https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7651

Popatlal Madhavji and Brothers Limited & 2 others v Diamond Trust Bank Kenya Limited (Commercial Case E818 of 2025) [2026] KEHC 7651 (KLR) (Commercial and Tax) (2 June 2026) (Ruling) Neutral citation: [2026] KEHC 7651 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Case E818 of 2025 RC Rutto, J June 2, 2026 Between Popatlal Madhavji and Brothers Limited 1st Plaintiff Chandresh Virendra Raithatha 2nd Plaintiff Divita Chandresh Raithatha 3rd Plaintiff and Diamond Trust Bank Kenya Limited Defendant Ruling 1.By way of a Notice of Motion Application dated 10th December, 2025, the Plaintiffs/Applicants have invoked sections 1A, 2B, 3A and 63 (c) & (e) of the Civil Procedure Act, Order 40, rule 1A (sic) and Order 51, rule 1 of the Civil Procedure Rules 2010 seeking the following reliefs:1.…Spent;2.That the statutory notice by the Respondent to the 1st Applicant dated 1st October 2025 be declared incurably defective, unenforceable, null and void ab initio;3.That an order of temporary injunction do issue restraining the Respondent, whether by itself, servants, agents or employees from advertising for sale, selling, disposing off, transferring, interfering or in any other way, dealing with property designate L.R. No. 209/2527/1 (property) or in any way enforcing the said impugned Notice;4.…Spent;5.…Spent;6.That an order do issue directing the Respondent to unfreeze the Applicants’ banking accounts for the 1st Applicant to enable the 1st Applicant resume normal banking operations forthwith;7.That the Respondent be condemned to pay the costs of this application. 2.The application is supported by the grounds on its face and the supporting affidavit sworn by the 2nd Applicant, the Managing Director of the 1st Applicant, on 12th June, 2025. In summary, the Applicants avers that the 1st Applicant is a family run company duly registered under the Companies Act. In 2001, it opened two bank account with the Respondent namely a Kenya Shillings (KSHS) account number 0105xxxxxx and a USD account number 0105xxxxxx. 3.Subsequently, the Defendant/Respondent extended banking facilities to the 1st Applicant, including an overdraft facility for the KSHS account and a term loan for the USD account. These facilities were secured by way of charges over the 1st Applicant’s property, namely L.R. No. 209/2527/1, valued at Kshs. 710,000,000.00/=. Over time, five legal charges were registered in favour of the Respondent on 5th October, 2001, 29th April, 2009, 18th June, 2014, 26th September, 2016, and 24th December, 2020. Further on 18th June, 2024, a deed of variation was registered by the Respondent to convert the principal outstanding sums in respect of a portion of the existing USD facility in the USD account. 4.It is deposed that the parties conducted their banking relationship in the ordinary course until 2019 when the COVID-19 pandemic adversely affected the 1st Applicant’s operations. The Applicants contend that a review of the charge instruments reveals that they did not expressly provide for the applicable rates of interest. Instead, the Respondent is accused of unilaterally imposing varying interest rates through letters of offer, as well as introducing onerous terms to the detriment of the 1st Applicant. It is further contended that these interest rates were never incorporated into the charge documents. 5.The Applicants further depose that by letter of offer dated 27th July, 2023, the Respondent introduced a rate of interest of 16% per annum, together with a commitment fee of 0.5% per quarter for the KSHS account and 2% per annum for the USD account. The letter also indicated that the facility would expire in six months’ time, thus terminating in January 2024. Subsequently on 11th April, 2024, the Respondent issued another letter of offer, which the Applicants describe as radical and retroactive in nature, as it sought to require the 1st Applicant to confirm the terms of the earlier letter of offer dated 27th July, 2023. The 1st Applicant did not execute the said letter, taking the position that it merely constituted an invitation to treat. 6.The Applicants further aver that on 9th May, 2025, the Respondent admitted that the facilities extended to the 1st Applicant were governed by the said letters of offer rather than the charge documents. They contended that from early April 2023, the Respondent deliberately and wrongfully disrupted the 1st Applicant business operations by charging unauthorized debts on their accounts, declining to honor payments to supplier and imposing unlawful charges and interests on its accounts. In addition, the 1st Applicant was allegedly unlawfully listed with the Credit Reference Bureau and threatened with receivership. 7.It is further deposed that on 17th and 21st August, 2024, the Respondent froze the 1st Applicant’s accounts without prior notice. Thereafter on 12th September, 2025, the Respondent recalled both the 1st Applicant’s KSHS and USD account facilities thereby terminating the banker - customer relationship. The 1st Applicant wrote several letters to the Respondent dated 29th November, 2024, 23rd January, 2025 and 19th July, 2025, seeking an amicable resolution but received no response. Consequently, it lodged a complaint with Central Bank of Kenya vide a letter dated 9th July, 2025, which also elicited no response. 