Respondents further submit that upon continued default, the bank lawfully exercised its statutory power of sale under Section 96 of the Land Act, 2012. They contend that the Applicant’s allegation of failure to issue statutory notices is unfounded and contradicted by documentary evidence showing compliance with all mandatory procedural steps, including issuance and service of statutory notices prior to commencement of the auction process.
68. The Respondents also submit that the Applicant’s allegations of illegal or excessive interest are unsubstantiated. They argue that all interest and charges applied were contractual, agreed upon in the signed letters of offer, credit agreements and charge instruments. They further contend that the Applicant has not produced any audit report or expert evidence to demonstrate any illegality in the computation of interest, rendering the allegations speculative and baseless.
69. On the issue of restructuring, the Respondents submit that loan restructures are a standard banking practice and in this case were initiated at the express request of the Applicant through board resolutions. They argue that each restructure constituted a fresh contractual arrangement with revised terms, and rely on the decision in National Bank of Kenya Ltd v Mutinda & another [2019] KEHC 11952, where the court held that a loan restructuring evidenced by a letter of offer and acceptance constitutes a valid modification of the original facility, with enforceable new terms.
70. The Respondents further submit that the Applicant is in clear admission of indebtedness and default, and that the outstanding loan continues to accrue interest. They state that as at 18th March, 2025, the total outstanding aggregate debt stood at Kshs.158,005,629.08, comprising both loan and current account balances, which exceeds the forced sale value of the charged property as per a pre-sale valuation report indicating a market value of Kshs.158,650,000 and a forced sale value of Kshs.119,000,000.
71. The Respondents submit that the doctrine of in duplum, as introduced under Section 44A of the Banking Act, has not been breached. They argue that a factual computation shows that the estimated principal at the time of default was approximately Kshs.80,000,000, thereby setting an in duplum ceiling of slightly above Kshs.160,000,000, which the current outstanding amount has not exceeded. They further submit that recovery costs are lawfully includable in computing the amount recoverable under Section 44A(2)(c) of the Banking Act.
72. The Respondents rely on the decision in Nguruman Limited v Jan Bonde Nielsen & 2 Others (2014) eKLR, where the Court of Appeal held that the three conditions for granting an interlocutory injunction – prima facie case, irreparable harm and balance of convenience – are sequential and must all be satisfied independently, and that failure to establish a prima facie case is fatal to the application.
73. On irreparable harm, the Respondents submit that the Applicant has failed to demonstrate any injury that cannot be adequately compensated by damages. They rely on JM v SMK & 4 others [2022] eKLR, which defined irreparable harm as injury not adequately remediable by damages, and further cite Elijah Kipng’eno Arap Bii v Kenya Commercial Bank Limited [2001] eKLR, where the court held that charged property is a commodity for sale whose loss is compensable in damages.
74. The Respondents further rely on Maithya v Housing Finance of Kenya Ltd & another [2003] EA as cited in Solomon Mbili Ngomo v Kenya Deposit Insurance Corp
[...truncated]
a. [Spent].
b. [Spent].
c. THAT pending the hearing and determination of this suit, this court be pleased to issue an order of temporary injunction restraining the Defendants/Respondents whether by themselves, their servants, agents and/or employees or whomsoever is acting on their behalf from selling by public auction, transferring, or disposing off Land TITLE NO.L.R. KISUMU/MUNICIPALITY BLOCK 6/2, KISUMU CITY, KISUMU COUNTY belonging to the Plaintiff/Applicant.
d. THAT this Honourable Court do grant the Plaintiff/Applicant relief under Sections 103 and 104 of the Land Act or any other appropriate relief by suspending the realization of security by way of sale by public auction of the Plaintiff’s charged property being Kisumu/Municipality Block 6/2 within Kisumu County until a determination of whether the amount being claimed by the 1st Defendant/Respondent is recoverable by operation of the law.
e. THAT this Honourable Court be pleased to make any other orders as it deems fit.
f. THAT costs of this application be provided for.
