https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9071

Mahadi Energy Ltd & another v Premier Bank Ltd & 6 others (Constitutional Petition E066 of 2024) [2026] KEHC 9071 (KLR) (26 June 2026) (Ruling) Neutral citation: [2026] KEHC 9071 (KLR) Republic of Kenya In the High Court at Mombasa Constitutional Petition E066 of 2024 J Ngaah, J June 26, 2026 Between Mahadi Energy Limited 1st Petitioner Ibrahim Hussein Mahadi 2nd Petitioner and Premier Bank Limited 1st Respondent Attorney General 2nd Respondent Kenya Bankers Association 3rd Respondent Central Bank Of Kenya 4th Respondent and Kenya Law Reform Commission 1st Interested Party Shabeel Project Services Ltd 2nd Interested Party Ultra-Eureka Farm Ltd 3rd Interested Party Ruling 1.By a petition dated 18 October 2024 and amended on 20 November 2024, the petitioners prayed for a raft of orders couched in the following terms:“a.A conservatory order or any equivalent or related relief under Article 23(3) of the Constitution of Kenya, 2010 and in line with the Supreme Court of Kenya Bia Tosha rule do issue restraining the 1st Respondent Mombasa High Court Constitutional Petition No. E066 of 2024; Mahadi Energy Limited & Another v. Premier Bank Kenya Limited (Previously trading as First Community Bank Limited) and others- Amended Petition from selling by public auction or any other manner, transferring and or in any manner whatsoever interfering with L.R No. MN/VI/2428, L.R No. MN/VI/4689, L.R. MN/VI/998, L.R. 209/5061, Title No. Nairobi/Block 103/434, CR. 46162, L.R No. 209/2389/95 Juja Road Nairobi, L.R No. 209/5082 Nairobi South C and L.R No. 25764 Juja Road Nairobi.b.An interlocutory order in terms of Article 35 (1) (b) of the Constitution for the 4th Respondent to produce in court the authority in Law under which the 1st Respondent is undertaking Islamic Banking business in Kenya, pending the hearing and determination of the petition.c.A declaration that Banks operating in Kenya cannot offer Islamic banking facilities until a legal framework is set by law regulating the manner in which such facilities are to operate and the calculation of profits thereof.d.A declaration that the 4th Respondent has violated Articles 10, 27 and 46 of the Constitution by allowing the 1st Respondent to operate Islamic banking business in Kenya without a statutory framework and/or set regulations guiding such operations.e.A declaration that Banks offering Islamic banking facilities shall be obligated by law to file a suit in a court of law to obtain a decree before the commencement of the process of sale of the security whether immovable or movable for any facility(ies) already given.f.An order directing the 2nd and 3rd Respondents to take steps to ensure that a Statutory and/or Regulatory Framework is put in place to regulate the manner in which the operations and/or lending is to be undertaken by Banks offering Islamic banking facilities.g.An interlocutory order in terms of the rule in Vodacom v. Kenneth Nkosana Makate and Article 35 (1) (b) of the Constitution for the 1st Respondent to, for purposes of assessment of profits deducted by the 1st Respondent, produce the complete bank statements from the start of its relationship with the Petitioners and a clear statement of the method and/or manner in which it calculated the profit allegedly due to it, pending the hearing and determination of the petition.h.A declaration that the 1st Respondent has violated Articles 10 and 46 of the Constitution of Kenya, 2010 by compelling the Petitioner to sign a deed of settlement dated 30th September, 2020 for alleged credit facilities which were never advanced but which the 1st Respondent seeks to recover.i.A declaration that the charge instruments registered against the properties known as L.R No. MN/VI/2428, L.R No. MN/VI/4689, L.R. MN/VI/998, L.R. 209/5061, Title No. Nairobi/Block 103/434, CR. 46162, L.R No. 209/2389/95 Juja Road Nairobi,L.R No. 209/5082 Nairobi South C and L.R No. 25764 Juja Road Nairobi and the intended public auction in exercise of the statutory power of sale is contra the provisions of Section 12 and 44A of the Banking Act.j.A declaration that the charge instruments registered against the properties known as L.R No. MN/VI/2428, L.R No. MN/VI/4689, L.R No. 209/2389/95 Juja Road Nairobi, L.R No. 209/5082 Nairobi South C and L.R No. 25764 Juja Road, Eastleigh Nairobi are null and void for all purposes.k.A declaration that the deed of settlement