8.On 1st October, 2025, the Respondent exercised its statutory power of sale, issued a statutory notice with the intention of exercising its statutory power of sale. The Applicants responded by a letter dated 7th November, 2025, contending that the notice was defective on several grounds namely; failure to specify the particulars of breach; reliance on letters of offer as opposed to the charge instruments; absences of a statement of accounts; failure to provide for the right of redemption and that the notice was vague, contradictory, and indeterminate as there was no basis for the demand of interest. 9.The Applicants further contend that on 18th December, 2024, the parties had agreed that the charged property be sold by way of private treaty to facilitate settlement of outstanding liabilities. They accused the Respondent of clogging their equitable right of redemption by subsequently issuing a statutory notice. Furthermore, the 2nd and 3rd Applicants were allegedly threatened with joinder in the recovery process despite not being properly appointed as guarantors. 10.The Applicants contend that the Respondent mismanaged the 1st Applicant’s accounts, resulting in financial losses amounting to Kshs. 32,058,332.42/= with a continuing monthly loss of Kshs. 1,678,332.39/=. They further allege that the Respondent levied unconscionable interest and penalties in the sum of USD 86,089.14 and Kshs. 18,004,730.96/= which sums they seek to recover. On the basis of the foregoing, the Applicants prayed that the application be allowed as prayed. 11.The application was opposed. The Respondent filed a replying affidavit, sworn on 8th April, 2026, by Faith Ndonga, its Legal Manager. It was deposed that the 1st Applicant was initially advanced a term loan pursuant to a letter of offer dated 17th March, 2009, for a sum of Kshs. 150,000,000.00/=. The loan was repayable over a period of 8 years in 96 monthly installments at a base lending interest rate of 15.5 per cent per annum less 1.5 per cent calculated on a reducing balance. The Respondent reserved the right to vary the applicable interest rate. The facility was secured by charge over the suit property. 12.The Respondent further deposed that the facilities were, from time to time, extended and enhanced at the request of the 1st Applicant and upon the Respondent’s approval, through various letters of offer dated 22nd January, 2011, 12th October, 2012, 4th December, 2012, 24th March, 2014, 30th May, 2017, 6th April, 2018, 14th December, 2018, 29th April, 2019, 3rd April, 2020, 25th September, 2020, 10th December, 2020, 27th September, 2022 and 27th July, 2023. 13.Regarding the letter of offer dated 23rd July, 2023, which the Applicants rely upon, the Respondent outlined its salient terms, stating that the facilities were secured by a further charge dated 29th April, 2009, a second further charge dated 18th June, 2014, a third further charge dated 26th September, 2016, and a fourth further charge dated 24th December, 2020. The facilities were also supported by joint and several guarantees from the 2nd Applicant and Shriti Semhi. 14.It was further deposed that by a letter dated 18th July, 2023, the 1st Applicant requested an extension of the moratorium on repayment of the principal outstanding sum. This request was approved and the Respondent issued a letter of offer dated 31st December, 2023, granting a moratorium on repayment of the principle outstanding amount from 29th June, 2023, to April 2024. However, the said letter of offer was not signed. Consequently, the Respondent maintained that the terms contained in the earlier letter of offer dated 27th July, 2023, remained binding, and the amounts guaranteed in the guarantee, term loan and overdraft fell due and payable by 27th January, 2024. 15.The Respondent contended that the 1st Applicant remained in persistent breach of its repayment obligations. As at 12th September, 2025, the outstanding facilities in arrears stood at USD 2,920,019.00 and Kshs. 54,619,152.42/=. This prompted the Respondent to issue a demand letter dated 12th September, 2025, which the 1st Applicant failed and/or refused to comply with. Thereafter, and in accordance with Section 90 (3) of the Land Act, the Respondent commenced the exercised of its right to statutory power of sale by issuing a statutory notice dated 1st October, 2025 with the intention of exercising its statutory power of sale. It was deposed that the notice complied with the requirements of Section 90 (2) of the Land Act, and was therefore valid. 16.It was further deposed that the present application was filed before the lapse of the 90-day statutory notice period. The Respondent contended that its statutory power of sale had not crystalised at the time rendering the application premature and inchoate. Notwithstanding this, and in light of the continued default by the 1st Applicant, the Respondent proceeded to issue a 45-day notification of sale dated 21st January, 2026, pursuant to Section 96 (2) of the Land Act, with a view to advertising the suit property for sale by way of a public auction. 