2. The grounds upon which the application is premised are set out on its face and are that the Applicant obtained various financial facilities from the 1st Respondent which were restructured from time to time, the latest restructuring having been by a letter dated 30th November, 2016, and secured the facilities by a legal charge over Title No. L.R. Kisumu/Municipality Block 6/2 situated in Kisumu City, Kisumu County.
3. The Applicant contends that whereas a total sum of Ksh.34.56 million was advanced to it and it has repaid Ksh.44.9 million, the 1st Respondent is demanding Ksh.148,848,016.08, which amount allegedly comprises excessive and unlawful interest charged after the loan became non-performing.
4. The Applicant further contends that it has identified a purchaser willing to buy the charged property at a price sufficient to settle its liabilities to the 1st Respondent, but requires time and the 1st Respondent’s approval to conclude the transaction after the lawful amount due is ascertained.
5. The Applicant avers that despite several meetings and discussions with the 1st Respondent regarding the proposed settlement, the latter failed to respond to its proposals and instead proceeded with the realization of the security. The Applicant asserts that the charged property was advertised for sale by public auction scheduled for 4th February, 2025 without the service of the requisite statutory notices and that the intended sale is therefore unlawful.
6. The Applicant apprehends that unless the orders sought are granted, the Respondents will proceed with the sale of the charged property, thereby occasioning it irreparable loss through disruption of its business operations, supplier relationships and tender opportunities.
7. The Applicant maintains that this Court has jurisdiction under Sections 103(4) and 104 of the Land Act, 2012 to postpone the realization of the security on such terms as may be just and equitable and that it is in the interests of justice that the application be allowed.
8. The application is supported by the affidavit of Keval Singh Sambi sworn on 3rd February, 2025 in which he deposes that he is a director of the Applicant and is duly authorized to swear the affidavit on its behalf, the Applicant having passed a resolution authorizing the institution of the suit and the filing of the application.
9. The deponent deposes that the Applicant has at all material times been a customer of the 1st Respondent and operates bank accounts with it and that in the year 2009, the Applicant obtained financial facilities comprising a term loan of Kshs.5,000,000 and an overdraft facility of Kshs.3,000,000, making a total of Kshs.8,000,000, which facilities were secured by a first legal charge over the property known as Kisumu/Municipality Block 6/2.
10. The deponent further deposes that the Applicant carries on the business of manufacturing, fitting and supplying furniture and related equipment and contends that the 1st Respondent has levied interest on the loan and overdraft facilities in excess of the agreed rates and contrary to the law, thereby increasing the repayment obligations and contributing to the default.
11. He avers that the Applicant wrote to the 1st Respondent seeking information regarding the loan accounts, including clarification on when the facilities allegedly became non-performing, but the 1st Respondent has failed to provide the requested information or respond to the Applicant’s correspondence.
12. He further avers that the Applicant engaged the 1st Respondent in several meetings with a view to regularizing the loan accounts and obtaining information regarding the facilities and was assured that the proposals would be forwarded to the head office for consideration, but no response was forthcoming.
13. According to the deponent, the Respondents did not serve the Applicant with the statutory notices required by law before exercising the statutory power of sale and instead only served what was described as a “21 days courtesy notice”, which, in his view, does not satisfy the requirements of Sections 90 and 96 of the Land Act.
14. He states that despite the ongoing engagements between the parties and the Applicant’s efforts to resolve the matter, the 1st Respondent instructed the 2nd Respondent to advertise the charged property for sale by public auction scheduled for 4th February, 2025, a development that came to the Applicant’s attention through a newspaper advertisement.
15. The deponent contends that unless the orders sought are granted, the 2nd Respondent will proceed with the sale of the charged property, thereby occasioning the Applicant irreparable loss and damage, whereas the Applicant only requires additional time to resolve the matter.