dated 30th September, 2020 is fraudulent and irregular.l.A consequential order that the consent orders obtained by the 1st Respondent in High Court Civil Case No. E065 of 2019; First Community Bank Limited v. Samiras Development Company Limited & others; High Court Civil Case No. E066 of 2019; First Community Bank Ltd v. Ibrahim Hussein Mahadi; High Court Civil Case No. E068 of 2019; First Community Bank Ltd v. Mahadi Energy Ltd & others; High Court Civil Case No. E069 of 2019; First Community Bank Ltd v. Ray Engineering & Construction International Ltd & 7 others; High Court Civil Case No. E070 of 2019; First Community Bank Limited v. Mahadi Oil Kenya Limited & 4 others; and High Court Civil Case No. E108 of 2019; Ibrahim Hussein Mahadi & another v. First Community Bank Limited on the basis of the deed of settlement dated 30th September, 2020 is fraudulent.m.Costs of the Petition.n.Any other relief or order as the court may deem fit to grant” 2.The affidavit in support of the petition was sworn by Ibrahim Hussein Mahadi who introduced himself in the affidavit as “the Chairman and Managing Director of the 1st Petitioner.” 3.Mahadi has sworn that on diverse dates between the years 2011 and 2017, the 1st Respondent advanced loan facilities to the Petitioners amounting in total to Kshs. 631,558,748.00. The loan facilities were in the nature of murahaba and musharakah, concepts of financing that follow the Islamic or Sharia Law. 4.He has explained “murahaba” to be an Islamic banking product where the bank and the customer agree on the mark up or profit on the financial product being sold to the customer whereas “musharakah” is a concept where the bank and the customer would acquire property jointly and divide it into several portions, with the customer obligated to buy each unit until fully owning the property. In each of these concepts, the bank specifies an expected "return", which is the alternative to the concept of "interest" that is proscribed in Sharia Law. 5.According to Mahadi, as a devout Muslim, he and his companies strictly partake of Islamic banking products. In this particular instance, the loan facilities they took from the 1st Respondent were secured through the following charges on the Petitioners' properties:a.Charge against CR 14493 (LR 2428/VI/MN) dated 21 February 2017.b.Charge against CR 38352 and CR 8844 (LR 4689/VI/MN and LR 998/VI/MN) dated 9 November 2011.c.Further charge against properties in (ii) above dated 5th October 2012.d.Variation and second further charge against properties in (ii) above dated 29th October 2013.e.Charge against IR 101465 (LR 209/2389/95) dated 29th February 2012.f.Charge against IR 88158 (LR 25764) dated 7th August 2012.g.Charge against IR 14876 (LR 209/5082) dated 29th October 2009.h.Further charge against property in (vii) dated 28th August 2010 6.The Petitioners are said to have substantially settled the loan facilities in the following manner:“a.Chase Bank Kenya Limited took over a part of the facilities from the Respondent amounting to Kshs. 99,669,221.93, through a conditional offer dated 10th September 2013 following an acceptance by the 1st Respondent of the arrangement made in a letter dated 3rd September 2013.b.Mvita Container Depot Limited paid to the bank approximately Kshs. 275,000,000.00 over a period of 4 years and 7 months in loan repayments on account of the Petitioners.c.On 26th July 2017, the 2nd Petitioner entered into a licence agreement with APM Terminal Kenya Ltd and the 1st Respondent whereby LR Nos 4689/VI/MN, 998 and 2428/VI/MN (which properties are charged to the 1st Respondent) were licenced at a monthly rent of Kshs. 5,000,000.00, which rentals were paid directly to the 1st Respondent for a period of 15 months, bringing the total paid to Kshs. 75,000,000.00.d.The National Land Commission paid to the 2nd Petitioner approximately Kshs. 40.1 Million as compensation for land acquisition. The amount was paid directly to the 1st Respondent.e.Mahadi personally paid approximately Kshs. 40 million from my personal account in part settlement of the outstanding loan facilities.” 7.It was alleged that despite making the aforesaid payments, they were not reflected in the bank statements received from the 1st Respondent. As a matter of fact, for years the Petitioners had requested and demanded to be furnished with bank statements from the 1st Respondent to no avail; it is only after one of the petitioners’ Advocates made persistent complaints to the Central Bank of Kenya that the 1st Respondent finally released partial bank statements. 