https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7692

Njoroge v KCB Bank Kenya Limited (Civil Suit 24 of 2018) [2026] KEHC 7692 (KLR) (3 June 2026) (Judgment) Neutral citation: [2026] KEHC 7692 (KLR) Republic of Kenya In the High Court at Bungoma Civil Suit 24 of 2018 REA Ougo, J June 3, 2026 Between Penina Njoki Njoroge Plaintiff and KCB Bank Kenya Limited Defendant Judgment 1.The Plaintiff instituted this suit vide an Originating Summons dated 17/12/2005. The same was brought pursuant to the Registered Land Act, Cap 300 (now repealed), and Order XXXVI, Rules 3A & 3F of the Civil Procedure Rules (now repealed). The summons sought determination of the following questions: -i.Whether the defendant has a legal and property registered charge over land parcel no. East Bukusu/North Sang’alo/1793 in respect of monies advanced to Peter Njoroge (deceased) on 2/6/1998?ii.Whether the borrowing related to the alleged charge has been fully paid?iii.Whetehr the defendant is entitled to exercise its statutory power of sale pursuant to section 74 of the Registered Land Act?iv.Whether the defendant has served the plaintiff with a proper and legal statutory notice of sale of the land parcel no. East Bukusu/North Sang’alo/1793?v.Whether the interest, penalties and other charges lumped on the loan account were agreed and incorporated in the charge document if any?vi.Whether the plaintiff has fully paid the loan to the defendant to entitle her to be released from the debt by discharging the title East Bukusu/North Sang’alo/1793 with the defendant?vii.Whether the interest charges, penalties and levies lumped on the plaintiff’s loan account are legal and permitted by section 44 and 45 of the Banking Act Cap 488 laws of Kenya?viii.Whether the defendant has regularly supplied the plaintiff with proper and regular statements of the loan account?ix.Whether the defendant through its agents have served the plaintiff with a proper notification of sale of the suit premises?x.Whether the defendant and/or its agents have valued the suit premises for purposes of the intended sale?xi.Whether the defendant and its agents have complied with the provisions of rule 15 of the Auctioneer Rules 1997?xii.Whether the plaintiff should be granted leave to discharge title of the security given to the defendant?xiii.Whether an order should issue directing that no interest is payable or further payments should be made or whether the loan has been fully paid?xiv.Whether an order discharging charge over the suit premises and delivery of title to the plaintiff should issue?xv.Whether the defendant has complied with the provisions of section 39 of the Central Bank of Kenya Act?xvi.Who should meet the costs of this originating summons? 2.The summons was supported by the Plaintiff’s witness statement dated 28/11/2014, which was adopted at the hearing. The Plaintiff contended that she was the widow of Peter Njoroge Njuguna, who died on 25/3/2001. At that time, he had secured a loan of Kshs. 370,000 on 2/6/1998, secured against title no. East Bukusu/North Sangalo/1793 (hereinafter referred to as the ‘suit property’). 3.That at the time of his death, the deceased had repaid Kshs. 200,000, and that she continued servicing the loan, making payments of Kshs. 300,000 on 17/9/2001, Kshs. 100,000 on 16/10/2002, Kshs. 2,000 on 17/3/2003, and Kshs. 1,000 on 13/5/2003. 4.The defendant’s claim of Kshs. 666,114 as at 31/3/2002 was grossly inflated, and the suit property had been discharged by then; thus, the defendant should be ordered to release the security. The defendant failed to furnish her with bank statements of the loan despite various requests, making it difficult to determine her true debt. No charge had been registered against the suit property to secure the loan advanced to the deceased; therefore, the sale of the suit property would be illegal. The plaintiff testified as Pw1. 5.The Defendant opposed the summons by a Replying Affidavit sworn on 18/1/2006, contending that the deceased herein applied for financial facilities and accommodation from the Defendant, which were extended to him, but subsequently defaulted on repayment of the loan, causing the amount due to escalate due to interest and other related charges. 6.That the defendant issued the requisite demands and statutory notices to the deceased, requiring settlement of the loan, and despite the deceased issuing numerous undertakings to settle the loan, the deceased failed to do so, thereby forcing the defendant to exercise its statutory right of sale. 7.Following the deceased’s death, the plaintiff engaged the defendant and sought to liquidate the debt accrued under various undertakings which she failed to uphold, thereby forcing the plaintiff to initiate steps to exercise its statutory right of sale, as the charge over the suit property remains subsisting and the Applicant has failed to take any steps to offset the outstanding debt arising from the loan facility. The provisions of the Banking Act and the Central Bank on Interest cannot operate retrospectively. The defendant also relied on a witness statement dated 9/4/2025 by Walter Klervy Mususi, who testified as Dw1, reiterating the averments made above. 