16. He further deposes that the 1st Respondent has charged illegal interest and levies not sanctioned by law and that the subsequent restructuring of the facilities was intended to conceal those unlawful charges.
17. He accuses the 1st Respondent of acting in bad faith and being intent on disposing of the charged property at an undervalue, contrary to its obligation to act fairly and in the Applicant’s best interests and to avoid causing unnecessary loss where such loss can reasonably be avoided.
18. Lastly, he deposes that this Court has jurisdiction under Sections 103(4) and 104 of the Land Act, 2012 to grant relief by postponing the realization of the security on such terms as may be just, that the application has been brought in good faith, and that it is in the interests of justice that the orders sought be granted.
19. The application is opposed and to that end the Respondents filed a replying affidavit sworn on by Deborah Muthoka sworn on 21st March, 2025 in which she deposes that she is the Recoveries Manager of the 1st Respondent and is duly authorized to swear the affidavit on behalf of the Respondents, the 2nd Respondent having acted as the 1st Respondent’s agent in the events leading to the filing of the suit.
20. The deponent deposes that pursuant to a letter of offer dated 21st March, 2009, the 1st Respondent advanced to the Applicant an overdraft facility of Kshs.3,000,000 and a term loan facility of Kshs.5,000,000, making an aggregate sum of Kshs.8,000,000. Copies of the letter of offer and the Applicant’s board resolution authorizing the borrowing are annexed to the affidavit as DM-1a and DM-1b.
21. The deponent avers that the facilities were secured by, among other securities, a legal charge over Title No. Kisumu Municipality/Block 6/2, directors’ guarantees and indemnities, a demand promissory note and board resolutions and that the Applicant’s directors executed the relevant security documents, including personal and corporate guarantees, copies of which are annexed as DM-2(a) to DM-2(c), while a copy of the charge dated 24th July, 2009 is annexed as DM-3.
22. It is deposed that between 2009 and 2016 the Applicant repeatedly sought and obtained additional facilities, restructurings, renewals and enhancements of its borrowing. These facilities were approved through various board resolutions and letters of offer annexed as DM-4(a) and DM-4(b), DM-5(a) and DM-5(b), DM-6, DM-7, DM-8(a) and DM-8(b), DM-9(a) to DM-9(d), DM-10(a) to DM-10(c), DM-11(a) and DM-11(b), and DM-12(a) and DM-12(b).
23. According to the deponent, the successive facilities were secured through the existing charge and subsequent further charges over the suit property, increasing the secured amount from Kshs.10,000,000 to Kshs.65,000,000, together with personal guarantees executed by the Applicant’s directors.
24. The deponent contends that the Applicant fell into arrears and defaulted in repayment of the facilities, prompting the issuance of a 30-day demand notice dated 2nd March, 2018 and a further 14-day demand notice dated 12th June, 2018. Copies thereof are annexed as DM-13 and DM-14 respectively.
25. It is the contention of the deponent that upon the Applicant’s continued default, the 1st Respondent commenced the statutory realization process by issuing a 90-day statutory notice dated 15th May, 2019 and a 40-day notice to sell dated 28th August, 2019 through its advocates. Copies of the notices together with certificates of postage are annexed to the affidavit as DM-15(a) and DM-15(b), and DM-16(a) and DM-16(b) respectively.
26. She asserts that following the lapse of the statutory notices, the 1st Respondent instructed auctioneers who served the Applicant with a 45-day redemption notice and notification of sale, copies of which are annexed as DM-17(a) to DM-17(c).
27. The deponent further states that despite being afforded more than two years within which to redeem the property, the Applicant failed to settle the debt and instead requested permission to sell the charged property by private treaty through letters dated 9th October, 2024 and 30th October, 2024 (annextures DM-18 and DM-19), and requested for time to conclude the sale.