8.Mahadi has sworn that a total of approximately Kshs. 530 Million had been paid towards settlement of the loan yet the payment had not reflected in the bank statements which the petitioners had been furnished with. Despite the payments made, the 1st Respondent still claims Kshs. 950 Million as the outstanding loan amount. 9.Further, in exercise of its statutory power of sale, the 1st respondent was in the process of selling the charged properties and had, in fact, advertised the properties for auction. 10.It is also sworn sometime in 2020, the 1st Respondent compelled the 1st Petitioner and its sister companies to sign a deed of settlement dated 30 September, 2020 for alleged credit facilities which were never advanced but which the 1st Respondent seeks to recover. The deed of settlement is alleged to be in violation of Articles 10 and 46 of the Constitution of Kenya, 2010 particularly because 1st Respondent did not advance any monies on account of the deed of settlement to entitle the 1st Respondent to exercise a statutory power of sale. 11.Turning to the legal foundation of the petition, the petitioner has invoked Articles 2,3,10, 19, 22, 24, 27, 35, 40, 46, 50 and 159 of the Constitution basically reproducing, in their petition, the text of these constitutional provisions. 12.The record shows that subsequent to the petition, several applications and counter applications were filed by the parties in the petition. Mutai, J. who disposed of some of the applications eventually recused himself from the matter on an application by the 2nd interested party. 13.When the learned counsel for the respective parties appeared before me for the first time on 29 October 2025, I directed them to return in court on 10 November 2025 after I had perused the file and to appraised myself of the matter. On 10 November 2026 I issued directions on the disposal of the pending applications resting with the specific direction requiring counsel to address the court on why the case was filed as a constitutional petition rather than an ordinary civil suit. 14.I directed that this question would be addressed as a preliminary point before delving into the applications and, ultimately into the petition, assuming the petition is properly before court. The issue was to be addressed as a preliminary point as its determination may as well determine the fate of the petitioners’ petition. 15.Undisputed facts, apparent on the face of the petition are that the petitioners borrowed money from the 1st respondent and, to secure the repayment of this money, they offered several properties against which charges were registered. Copies of the charge documents exhibited on the affidavit in support of the petition show that some charges were registered under the Registration of Titles Act, cap. 281; the Land Act, cap. 280 and the Land Registration Act, cap. 300. The charge documents were executed by the 1st petitioner, described in the documents as the chargor and the 1st respondent. 16.In the charges registered under the Land Act, cap. 280 and the Land Registration Act, cap. 300, for instance, the 1st respondent’s remedies in the event of default on any of the obligations upon the 1st petitioner were captured in the charge document as follows:“Bank's Rights/Remedies and Consequences of Default -8.1At any time after the occurrence of any of the event,; specified Clause 7, the Bank may serve a notice on the Chargor in accordance with Section 90 of the Land Act demanding payment of the monies secured by this Charge and if the Chargor does not comply with the notice served under Section 90 of the Land Act the Bank may:-8.1.1sue the Charger for any monies due and owing under this Charge;8.1.2appoint a receiver of the income of the Charged Properly;8.1.3lease or sub-lease the Charged Property;8.1.4enter into possession of the Charged Property; or8.1.5sell the Charged Property;8.1.6all such remedies to be exercised in accordance with the Land Act.” 17.The charge documents also set out the Chargor’s rights including redemption of the security upon payment of the loan amount. Other charges were registered under the Registration of Titles Act, cap. 281 but, as noted, between the same parties. 