17.As at 27th January, 2026, the Respondent averred that the outstanding indebtedness had risen to USD 3,528,238.30 and Kshs. 54,887,331.53/= consisting of the outstanding principal sum, contractual interest and penalty interest lawfully due and owing. It was further deposed that the directors of the 1st Applicant had executed memorandum of acceptance confirming that they understood and agreed to be bound by the terms of the letters of offer, as a pre-condition, to disbursement of funds. The Respondent also maintained that it duly responded to the complaints raised by the 1st Applicant through its letters dated 13th December, 2024, and 18th December, 2024, and denied having unlawfully frozen the 1st Applicant’s current accounts. 18.The Respondent further contended that any dispute regarding the accounts did not constitute a valid basis for the grant of injunctive relief. It was deposed that, in various correspondences, the 1st Applicants’ directors expressly admitted indebtedness and made several promises to sell their properties to obtain proceeds for paying the outstanding amount. Despite this, the Applicants continued to dispute the charging of default interest, notwithstanding that such charges were provided for under the agreed terms in the letters of offer. The Respondent added that the 1st Applicant was listed with the Credit Reference Bureau on account of its default. 19.On the foregoing basis, the Respondent urged the Court to dismiss the application with costs contending that it was lawfully entitled to exercise its statutory power of sale on account of the 1st Applicant’s continued breach of its obligations. It was further submitted that once a property is charged as security for a loan, it becomes a commodity for sale, and any loss arising therefrom can be easily compensated by an award of damages. Accordingly, the Applicants had failed to demonstrate irreparable harm. The Respondents also accused; the Applicants of material non-disclosure, particularly their failure to candidly admit that they were indebted to the Respondent, and have neglected honor their financial obligations. They asserted that the application did not meet the threshold for grant of an injunction as set out in Giella vs. Cassman Brown. It was therefore urged that in the interest of justice, the application be dismissed. 20.The 2nd Applicant filed a supplementary affidavit sworn on 22nd April, 2026. In it she urged the court to take into account that the Respondent had contravened the court’s directions by filing its pleadings outside the prescribed timelines. She deposed that the Respondent only filed its response after serving the 1st Applicant with a 45-day redemption notice on 17th March, 2026, together with a notification of sale. This, according to the Applicants, was in disregard of the pendency of the suit and prompted them to issue a letter of protest, accusing the Respondent of breaching the doctrine of lis pendens. 21.The Applicants further deposed that they sought for interlocutory judgment, against the Respondent, on 25th March, 2026, for failure to file its defence. However, that request was dismissed by the court on 30th March, 2026. 22.The Applicants expressed dissatisfaction with the said decision and contended that the Respondent subsequently filed its response, 67 days out of time, on 8th April, 2026, and proceeded to file a further replying affidavit, on 16th April, 2026, a supplementary affidavit and written submissions, without seeking the leave of this Court. Notwithstanding the foregoing, the Applicant challenged the competence of the replying affidavit on the ground that it was defective for the reason that the deponent did not adduce evidence of authority to swear affidavit on behalf of the Respondent. 23.They further opposed the grounds set forth in the replying affidavit maintaining that a statutory notice can only be issued upon default under a valid charge. It was their position that no such default had occurred on the part of the 1t Applicant, and consequently, the statutory notice ought not to have been issued or served on the 1st Applicant. 24.The 2nd Applicant also faulted the Respondent for failing to provide a reconciled and comprehensive statement of accounts, contending that the alleged breach were unsupported by documentary evidence. In her view, the Respondent’s conduct amounted to a violation of Section 44 of the Banking Act. The Applicants denied all the averments contained in the replying affidavit in toto and reiterated the contents of their application, urging the court to grant the orders sought. 25.In response, the Respondent filed a further affidavit, sworn by Faith Ndonga, on 16th April, 2026, annexing, inter alia, a letter of offer dated 24th October, 2019. The same deponent, also filed a supplementary affidavit, sworn on 7th May, 2026, pursuant to leave granted on 4th May, 2026. It was deposed that no prejudice had been occasioned to the Applicants by the late service of their replying affidavit, as they had an opportunity to respond by filing a supplementary affidavit together with written submissions. 