28. It is averred by the deponent that the 1st Respondent engaged the Applicant regarding the proposed private treaty sale and sought particulars of the intended purchaser, the proposed purchase price, the deposit payable and a draft sale agreement. The correspondence exchanged between the parties is annexed as DM-20.
29. The deponent contends that the Applicant failed to provide the requested information and continued delaying the proposed transaction, whereupon the 1st Respondent instructed the auctioneer to issue a 21-day courtesy notice dated 20th December, 2024 before advertising the property for sale by public auction which was scheduled for 4th February, 2025. (Annextures DM-21(a) to DM-21(d).
30. It is further deposed that before the property was advertised for sale, a valuation was undertaken and a valuation report dated 1st March, 2024 prepared (annexture DM-22), which indicated that the property had a market value of Kshs.158,650,000 and a forced sale value of Kshs.119,000,000.
31. According to the deponent, as at 18th March, 2025 the loan account reflected an outstanding balance of Kshs.97,769,535 while the current account reflected an outstanding balance of Kshs.60,236,094.08, bringing the total indebtedness to Kshs.158,005,629.08. She has annexed statements of account as DM-23(a) and DM-23(b).
32. The Respondents, through the deponent’s replying affidavit, maintain that all statutory notices required by law were duly issued and served and that the statutory power of sale had therefore crystallized and the allegation that only a 21-day courtesy notice was issued is denied, the position being that the courtesy notice was merely an additional reminder issued after completion of the statutory process.
33. The deponent denies the Applicant’s allegations that unlawful interest, illegal levies or fraudulent charges were imposed or concealed through loan restructurings, contending that all restructurings were undertaken at the Applicant’s request and were supported by duly executed board resolutions, letters of offer and security documents.
34. The deponent contends that all interest charged was in accordance with the contractual terms governing the facilities and that the Applicant has not produced any audit report or other evidence demonstrating the existence of unlawful charges, fraud or illegality.
35. She contends that the Applicant has admitted its indebtedness and does not challenge the validity of the charge instruments, and therefore has not established a prima facie case or demonstrated any irreparable injury incapable of compensation by damages.
36. Lastly, the deponent asserts that the suit and application are intended to delay and frustrate the 1st Respondent’s lawful realization of the security, whereas the 1st Respondent continues to suffer prejudice as the outstanding indebtedness has exceeded the forced sale value of the property. In the alternative, it is urged that any preservatory orders granted should be conditional upon the Applicant making a substantial payment towards the outstanding debt.
37. In its submissions, the Applicant contends that the 1st Respondent has been levying interest on both the loan and overdraft facilities in excess of the agreed contractual rates and contrary to the law, thereby inflating the repayment obligations and contributing to the alleged default.
38. The Applicant further submits that despite repeated efforts to obtain information from the 1st Respondent, including clarification on when the loan accounts allegedly became non-performing, no responses were forthcoming. It is also the Applicant’s position that although several meetings were held with representatives of the 1st Respondent in an attempt to regularize the accounts and obtain necessary information, the Applicant was only assured that the matter would be escalated to head office and that feedback would be communicated, which was never done.
39. The Applicant avers that the 1st Respondent proceeded to instruct the 2nd Respondent to dispose of the charged property known as Kisumu Municipality/Block 6/2 despite the alleged imposition of unlawful interest and levies. It is contended that the intended sale is unlawful and ought to be restrained pending determination of the dispute.
40. On the issue of whether a prima facie case has been established, the Applicant relies on the principles set out in Giella v Cassman Brown & Co. Ltd [1973] E.A. 358 and as restated in Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others [2016] eKLR, and submits that an applicant must demonstrate a prima facie case with a probability of success, irreparable harm, and, where in doubt, the balance of convenience. Further reliance is placed on Nguruman Limited v Jan Bonde Nielsen & 2 others [2014] eKLR.
41. The Applicant submits that a prima facie case has been established on the basis that although a total of Kshs.34.56 million was disbursed, it has repaid Kshs.44.9 million, yet the 1st Respondent now demands Kshs.148,848,016.08, the difference allegedly representing excessive and unlawful interest amounting to Kshs.114,288,018.08.