18.In a nutshell, there was a contract or several contracts between the petitioners and the 1st respondent and which, for all intents and purposes, are the basis upon which this petition is founded. As a matter of fact, the learned counsel for the petitioner has admitted in his submissions that the petitioners’ dispute with the 1st respondent is a commercial one. However, he has sought to justify it as a constitutional matter because in his view “the scope of the issues before this court extends well beyond those narrow, parochial interests” and that “the petitioners primarily challenge the constitutionality of Islamic banking in Kenya”. 19.In the Supreme Court case of Communications Commission of Kenya & 5 others v Royal Media Services Limited & 5 others (Petition 14, 14A, 14B & 14C of 2014 (Consolidated)) [2014] KESC 53 (KLR) (29 September 2014) (Judgment), case which has been cited by the petitioners in support of their position, a similar argument was proffered. 20.The case was about digital migration of terrestrial television broadcasting from analogue to digital platform. Media houses, namely, Royal Media Services Limited, Nation Media Services Limited and Standard Group Limited alleged, inter alia, that their intellectual property rights had been violated and sought reliefs by way of a constitutional petition. 21.The late Majanja, J. captured their case as follows:“130.The petitioners allege at paragraph 72 of the petition that, “In breach of the Petitioners' intellectual property rights, the 3rd Respondent has by a letter dated 19th August 2013 unlawfully authorized the 4th, 5th, 6th, 7th and 8th Respondents to intercept and transmit the Petitioners' broadcasts, the Petitioners' locally produced programs and third party licensed programs without their authorization or consent.” As a result they seek a permanent injunction against the 4th, 5th, 6th and 7th respondents to restrain the violation”. 22.In dismissing the petitioners’ s argument that they could seek remedy by way of a constitutional petition, the learned judge held as follows:“In any case a violation of intellectual property rights is not a matter to be addressed by a petition to enforce fundamental rights and freedoms because there is a specific legal regime established by law to address intellectual property rights. This court has on several occasions emphasized that where there is a specific mechanism of dispute resolution established by ordinary law, then such a process ought to be pursued and that not every wrong attracts constitutional relief. In Sanitam Services (EA) Ltd v Tamia Ltd and Others Nairobi Petition No. 305 of 2012 [2012] eKLR the court noted that, “[10] Any breach of the intellectual property rights against the respondents can be enforced through the legal mechanisms provided by statute or common law, where applicable, hence it is unnecessary to invoke the provisions of Article 22 to enforce what are ordinary rights.” 23.When the case escalated to the Supreme Court as Communications Commission of Kenya & 5 others v Royal Media Services Limited & 5 others (Petition 14, 14A, 14B & 14C of 2014 (Consolidated)) [2014] KESC 53 (KLR) (29 September 2014) (Judgment), the Supreme Court upheld the learned judge’s reasoning and noted as follows:“It was the trial Court’s finding that the content generated by the 1st, 2nd and 3rd respondents had been freely available to the public on the digital platform, since its launch in 2009 (paragraph 66 of the Judgment). The learned Judge observed that a case of violation of intellectual property rights is not a matter to be addressed by a petition to enforce fundamental rights (paragraph 134). He relied on Sanitam Services (EA) Ltd. v. Tamia Ltd.&16 Others, Nairobi Petition No. 305 of 2012; [2012] eKLR, in which the Court held that a breach of intellectual property rights can be enforced through the legal mechanisms provided by statute or the common law, and that the invocation of the Constitution, particularly Article 22, was not necessary to enforce ordinary rights (paragraph 10).(254)The Appellate Court (Musinga J.A) agreed with Majanja J.,that if indeed the appellants had violated the intellectual property rights of the broadcasters, a petition to enforce fundamental rights and freedoms was not the proper recourse, as there exists a definite legal regime for the resolution of such complaint (paragraph 136).