8.The summons proceeded to hearings on 9/10/2025 and 13/11/2025, during which each party gave evidence. The court directed the parties to file their respective written submissions. 9.The plaintiff submitted that the defendant made errors in calculating her liability, as evidenced by the testimony of Dw1, who, on cross-examination, admitted that there was an error in the bank statements, including the addition of Kshs. 14,000 to the loan account, which was described as an error that was corrected. The plaintiff further submitted that the defendant failed to comply with Sections 44 and 44A of the Banking Act by unilaterally varying the interest rates. Consequently, a detailed statement of account would integrate the record of various transactions, interest or charges levied. That there was no legal charge registered against the suit property, and as such the defendant ought to be compelled to deliver up the Certificate of Title and, if charged, to have it discharged. 10.On its part, the defendant submitted that it proved beyond reasonable doubt that the suit property was charged to it to secure various financial obligations advanced to the plaintiff. It complied by issuing the relevant statutory notices, which were acknowledged by the deceased, who requested more time to settle the outstanding loan. The contract entered into between it and the plaintiff predated the in duplum principle, and the law does not operate retrospectively. It further submitted that, at the time the plaintiff filed the suit on 27/12/2005, the said rule was not operational, and thus the plaintiff cannot rely on it. Further, it submitted that its witness admitted in his testimony that the loan stopped accruing interest when the amount due reached Kshs. 701,946.51, an amount that has been outstanding since 31/3/2011. 11.That the amount of Kshs. 701,946.51 is due and outstanding, and therefore the security cannot be discharged unless the said amount is paid in full. Accordingly, the plaintiff has failed to prove her case on the balance of probabilities and does not merit the grant of the orders sought. On the contrary, the suit ought to be dismissed with costs to it. Analysis And Determination 12.Upon considering the Originating Summons and the statements, the evidence adduced in court, as well as the written submissions filed by both parties, I find the following issues for determination;i.What was the principal amount advanced to the deceased & what were the terms of the agreement therein? and if so?ii.Whether the deceased came into default of his financial obligations to the defendant?iii.Whether the defendant’s exercise of its statutory right of sale had accrued?iv.Whether the in duplum principle is applicable in the instant case? 13.On the first issue, the undisputed evidence on record is that the deceased herein obtained an overdraft facility of Kshs. 370,000 from the defendant under an agreement dated 2/6/1998. The deceased appended his signature to the document four days later, on 6/6/1998. The aforementioned agreement also provided that interest on the facility would be 36%, and in the event of default, the default interest rate would be 17% above the stated rate. 14.The plaintiff raised an issue regarding the suit property having been charged as security for the financial facilities advanced to the deceased. I note that no Charge document was produced in court as evidence of this. However, in her own documents produced as exhibits in court, the plaintiff sought to rely on a Certificate of Search dated 22/11/2004, which showed that the suit property was charged to the defendant bank to secure a number of facilities advanced to the deceased from 24/10/1985 to 16/1/1997. 15.There was no evidence on record that a charge was registered to secure the specific facility advanced to the deceased under the agreement dated 2/6/1998, signed by the deceased on 6/6/1998, for the overdraft of Kshs. 370,000. However, this agreement contained an express term as follows.“The bank reserves the right to set off or combine all or any accounts of the borrower in their own right whatever their nature. The right to consolidate all securities held on any account as security for all liabilities is also held.” 16.The defendant submitted that the suit property was used to secure numerous facilities advanced to the deceased, as evidenced by the Certificate of Search produced by the plaintiff. 17.I have perused the said Certificate of Search and note that the entries in the encumbrance section are as follows.1-24/10/85 Charge to secure a sum of Kshs. 50,0004-25/9/87 Charge to secure a sum of Kshs. 50,0007-16/5/91 Charge to secure a sum of Kshs. 50,00010-4/1/95 Further charge to secure an amount of Kshs. 280,00011-16/1/97 Further charge to secure an amount of Kshs. 70, 000Proprietor Kenya Commercial Bank Ltd.Note: Right To Tack & Consolidate Further Advance Are Reserved In Section 83 & 84 OF THE R.L.A 18.Consequently, upon operationalisation of the contract, the suit property became available for attachment as security for the advanced loan facility once the deceased defaulted on repayment of the loan advanced. 