42. It is argued that this contravenes Section 44A of the Banking Act, Cap 488, and the in duplum rule, which limits recovery on a non-performing loan to the principal, interest not exceeding the principal, and recovery expenses. The Applicant contends that the sums demanded exceed the permissible statutory threshold and therefore raise a triable issue as to the legality of the amount claimed and the Applicant’s right not to be subjected to unlawful charges.
43. On whether irreparable harm would be suffered, the Applicant submits that if the injunction is not granted, the 2nd Respondent will proceed with the sale of the charged property, resulting in loss of land, disruption of business operations and cancellation of supplier and tender arrangements, which cannot be adequately compensated by damages. Reliance is placed on the passage in Halsbury’s Laws of England on irreparable injury, to the effect that such injury is substantial and not adequately compensable by damages, particularly where the subject matter may be destroyed or lost.
44. The Applicant further contends that the imposition of allegedly unconscionable and unlawful interest would in itself occasion irreparable harm. It is therefore urged that the Court grants an injunction suspending the realization of the security pending determination of the legality of the amounts claimed and the rights of the parties.
45. On the balance of convenience, the Applicant submits that it tilts in its favour as it stands to suffer greater prejudice through loss of its property, business relationships and alleged financial exploitation through excessive interest charges.
46. It is argued that the 1st Respondent would not suffer prejudice if the injunction is granted, and reliance is placed on Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others [2016] eKLR for the proposition that where doubt exists, the Court considers which party would suffer greater harm and seeks to preserve the status quo.
47. Finally, the Applicant submits that it has a protectable interest in the suit property and has in fact secured a willing purchaser capable of settling the outstanding liability, requiring only time and confirmation of the lawful amount due. It is contended that Sections 103 and 104 of the Land Act empower the Court to grant relief to facilitate redemption, and that the application has been brought in good faith and in the interests of justice.
48. In its further submissions, which are to a large extent repetitive of its initial submissions, the Applicant asserts that the Respondents’ case amounts to a repetition of their earlier pleadings and does not address the substantive illegality and disputed issues raised regarding the loan account and enforcement process.
49. On the issue of whether the Applicant has established a prima facie case with a likelihood of success, the Appellant relies on the definition of a prima facie case as set out in Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125, where the Court stated that a prima facie case exists where on the material presented, a court properly directing itself would conclude that there exists a right apparently infringed requiring rebuttal.
50. The Applicant submits that it has established a prima facie case on the basis that the interest and charges levied by the 1st Respondent exceed the permissible legal threshold under Section 44A(2) of the Banking Act, which limits recoverable amounts on a non-performing loan to the principal owing at the time of default, together with contractual interest not exceeding the principal and recoverable enforcement expenses.
51. It contends that despite repaying approximately Kshs.44.9 million, the Respondents are demanding a sum of about Kshs.158 million, which it argues demonstrates that the interest and charges have exceeded the lawful limits and amount to more than 300% of the original loan.
52. The Applicant further submits that the statutory framework gives effect to the in duplum rule, which was explained in Kenya Hotels Limited v Oriental Commercial Bank Ltd (Formerly Delphis Bank Limited) [2019] eKLR, where the Court of Appeal held that interest ceases to accrue once it equals the principal amount, the rule having been consistently applied since its introduction in 2007. It argues that in the present case, the Respondents are demanding interest beyond twice the principal amount, contrary to the in duplum principle and Section 44A of the Banking Act.
53. The Applicant further challenges the Respondents’ computation under Section 44A, particularly the assertion that recovery costs estimated at Kshs.10,000,000 at the time of default should be included in determining the in duplum ceiling. It submits that although Section 44A(2)(c) allows inclusion of recovery expenses, the Respondents bear the evidential burden to prove such expenses with proper documentation such as receipts or audited accounts. In the absence of any itemized or verified proof of such costs, the Applicant contends that the figures advanced by the Respondents are speculative and incapable of justifying the inflated ceiling of approximately Kshs.160 million.