(255)Section 35(4) of the Copyright Act provides an avenue for redress, in the event of an infringement. It thus provides:Infringement of any right protected under this Act shall be actionable at the suit of the owner of the right and in any action for the infringement the following reliefs shall be available to the plaintiff:a.relief by way of damages, injunctions, accounts or otherwise that is available in any corresponding proceedings in respect of infringement of their proprietary rights;(b)delivery-up of any article in possession of the defendant which appears to the court to be an infringing copy; or any article used or intended to be used for making infringing copies…” 24.The court underscored the doctrine of constitutional avoidance as articulated by the appellants before it and noted, thus:“(256)The appellants in this case are seeking to invoke the “principle of avoidance”, also known as “constitutional avoidance”. The principle of avoidance entails that a Court will not determine a constitutional issue, when a matter may properly be decided on another basis. In South Africa, in S v. Mhlungu, 1995 (3) SA 867 (CC) the Constitutional CourtKentridge AJ, articulated the principle of avoidance in his minority Judgment as follows [at paragraph 59]:I would lay it down as a general principle that where it is possible to decide any case, civil or criminal, without reaching a constitutional issue, that is the course which should be followed.” 25.The court also referred to a United States decision in which the conditions under which the doctrine of constitutional avoidance may be applied were outlined and held as follows:(257)Similarly the U.S. Supreme Court has held that it would not decide a constitutional question which was properly before it, if there was also some other basis upon which the case could have been disposed of (Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 347 (1936)). 26.The court then concluded as follows:“(258)From the foundation of principle well developed in the comparative practice, we hold that the 1st, 2nd and 3rd respondents’ claim in the High Court, regarding infringement of intellectual property rights, was a plain copyright- infringement claim, and it was not properly laid before that Court as a constitutional issue. This was, therefore, not a proper question falling to the jurisdiction of the Appellate Court.” 27.Although the petitioners have urged that the gravamen of their petition is the “constitutionality of Islamic banking in Kenya” the court cannot ignore the fact that the petitioners and the 1st respondent were in a contractual relationship. As noted, the learned counsel for the petitioner has acknowledged as much, in his submissions. 28.There is no doubt from the pleadings that although prayers for reliefs that would ordinarily be sought in a constitutional petition have, for lack of a better description, been thrown into the petition, it is not difficult to see that what the petitioners are seeking is what they would have sought in a civil commercial dispute. Sample these prayers:“a.A conservatory order or any equivalent or related relief under Article 23(3) of the Constitution of Kenya, 2010 and in line with the Supreme Court of Kenya Bia Tosha rule do issue restraining the 1st Respondent Mombasa High Court Constitutional Petition No. E066 of 2024; Mahadi Energy Limited & Another v. Premier Bank Kenya Limited (Previously trading as First Community Bank Limited) and others- Amended Petition from selling by public auction or any other manner, transferring and or in any manner whatsoever interfering with L.R No. MN/VI/2428, L.R No. MN/VI/4689, L.R. MN/VI/998, L.R. 209/5061, Title No. Nairobi/Block 103/434, CR. 46162, L.R No. 209/2389/95 Juja Road Nairobi, L.R No. 209/5082 Nairobi South C and L.R No. 25764 Juja Road Nairobi.g.An interlocutory order in terms of the rule in Vodacom v. Kenneth Nkosana Makate and Article 35 (1) (b) of the Constitution for the 1st Respondent to, for purposes of assessment of profits deducted by the 1st Respondent, produce the complete bank statements from the start of its relationship with the Petitioners and a clear statement of the method and/or manner in which it calculated the profit allegedly due to it, pending the hearing and determination of the petition.h.A declaration that the 1st Respondent has violated Articles 10 and 46 of the Constitution of Kenya, 2010 by compelling the Petitioner to sign a deed of settlement dated 30th September, 2020 for alleged credit facilities which were never advanced but which the 1st Respondent seeks to recover.i.A declaration that the charge instruments registered against the