26.The Respondent further contended that the doctrine of lis pendens is only applicable where there exists a prohibitory order issued by the court, and that in the absence of such an order, it was within its right to proceed to issue a 45-day redemption notice on 17th March, 2026. The Respondent reiterated that the Applicants had failed to satisfy the legal threshold for the grant of the orders sought and accordingly, prayed that the application be dismissed with costs. 27.Parties canvassed the application by way of written submissions. The Applicants filed submissions dated 22nd April, 2026, urging the court to allow the application on the basis that the requisite legal threshold had been met. The Respondent on its part, filed written submissions dated 15th April, 2026, contending that the application failed to meet the established legal principles and ought to be dismissed with costs. Analysis and determination 28.The Applicants raised several preliminary issues. Firstly, they complained that some of the pleadings and submissions filed by the Respondents were irregular, having been filed out of time and without leave of the court. They urged the Court to disregard the same. However, upon perusal of the court record, it is evident that the Respondent did, in fact, seek and obtain leave to file the impugned pleadings. If the Applicants were dissatisfied with that decision, the proper recourse lay in challenging the same before the appropriate forum. What the Applicants now invite this Court to do is to sit on its own appeal over its own decisions, an approach that is procedurally untenable and not founded in law. 29.In any event, Article 159(2)(d) of the Constitution requires this Court to administer justice without undue regard to procedural technicalities. More importantly, the Applicants were afforded an opportunity to respond to the impugned pleadings, which they duly exercised by filing a supplementary affidavit and written submissions. In the circumstances, and in the interest of substantive justice, I find no prejudice occasioned to the Applicants. Accordingly, all the pleadings and submissions on record shall be considered. 30.The Applicants further challenged the competence of the Respondent’s affidavits on the ground that the deponent failed to attach proof of authority to swear the affidavits on behalf of the Respondent. This argument is without merit. The deponent expressly stated, at the outset of her affidavits, that she was duly authorized in her capacity as Legal Manager and an officer of the Respondent. 31.It is settled law that such authority need not necessarily be annexed at the time of filing and may be produced at any time before judgment. Striking out pleadings on such a technicality would amount to a draconian measure, particularly where no prejudice has been demonstrated. I therefore find that this objection is devoid of merit and must fail. 32.Turning to the merits of the application, this Court has carefully considered the application, the affidavits in support and opposition, the annexures thereto, and the rival submissions of parties. The Applicant seeks inter alia, an order for temporary injunction. The principles governing the grant of interlocutory injunction are well settled in of Giella vs. Cassman Brown (1973) EA 358 as follows:-“Firstly an Applicant must establish a prima facie case with probability of success. Secondly, an injunction will not normally be granted unless otherwise the Applicant will suffer injury which will not be compensated in damages. Thirdly, if the court is in doubt, it will decide the application on a balance of convenience.” 33.On whether the Applicants have established a prima facie case, the Court is guided by the definition set out in Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR, that a prima facie case is one which, on the material presented, demonstrates the existence of a right that has apparently been infringed, calling for rebuttal. 34.In the present case, it is not disputed that the 1st Applicant maintained two bank accounts with the Respondent namely a KSHS account number 0105xxxxxx and a USD account number 0105xxxxxx. It is similarly not in contention that the Respondent extended credit facilities to the 1st Applicant, including a term loan of Kshs. 150,000,000.00/=, secured by charge of the 1st Applicant’s property namely L.R. No. 209/2527/1. Over time, several further charges were registered on the following dates 5th October, 2001, 29th April, 2009, 18th June, 2014, 26th September, 2016 and 24th December, 2020. Those facilities were restructured on multiple occasions. Additionally, the facilities were secured by guarantees executed by the 2nd Applicant and one Shriti Semhi. 35.While the Applicants contend that the applicable interest rates were not provided for in the charge instruments, the Respondent has exhibited memoranda of acceptance duly executed by the 1st Applicant’s directors, confirming their acceptance of and binding commitment to the terms contained in the letters of offer. Those documents expressly outlined the applicable interest, fees, and consequences of default. At this juncture, and from the cursory look, it cannot therefore be said that the contractual relationship lacked clarity or binding terms. 