The East African Development Bank (EADB) has lost its bid to recover Sh1.3 billion from Kenya Bus Service (Mombasa) Limited and its guarantors, bringing to an end a 23-year court battle.
The lender’s claim collapsed after the High Court found that it had failed to satisfactorily explain how the original loan and accrued profits had escalated to the amount being sought.
The court said the bank did not provide sufficient documentation to justify the figures presented.
“The bank cannot, in a liquidated demand, simply throw figures at the court. There is no indication or documentation showing how the loan amount ballooned to $9.9 million within six years. In the circumstances, the suit lacks merit and is hereby dismissed,” the High Court said in a ruling delivered on June 13.
Court records show that on October 1, 1998, EADB agreed to extend KBS (Mombasa) Limited a loan in various currencies equivalent to Special Drawing Rights (SDR) 1,600,000 on condition that the firm provided personal guarantees acceptable to the bank to secure the company’s obligations.
At the time, the amount was equivalent to approximately Sh126 million. The bank averred that under a written guarantee, the assures irrevocably and unconditionally guaranteed, as primary obligors, repayment of the loan together with interest, fees and all related charges upon demand by the bank.
However, the court noted that the bank failed to explain how the original loan related to the $3.5 million (currently Sh451.5 million) it claimed was outstanding as of February 28, 2003. The claim was subsequently amended, with the amount sought rising further to $9.9 million (Sh1.3 billion).
The court also observed that evidence had been presented showing repayments amounting to Sh1.7 million and Sh44.9 million. However, there was no evidence demonstrating how those payments had been applied to the loan account or factored into the balance claimed by the lender.
“First, the principal amount was SDR 1,600,000. There is no indication as to when the SDR loan was converted into a US dollar account. To make matters worse, the sum of $3.5 million was allegedly outstanding as of February 28, 2003,” the court stated.
The judge concluded that, in the absence of a clear account showing how the debt had accumulated to nearly $10 million, the bank had failed to prove its claim on a balance of probabilities.
The dispute stems from a 1998 loan agreement and related guarantees that came under scrutiny after KBS (Mombasa) Limited defaulted on its repayment obligations.
The matter was filed in court in 2003 as the lender sought to enforce personal guarantees against the defendants for the unpaid facility.
The bank sued Mutjaba Jaffer, Manoj Shah, Sachin Amritlal Purshottam Bhmji Devan and Reena Amritlal. Sachin and Reena were as the legal administrators of the estate of Amritlal Purshottam Bhmji Devan alias Amritlal Devani.
EADB maintained that the defendants were personally liable for the outstanding debt.
Following default, EADB appointed receivers and managers in April 2001 to take control of the company’s charged assets and recover the debt.
Evidence presented by the bank showed that the charged property was eventually sold and the proceeds credited to the borrower’s account.
However, EADB maintained that the recovery was insufficient to extinguish the debt, leaving the guarantors liable for the outstanding balance.