properties known as L.R No. MN/VI/2428, L.R No. MN/VI/4689, L.R. MN/VI/998, L.R. 209/5061, Title No. Nairobi/Block 103/434, CR. 46162, L.R No. 209/2389/95 Juja Road Nairobi,L.R No. 209/5082 Nairobi South C and L.R No. 25764 Juja Road Nairobi and the intended public auction in exercise of the statutory power of sale is contra the provisions of Section 12 and 44A of the Banking Act.j.A declaration that the charge instruments registered against the properties known as L.R No. MN/VI/2428, L.R No. MN/VI/4689, L.R No. 209/2389/95 Juja Road Nairobi, L.R No. 209/5082 Nairobi South C and L.R No. 25764 Juja Road, Eastleigh Nairobi are null and void for all purposes.k.A declaration that the deed of settlement dated 30th September, 2020 is fraudulent and irregular.l.A consequential order that the consent orders obtained by the 1st Respondent in High Court Civil Case No. E065 of 2019; First Community Bank Limited v. Samiras Development Company Limited & others; High Court Civil Case No. E066 of 2019; First Community Bank Ltd v. Ibrahim Hussein Mahadi; High Court Civil Case No. E068 of 2019; First Community Bank Ltd v. Mahadi Energy Ltd & others; High Court Civil Case No. E069 of 2019; First Community Bank Ltd v. Ray Engineering & Construction International Ltd & 7 others; High Court Civil Case No. E070 of 2019; First Community Bank Limited v. Mahadi Oil Kenya Limited & 4 others; and High Court Civil Case No. E108 of 2019; Ibrahim Hussein Mahadi & another v. First Community Bank Limited on the basis of the deed of settlement dated 30th September, 2020 is fraudulent.” 29.Except for the prayer for costs, the rest of the prayers have been spiced up with constitutional provisions and coined as reliefs that would ordinarily be sought in a constitutional petition but, in reality, they are serve as a veil and seek to achieve the same purpose as the foregoing prayers. 30.Like it was in Communications Commission of Kenya & 5 others v Royal Media Services Limited & 5 others (supra), the petitioners have, in their petition, invoked several articles of the Constitution as underpinning their quest for the reliefs sought. But the description of a suit that is, for all intents and purposes, an ordinary civil claim or invoking constitutional provisions in such a suit does not necessarily qualify it as a constitutional petition. 31.Granted; the petitioners have a constitutional right to property, regardless of its form. However, as long as their property rights are traceable to a contract those rights can only be enforced as between the parties to the contract through an ordinary suit and not by way of a constitutional petition. In the Communications Commission of Kenya & 5 Others versus Royal Media Services Limited & 5 others (supra), the Supreme Court agreed with this Honourable Court that the petitioners’ right to intellectual property had not been violated but even if there was such a violation, their remedy as much as the manner of approaching court was available under statute, in particular, section 34 of the Copyright Act. 32.A constitutional petition is a process that is invoked whenever the solemnity of the occasion demands. Like it was held by the Privy Council in Kemrajh Harrikissoon Versus Attorney General of Trinidad & Tobago (1979) 3WLR 62 the right to apply to the High Court for redress when any human right or fundamental freedom is or is likely to be contravened, is an important safeguard of those rights and freedoms; but its value is diminished if it is allowed to be misused as a general substitute for normal proceedings. 33.Thus, paraphrasing the Privy Council holding, the mere allegation that a human right or fundamental freedom of the applicant has been or is likely to be contravened is not of itself sufficient to entitle an applicant to invoke the jurisdiction of the court under article 22 or 23 of the Constitution if it is apparent that the allegation is being made solely for the purpose of avoiding the necessity of applying in the normal way for the appropriate remedy. 34.For the reasons I have given, the petitioners purported constitutional petition appeal to me to be more of an abuse of the due process of this Honourable Court than a competent petition. It is hereby struck out. However, considering that the question of the propriety of the petitioners’ petition was raised by the court, I make no order as to costs. It is so ordered. SIGNED, DATED AND DELIVERED ON 26 JUNE 2026NGAAH JAIRUSJUDGE