19.Consequently, I find that the defendant advanced the deceased an overdraft facility of Kshs. 370,000, that upon default in repayment, the defendant reserved the right to attach the suit property as security and exercise its statutory right of sale over the said property as provided in the loan agreement. 20.Whether the deceased/plaintiff was in default on repayment of the advanced funds is not in dispute. The defendant adduced evidence that the deceased plaintiff’s husband had fallen into default on repayment of the advanced funds, prompting the defendant to initiate the process of exercising its right of sale over the suit property. When the deceased realised that the defendant had advertised the suit property for sale by Public Auction, he contacted the defendant and executed an irrevocable undertaking dated 10/2/2000, seeking suspension of the intended auction on the condition that he would settle the loan in instalments as agreed. 21.There were numerous letters of correspondence between the deceased and the defendant, and subsequently between the plaintiff and the defendant, in which both the deceased and the plaintiff acknowledged being in default to the bank. 22.In an undertaking signed on 10/2/2000, the deceased undertook to settle his debt to the defendant in instalments to forestall an intended Public Auction of the suit property. On her part, the plaintiff, through her advocate, wrote to the defendant on 28/2/2002, requesting an 8-month period to clear the outstanding arrears. 23.Clearly, the deceased was in default of his financial obligations to the defendant. When the plaintiff began acting on behalf of the deceased’s estate, despite making part payments to settle the amount due, she failed to settle the outstanding balance. 24.Having established that the deceased and his estate were in default in settling the amount due to the defendant, it is evident that the defendant’s statutory right of sale had accrued. As to whether the requisite statutory notices were served on the plaintiff, section 74 of the Registered Land Act Cap. 300 (now repealed) required that a notification of sale of the property and the 45-day redemption notice required under the Auctioneers Rules be issued to the chargee. 25.The defendant contended that the plaintiff and the deceased were regularly informed of their indebtedness and that the requisite notices were served upon them. From the record, the defendant issued the first statutory notice under section 74 of the Registered Land Act (now repealed) on 18/9/1999, and a second on 27/11/1999. Both were acknowledged in the deceased’s undertaking dated 10/2/2000, which forestalled the Public Auction of the suit property. Following the deceased’s death, the plaintiff undertook to settle the deceased’s debt but made only partial payment. 26.From the evidence on record, it is thus clear that the defendant complied with the law as it was then as required under section 74 of the Registered Land Act (now repealed) by issuing the requisite statutory notices. 27.As to whether the in duplum principle is applicable in the instant case, the plaintiff contends that the defendant failed to comply with Sections 44 and 44A of the Banking Act by unilaterally varying the interest rates. Conversely, the defendant contends that the agreement with the plaintiff was entered into before the in duplum principle came into operation, that the law does not operate retrospectively, and that, even at the time of filing the instant suit, the rule was not operational, and thus the plaintiff cannot rely on it.28.Section 44A of the Banking Act came into force on 1 May 2007. That provision of law sets out the maximum amount a banking institution that grants a loan to a borrower may recover on the original loan. The banking institution is limited in what it may recover from a debtor in respect of a non-performing loan, and the maximum recoverable amount is defined as follows in section 44A(2):“The maximum amount referred in subsection (1) is the sum of the following – a)The principal owing when the loan becomes non performing; b)Interest, in accordance with the contract between the debtor and the institution, not exceeding the principal owing when the loan becomes non performing; andc)Expenses incurred in the recovery of any amounts owed by the debtor.” 29.Under that provision, if a loan becomes non-performing, the debtor resumes payments, and the loan becomes non-performing again, the limitation under the said paragraphs shall be determined by reference to the time the loan last became non-performing. In addition, by section 44A (6) it is provided:“This section shall apply with respect to loans made before this section comes into operation, including loans that have become non performing before this section comes into operation.” 