54. On irreparable harm, the Applicant again relies on the definition of irreparable injury in Halsbury’s Laws of England, which describes it as injury that cannot be adequately remedied by damages, or where damages are not an adequate remedy, including situations where the subject matter of the dispute may be destroyed. The Applicant submits that the intended sale of the suit property, Kisumu/Municipality Block 6/2, would permanently deprive it of a critical commercial asset essential to its operations, business continuity and contractual engagements.
55. The Applicant further submits that loss of the suit property would have a cascading “domino effect” on its business operations, including loss of suppliers, tenders and commercial reputation, and that such losses cannot be adequately quantified in monetary terms. It argues that once the property is sold, restoration to its original position would be impossible even if it ultimately succeeds in the main suit.
56. The Applicant relies on Nguruman Ltd v Jan Bonde Nielsen & 2 Others [2014] eKLR, where the Court of Appeal held that irreparable injury must be actual, substantial, and not merely speculative, and that damages must not be an adequate remedy. It submits that its case meets this threshold because the sale of the charged property would render the suit nugatory.
57. The Applicant also cites Jelangat & another v Mwananchi Credit Limited & another (Civil Case 374 of 2018) [2023] KEHC 19922 (KLR), where the Court held that courts will intervene where contractual terms are illegal, unconscionable, oppressive, fraudulent or amount to unjust enrichment, particularly where a borrower is placed in a vulnerable position. It submits that the Respondents’ conduct in imposing allegedly excessive and unconscionable interest falls within this category.
58. On the balance of convenience, the Applicant submits that it lies in its favour because it stands to suffer significantly greater harm if the injunction is denied compared to the Respondents, who are a financial institution whose rights to recover the debt will remain intact. It relies on Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 Others [2016] KEHC 7263 (KLR), where the Court emphasized that in determining the balance of convenience, the court considers comparative injury to both parties and seeks to preserve the status quo pending determination of the dispute.
59. The Applicant further submits that it has demonstrated good faith by securing a third-party purchaser willing to purchase the property at a price sufficient to clear the outstanding debt, and that allowing time for a private treaty sale would serve the interests of both parties by settling the debt without resorting to a public auction that may result in undervaluation and residual debt.
60. The Applicant also relies on Sections 103 and 104 of the Land Act, 2012, submitting that these provisions preserve a chargor’s redemption rights and allow opportunity to regularize the default before sale is completed. It argues that these statutory protections would be defeated if the Respondents are allowed to proceed with the auction.
61. The Applicant concludes that it has satisfied all three limbs for the grant of an interlocutory injunction and therefore prays that the injunction be granted with costs.
62. On their part, the Respondents submit that the Applicant’s case lacks merit and is an attempt to frustrate the statutory process of realizing securities over a loan facility that has been outstanding and in default for a considerable period. They contend that the Applicant freely entered into multiple loan agreements and subsequent restructures with the 1st Respondent bank, all of which were duly approved through formal board resolutions and supported by executed security documents, including a legal charge over LR No. Kisumu Municipality/Block 6/2 and personal guarantees by the directors of the borrowing entity.
63. The Respondents further submit that the initial facility was granted pursuant to an offer letter dated 21st March, 2009, comprising an overdraft of Kshs.3,000,000 and a term loan of Kshs.5,000,000, secured by inter alia a legal charge over the suit property, personal guarantees and other standard banking securities.
64. They state that subsequent restructures and additional facilities were issued in 2010, 2011, 2012, 2013, 2016 and thereafter, each time at the request of the borrower, culminating in a consolidated facility of Kshs.65,000,000 secured by a 3rd further charge over the suit property and continuing personal guarantees.
