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JudgmentNYORO CONSTRUCTIONS CO. LIMITED VS Kenya Commercial Bank Ltd7 min read

NYORO CONSTRUCTIONS CO. LIMITED VS Kenya Commercial Bank Ltd

High Court at Milimani High Court · · Peter Mulwa

  1. The applicant Kenya Commercial Bank, Kenya Limited filed the subject Notice of Motion dated 19th January 2024 brought under Sections 1A, 1B and 3A of the Civil Procedure Act, Order 40 Rule 7 and Order 51 Rule 1 of the Civil Procedure Rules, seeking the following orders:
  2. Spent
  3. Spent
  4. To set aside the temporary orders of this court by Hon. J. Chacha Mwita given on 31st July 2013 suspending the sale of properties charged to the Defendant.
  5. In alternative to prayer 3, this court be pleased to vary the terms of the orders issued on 31 July 2023 and order the Plaintiff to settle the outstanding arrears of Kshs. 919,820,326.20 as of 16th January 2024 within 14 days and to continue servicing the loan by paying the monthly instalments as and when they fall due per the terms of the security agreements.
  6. In case of default with prayer 4 the Defendant be at liberty to proceed with the exercise of its statutory power of sale.
  7. The costs of the application be provided for.
  8. The application is supported by the supporting affidavit of Lilian Sogo sworn on 19th January 2024.
  9. In summary the facts of this case are that Defendant advanced various banking facilities to the Plaintiff in the sum of Kshs 1.5 billion as working capital for the construction of various roads on behalf of the government. The Plaintiff provided security to wit, debenture over the Plaintiff’s assets, legal charge over the properties L. R. 6826/3, L.R. 209/10806, and L.R. 209/12116/31. It also provided logbooks, deeds of assignment on all receivables in respect of contracts between various contracting parties and borrower, guarantees and indemnities of the directors of the company and corporate guarantees and indemnities by the concerned companies.
  10. The Plaintiff defaulted to pay the loan facility as agreed and the defendant issued the requisite statutory notices. The Plaintiff failed to regularize the loan and the Defendant instructed the auctioneers to take out the legal steps to advertise the sale of the charged properties. The advertisement was done and the sale was scheduled to take place on 8th August 2023.
  11. As a consequence, the Plaintiff filed a suit vide the plaint dated 24th July 2023 together with the Notice of Motion dated 24th July 2023 seeking an injunction against the Defendant from auctioning, selling, or disposing of the Plaintiff’s assets of land Parcel Nos. L. R. 6826/3, L.R. 209/10806, and L.R. 209/12116/31 and L.R. 209/12116/45.
  12. Upon hearing the application, this court presided by Hon Justice Chacha Mwita on 31st July 2023 issued the following orders:
  13. That the sale due on 8th August 2023 is hereby suspended on condition that:
  14. the Plaintiff do pay the defendant Kshs 200,000,000/= within 14 days from the date hereof.
  15. the Plaintiff will also pay the auctioneer's charges.
  16. That in default of (a) and (b) above, the orders suspending the sale shall stand set aside and the defendant will proceed to sell the property.
  17. That the parties to agree on payment of the balance of the loan
  18. That mention on 31/10/2023 for parties to comply with the pre-trial directions.
  19. According to the applicant, the Plaintiff complied with the orders of the court but has since failed to make any monthly remittance as per the loan agreement as a result the arrears have shot up and as of 14th March 2023, the outstanding amount is Kshs.1,242,466,284/= thus prompting the Defendant to file the instant application seeking to set aside the temporary orders of an injunction issued on 31st July 2023.
  20. In opposing the instant application Josiah Njoroge Njuguna the company director swore a replying affidavit on 21st March 2024 and averred that in compliance with the court orders of 31st July, 2023 the company has paid a total sum of Kshs. 391,285,032 as follows: a deposit of Kshs 270,000,000/= and a recovery by the Defendant of a sum of Kshs. 121,285,032/= from the performance bond. He urged that the Plaintiff is acting per the interim orders and is working towards clearing the loan facility.
  21. The application was heard by way of written submissions, the Defendant filed submissions dated 30th April 2023 while Plaintiff filed submissions dated 4th July 2024, which I have considered.
  22. The jurisdiction of the court to set aside an order of injunction is set out under Order 40 Rule 7 of the Civil Procedure Rules which provides thus:

“Any order for an injunction may be discharged, or varied, or set aside by the court on application made thereto by any party dissatisfied with such order.”