30.That is, contrary to the defendant's averments, the provision applies to loans and has retrospective effect. 31.In this case, after obtaining the loan on 6/6/1998, the deceased subsequently went into default, prompting the defendant to commence the process of realising its right of sale. The defendant stated that it initially instructed its advocate to write to the deceased on 10/4/1999, demanding payment of the entire amount. At this point, the loan became non-performing. 32.However, the record shows that following the deceased’s death, the plaintiff testified that she paid the defendant Kshs. 300,000 in 2001, Kshs. 100,000 on 16/10/2002, Kshs. 2,000 on 17/3/2003, and Kshs. 1,000 on 13/5/2003. Accordingly, the loan became non-performing again 90 days after 13/5/2003, the date of the plaintiff’s last repayment. 33.Consequently, in accordance with the provisions of section 44A, the in duplum rule applies in the instant case. 34.Considering the amounts paid by the plaintiff cited above, the record shows that the deceased paid Kshs. 152,020.30 on 23/12/1999, bringing the total of funds paid by the deceased and the plaintiff in settlement of the loan to Kshs. 555,020.30. The plaintiff further stated that the outstanding loan as at 31/3/2011 was Kshs. 701,946.51, an amount which Dw1 testified was the amount due, as interest had stopped accruing. 35.My interpretation of the above paragraph is that by the time the plaintiff has fully repaid the loan, she would have paid a total of Kshs. 1,256,966.81, which is more than 2½ times the sum originally advanced to the deceased. 36.In Mwambeja Ranching Company Limited & another v Kenya National Capital Corporation [2019] KECA 436 (KLR), the Court of Appeal clarified the application of the in duplum rule, holding that it applies to the total outstanding debt, including any arrears or accumulated interest at any given time, not merely to the original loan amount. 37.The question that arises is whether the amount the defendant seeks as an outstanding balance violates section 44A of the Banking Act. At the time the outstanding balance was due, the plaintiff had made payments of Kshs. 555,020.30, which exceeded the principal by Kshs. 185,020.30. The amount the defendant claims as outstanding clearly violates section 44A. 38.The plaintiff further averred that the defendant failed to comply with Sections 44 and 44A of the Banking Act by unilaterally varying the interest rates. This was confirmed by Dw1's testimony. 39.The agreement between the parties herein sets the interest rate at 36% p.a., with an additional penalty clause setting the default rate at 17% p.a. above the initial interest rate. 40.I reiterate that section 44 of the Banking Act incorporated the in duplum rule which limited the amount a bank or financial institution could recover from a non-performing loan. 41.The Court of Appeal in the case of Housing Finance Company of Kenya v John Silas Lenana Ole Puleiy (2019) eKLR stated:“The respondent agreed to meet the repayment installments as and when they fell due, inclusive of the interest accrued and lawfully levied, and in default allowed the appellant to realize the security within the terms of the charge and the law. (See of Kenya Commercial Bank Ltd v. Osebe (supra) and Mbuthia v. Jimba Credit Finance Corporation & another (supra). The contractual rate of interest as provided for in the two charges was 18% & 19% respectively. The respondent’s contention is that the appellant levied irregular, illegal, unlawful and wrongful default penalty charges/ or interest without the sanction of the Minister for Finance under section 44 of the Banking Act as read with section 39 of the Central Bank Act.The appellant does not deny that the levied default penalty charges or interest were not provided for in the two charges. Neither does it dispute that these were indeed levied. The explanation it gave and which the trial judge rejected was that the default penalty charges or interest were levied pursuant to custom and usage in the mortgage industry in Kenya. The appellant did not adduce any evidence of established custom and usage supporting the charging of default penalty charges or interest, which the respondent was charged. We seriously doubt whether such custom and usage, even if proved, could prevail over the express provisions of the law. In any case, the appellant did not contest the finding by the learned judge that the default penalty charges or interests were levied without the sanction of the Minister for Finance under section 44 of the Banking Act as read with section 39 of the Banking Central Bank Act.Accordingly, we cannot fault the learned judge for holding that the appellant irregularly, illegally, unlawfully and wrongfully levied default penalty charges or interest on the respondent’s mortgage account and that the exercise of the statutory power of sale was, in the circumstances, unjustified”. 