65. The Respondents submit that the Applicant persistently defaulted on repayment obligations, prompting the bank to issue the requisite statutory notices in accordance with the law. These included a 30-day demand notice issued through L.G. Menezes & Co. Advocates dated 21st March, 2018, a 14-day demand notice dated 12th June, 2018, a 90-day statutory notice dated 15th May, 2019, a 40-day notice to sell dated 28th August, 2019 and a 45-day redemption notice served through Igare Auctioneers together with notification of sale. They rely on proof of service by registered post and affidavits of service, submitting that the notices were properly served at the borrower’s last known address in compliance with Section 3(5) of the Interpretation and General Provisions Act.
66. In support of the validity of service, the Respondents rely on the decision in Nyagilo Ochieng & Another v Phanuel B. Ochieng & 2 Others [1996] eKLR, where the Court of Appeal held that where service by registered post is proved, a presumption of service arises and the burden shifts to the addressee to prove non-receipt.
67. The Respondents further submit that upon continued default, the bank lawfully exercised its statutory power of sale under Section 96 of the Land Act, 2012. They contend that the Applicant’s allegation of failure to issue statutory notices is unfounded and contradicted by documentary evidence showing compliance with all mandatory procedural steps, including issuance and service of statutory notices prior to commencement of the auction process.
68. The Respondents also submit that the Applicant’s allegations of illegal or excessive interest are unsubstantiated. They argue that all interest and charges applied were contractual, agreed upon in the signed letters of offer, credit agreements and charge instruments. They further contend that the Applicant has not produced any audit report or expert evidence to demonstrate any illegality in the computation of interest, rendering the allegations speculative and baseless.
69. On the issue of restructuring, the Respondents submit that loan restructures are a standard banking practice and in this case were initiated at the express request of the Applicant through board resolutions. They argue that each restructure constituted a fresh contractual arrangement with revised terms, and rely on the decision in National Bank of Kenya Ltd v Mutinda & another [2019] KEHC 11952, where the court held that a loan restructuring evidenced by a letter of offer and acceptance constitutes a valid modification of the original facility, with enforceable new terms.
70. The Respondents further submit that the Applicant is in clear admission of indebtedness and default, and that the outstanding loan continues to accrue interest. They state that as at 18th March, 2025, the total outstanding aggregate debt stood at Kshs.158,005,629.08, comprising both loan and current account balances, which exceeds the forced sale value of the charged property as per a pre-sale valuation report indicating a market value of Kshs.158,650,000 and a forced sale value of Kshs.119,000,000.
71. The Respondents submit that the doctrine of in duplum, as introduced under Section 44A of the Banking Act, has not been breached. They argue that a factual computation shows that the estimated principal at the time of default was approximately Kshs.80,000,000, thereby setting an in duplum ceiling of slightly above Kshs.160,000,000, which the current outstanding amount has not exceeded. They further submit that recovery costs are lawfully includable in computing the amount recoverable under Section 44A(2)(c) of the Banking Act.
72. The Respondents rely on the decision in Nguruman Limited v Jan Bonde Nielsen & 2 Others (2014) eKLR, where the Court of Appeal held that the three conditions for granting an interlocutory injunction – prima facie case, irreparable harm and balance of convenience – are sequential and must all be satisfied independently, and that failure to establish a prima facie case is fatal to the application.
73. On irreparable harm, the Respondents submit that the Applicant has failed to demonstrate any injury that cannot be adequately compensated by damages. They rely on JM v SMK & 4 others [2022] eKLR, which defined irreparable harm as injury not adequately remediable by damages, and further cite Elijah Kipng’eno Arap Bii v Kenya Commercial Bank Limited [2001] eKLR, where the court held that charged property is a commodity for sale whose loss is compensable in damages.
74. The Respondents further rely on Maithya v Housing Finance of Kenya Ltd & another [2003] EA as cited in Solomon Mbili Ngomo v Kenya Deposit Insurance Corp
[...truncated]