36.It is also significant to note that the Applicants sought indulgence from the Respondent on several occasions, thereby acknowledging the existence of the debt. That regardless, they failed to regularize the loan accounts or demonstrate any payment effort. Indeed, even after the service of the statutory notice by the Respondent in exercising its statutory power of sale, as well as the 45-day redemption notice no evidence of payment or settlement has been tendered. Notably all the while, service of the notices was not disputed. 37.Without delving into the merits of the substantive dispute, I find on a prima facie basis, that the Applicants remain indebted to the Respondent, both as the principal borrower and guarantors. No sufficient grounds have been demonstrated to justify restraining the Respondent from exercising its statutory power of sale. Though the Applicants have urged this Court to find the statutory notice defective, at this interlocutory stage, those orders are overly drastic and unsupported by cogent evidence. It therefore cannot be granted at this stage. That prayer must fail. 38.The Applicants have also invoked the doctrine of lis pendens, contending that the Respondent acted in breach therefore by issuing a redemption notice during the pendency of this application. In the case of Mawji vs. US International University & Another [1976] KLR 185, Madan, J.A. held:““The doctrine of lis pendens under section 52 of TPA is a substantive law of general application. Apart from being in the statute, it is a doctrine equally recognized by common law. It is based on expedience of the court. The doctrine of lis pendens is necessary for final adjudication of the matters before the court and in the general interests of public policy and good effective administration of justice. It therefore overrides, section 23 of the RTA and prohibits a party from giving to others pending the litigation rights to the property in dispute so as to prejudice the other…”“Every man is presumed to be attentive to what passes in the courts of justice of the State or sovereignty where he resides. Therefore, purchase made of a property actually in litigation pendete lite for a valuable consideration and without any express or implied notice in point of fact affects the purchaser in the same manner as if he had notice and will accordingly be bound by the judgment or decree in the suit.”” 39.Upon consideration, I am not persuaded that the Respondent acted in contravention of the doctrine. The issuance of a statutory or redemption notice, in exercise of contractual and statutory rights, does not in itself amount to alienation or transfer of property. Moreover, no prohibitory orders had been issued restraining the Respondent from proceeding in that regard. The argument based on lis pendens is therefore unavailing. 40.Turning to the second limb, the Court must consider whether the Applicants have demonstrated that they will suffer irreparable harm that cannot be compensated by an award of damages. This Court shall consider the same within the pronouncements of the binding decision of the Court of Appeal in Nguruman Ltd vs. Jan Bonde Nielsen & 2 Others [2014] eKLR that held:-“On the second factor, the equitable remedy of temporary injunction is issued solely to prevent grave and irreparable injury; that is, injury that is actual, substantial and demonstrable; injury that cannot “adequately” be compensated by an award of damages. An injury is irreparable where there is no standard by which their amount can be measured with reasonable accuracy or the injury or harm is of such a nature that monetary compensation, of whatever amount, will never be adequate remedy.” 41.In the present case, the suit property was offered as security for a financial facility. It is trite law that once property is charged, it becomes a commodity for sale in the event of default. Any loss that may arise from its realization is, in the ordinary course, compensable in damages. The Applicants have not demonstrated any exceptional circumstances to displace this principle. 42.Consequently, I am not satisfied that the Applicants have established that they stand to suffer irreparable harm incapable of compensation by damages. 43.As regards the balance of convenience, having found that the Applicants have failed to satisfy the first two limbs of the Giella test, the Court need not consider this limb. In any event, the balance would tilt in favour of allowing the Respondent to exercise its lawful rights rather than restraining it indefinitely to its detriment. 44.In the result, and for the foregoing reasons, I find that the Notice of Motion dated 10th December, 2025, is devoid of merit. The same is hereby dismissed with costs to the Respondent. 45.It is so ordered. DELIVERED, DATED AND SIGNED VIRTUALLY THIS 2ND DAY OF JUNE, 2026RHODA RUTTOJUDGEIn the presence of;Court Assistant: WabwireMs. Mbirwe holding brief for AGN Kamau for Plaintiff/ApplicantMr. Janjo David for the Defendant