  1. An injunction is an equitable remedy issued to prevent the ends of justice from being defeated. However, if it is proved that the injunction is unjust or inequitable and or if the interest of justice so require, or if it is shown the injunction has failed to achieve the goals for which it was designed, the court has unrestricted discretion to discharge, modify, or set aside an injunction order.
  2. In the case of Kenya Elecricity Transmission Company Limited v Kibotu Limited [2019] eKLR, the court observed: 

“Interlocutory injunctions are meant to preserve the substratum of the suit pending the hearing and determination of the suit. The grant of interlocutory injunctions is not meant to occasion prejudice to any party. In this particular case the defendant would be able to be compensated by way of damages if the court finds that the plaintiff did not deserve the grant of the injunction. The damages can be quantified…nd disturbance. These are monetary in nature which can be granted if the defendant’s counterclaim succeeds.”

  1. In the instant case, the Plaintiff avers that the application by the Defendant is intended to distract from the central issues and cause further delay in the hearing of the main suit. I note that, since the Plaintiff obtained a temporary injunction the have not set the suit down for hearing, nor have they paid the monthly instalments.
  2. There is nothing substantial done by the Plaintiff towards repayment of the loan except asserting that the government owes it a sum of Kshs 1,008,594,815.20 which it is yet to pay and that the Defendant accepted to take the certificate discounting and accepted that the credit facility would be settled by the Government of Kenya.
  3. There is no evidence adduced by the Plaintiff to indicate it has acted in good faith, and that it has repaid some amount towards clearing the loan balance. The Defendant asserts that the Plaintiff failed to remit the monthly instalments despite the court’s orders being explicit that the parties ought to agree on the payment of the balance of the loan.
  4. I have perused the court orders, it is clear that the court did not discharge the Plaintiff’s obligation to repay the loan. I also find that the Plaintiff failed to act in accordance with the overriding objectives and have the suit set down for hearing on merit. The issuance of a temporary injunction by the court is not bar to a party from undertaking its obligations, the injunction should also not be used to compromise the hearing of the suit on merit.
  5. From the record I note that a defence has been filed, I also note that parties are yet to comply with the pre-trial directions, the suit is therefore not ready to be set down for hearing, the Plaintiff has gone into slumber, and only awakened by the Defendant’s application seeking to set aside the temporary injunction. The Defendant continues to suffer economic loss as the Plaintiff is indebted to it in huge sums and has used the temporary injunction in failing to repay the loan, this is a circumstance that would ordinarily allow an application for setting aside the temporary injunction.
  6. In the case of Mobile Kitale Service Station v Mobil Oil Kenya Limited & Another (2004) eKLR the court stated that:

“An interlocutory injunction is given on the court’s understanding that the defendant is trampling on the rights of the plaintiff. An interlocutory injunction, being an equitable remedy, would be taken away (discharged) where it is shown that the person’s conduct with respect to matters pertinent to the suit does not meet the approval of the court which granted the orders which is the subject matter.

The orders of injunction cannot be used to intimidate and oppress another party.  It is a weapon only meant for a specific purpose – to shield the party against violation of his rights or threatened violation of the legal rights of the person seeking it.”

  1. The debt is not disputed and the Plaintiff alleged that the failure to honor the debt was occasioned by the fact that the government failed to pay the work done despite having completed the same and the completion certificate issued. I note that the sum in dispute is huge and taking the unique circumstances of the case I find it is not unjust and inequitable to sustain the injunction.
  2. In the result, I find the Defendant’s Notice of Motion dated 19th January 2024 has merit and is allowed. The temporary injunction orders given on 31st July 2023 suspending the sale of properties charged to the Defendant by the Plaintiff are hereby discharged. The Defendant will have costs of the application.

RULING delivered virtually, dated and signed at NAIROBI

This 7th day of November 2024.


P. MULWA

JUDGE

In the presence of:

Mr. Mutiso for plaintiff/respondent

Mr. for defendant/applicant

Court Assistant: Carlos

    NYORO CONSTRUCTIONS CO. LIMITED VS Kenya Commercial Bank Ltd NYORO CONSTRUCTIONS CO. LIMITED VS Kenya Commercial Bank Ltd