42.In the present case, the question to be asked and answered is whether, on a balance of probabilities, the defendant addressed the issue of overcharging for interest. My analysis of the evidence regarding the facility secured by the plaintiff and advanced by the bank is not the same as to the interest charged. 43.The interest charged was agreed by the parties in the agreement. This court is well aware of the decision in National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & another [2001] KLR 112 – under holding 1 and at page 118 it was held: -“A court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded and proved. … it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain.” 44.Courts do not rewrite contracts for individuals who belatedly realise they entered into “bad bargains.” However, courts in Kenya do not enforce unconscionable contracts either. In Kenya, the doctrine of unconscionability — though not always expressly named — is recognised and applied through general principles of equity, fairness, and public policy under the law of contract. In National Bank of Kenya Ltd supra, the Court of Appeal emphasised that while courts do not interfere with parties’ freedom to contract, they will not enforce a contract that is "illegal, immoral, or unconscionable." 45.The Court of Appeal in Ajay Indravadan Shah v Guilders International Bank Ltd, Civil Appeal No. 135/2001 [2002] 1 EA 269, held that:“….the provisions of section 26(1) of the Civil Procedure Act are applicable only where the parties to a dispute have not, by their agreement, fixed the rate of interest payable. If the parties by their agreement have fixed the rate of interest, then the court has no discretion in the matter and must enforce the agreed rate Unless it is shown in the usual way that either that agreed rate is illegal or unconscionable or fraudulent.” 46.In Kenya Commercial Finance Company Ltd v Ngeny & Another [2002] 1KLR, the Court of Appeal as follows:“The court will not interfere where parties have contracted on arms-length basis. However, by its equitable jurisdiction, this court will set aside any bargain which is harsh, unconscionable and oppressive or where having agreed to certain terms and conditions, thereafter imposes additional terms upon the other party. Equity can intervene to relieve that party of such conditions.” 47.This position was echoed in Shah v Guilders International Bank Ltd [2002] 1 EA 264 (CAK), where the Court of Appeal again held that:“…where the rate of interest [has been agreed upon by parties,] the court was obliged to enforce the agreed rate unless it was illegal, unconscionable or fraudulent.” 48.In Margaret Njeri Muiruri v Bank of Baroda (Kenya) Ltd (2014) KLR, this Court held as follows:“Nevertheless, courts have never been shy to interfere with or refuse to enforce contracts which are unconscionable, unfair or oppressive due to the procedural abuse during formation of the contract, or due to contract terms that are unreasonably favourable to one party and would preclude meaningful choice for the other party. An unconscionable contract is one that is extremely unfair. Substantive unconscionability is that which results from actual contract terms that are unduly harsh, commercially unreasonable, and grossly unfair given the existing circumstances of the case (See Black’s Law Dictionary, 9th Edition, Gardner, Ed.).” 49.The above authorities demonstrate that a court can interfere with a contract even where parties have agreed on the terms if the resulting agreement is highly oppressive or unfair. 50.Having reviewed the contract entered into by the parties, I have no doubt that its terms are unconscionable. The facts show that the deceased was loaned Kshs. 370,000 and has repaid Kshs. 555,020.30, leaving an unpaid balance of Kshs. 701,94.51. If I use this figure to calculate the amount payable as at today under the terms of the parties’ agreement, the amount would be Kshs 1,256,966.81. This sum arises from the application of an annual interest rate of 36%, compounded by the inclusion of a default interest rate of 17% on top of the annual interest rate. There is no question that the figure, exceeding Kshs. 1.2 million on a principal sum of Kshs. 370,000, is a disproportionate escalation; 51.I therefore find the contract between the parties void for unconscionability. 52.In the circumstances, it is my finding that the plaintiff has proved her case on a balance of probabilities against the defendant. The final orders are as follows;a.That the contract between the parties dated 2/6/1998 is void for unconscionability.b.That no further payments are due from the plaintiff to the defendant.c.That the defendant is directed to effect a discharge over the suit property within the next 30 days and surrender the title to the plaintiff.d.That the plaintiff is awarded costs of the suit. DATED, SIGNED AND DELIVERED VIRTUALLY ON THE 3RD DAY OF JUNE 2026.R. E. OUGOJUDGEIn the presence of :Miss Mutunda h/b for Mr Masinde for the PlaintiffDefendant/ AbsentWilkister C/A