https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12253

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **MILIMANI LAW COURTS** **COMMERCIAL AND TAX DIVISION** **COMM. CASE NO. E008 OF 2025** **BETWEEN** **SOBETRA KENYA LIMITED..…….......................................................1ST PLAINTIFF** **SOBETRA UGANDA LIMITED……………………………………….2ND PLAINTIFF** **AND** **SIDIAN BANK LIMITED........………………………….…………….1ST DEFENDANT** **REGENT AUCTIONEERS……………………………………..……2ND DEFENDANT** **RULING** **Introduction and Background** 1. The Plaintiffs (“Sobetra”) are customers of the 1st Defendant (“the Bank”) and pursuant to the customer-bank relationship, they sought and were advanced various loan facilities including an Asset Finance Facility in the sum of Kshs.99,214,491.00/-, an Overdraft Facility in the sum of Kshs.300,000,000.00/- a Short-Term Loan/Certificate Discounting Facility in the sum of Kshs.300,000,000.00/-, a Letter of Credit Facility in the sum of Kshs.400,000,000.00/- or USD equivalent and a Short-Term Loan/Discounting Facility in the sum of Kshs.100,000,000.00/-. 2. The aforementioned facilities were secured by among others listed in the respective Letters of Offer; the registration of a third-party legal charges over properties title known as LR NO. 1/279 and LR NO. 1/1001 both registered in the name of *Bemuda Holdings Limited*; all-assets debentures over the borrowing company’s assets; corporate guarantee of *Bemuda Holdings Limited* and Directors’ personal guarantees and indemnities. The purpose of the facilities was to finance Sobetra’s working capital requirements as they had been awarded several construction contracts including a sub-contract to undertake various infrastructural works at *Konza Techno City by ICM SPA* and a contract to undertake construction of various roads by the Kenya Rural Roads Authority (KeRRA). 3. On 10th January 2025, Sobetra filed the present suit together with a Notice of Motion of the same date seeking to stop the auction of the charged properties pending the hearing of the suit. They further seek the court to compel the Bank to provide the them with full statements of account for all their loan facilities and to have the court determine the exact amount owed to the Bank before any further action is taken to recover the debt, as they dispute the current sum demanded. This application is supported by the grounds on its face and the affidavits of Sobetra’s director, Petrangeli Giorgio Caesar Antonio sworn on 10th January 2025 and 19th March 2025. It is opposed by the Bank through the replying affidavit of its Manager, Debt Recovery & Remedial Management, Credit Risk Department, sworn on 10th February 2025. 1. Sobetra claim that they were not served with the mandatory statutory notices and only received a Notification of Sale from the auctioneer and that the statutory notice was sent to the guarantors, but they only obtained it from them. They dispute the amount of Kshs.577,969,849.00/- and USD 1,116,048 demanded by the Bank terming it outrageous, lacking any basis, and overstated. That their own financial consultant calculated an overcharge of Kshs.301,958,850.00/- and USD 216,041 and they allege the Bank has varied the terms of the lending agreement and levied interest in excess of the agreed upon rates without proper notice, constituting a breach of contract. 2. Sobetra further states that despite repeated requests since June 2024, the Bank has failed to furnish them with statements of account, preventing them from reconciling the disputed amount. They depone that the Bank holds substantial security over receivables from government agencies that are more than enough to cover the debt and they further argue the Bank is unfairly pursuing the third-party property without first realizing these other and more abundant securities. Sobetra claim the Bank's actions are unconscionable and aimed at denying them and the guarantor, *Bemuda Holdings* their equity of redemption They also allege the Bank has already found a buyer for the charged properties indicating a pre-determined plan to sell them. 3. The Bank responds by stating that Sobetra have acknowledged their indebtedness and have repeatedly defaulted on the loan facilities. The Bank maintains it has fully complied with all legal procedures required to realize the security and therefore Sobetra have not established any grounds for the court to grant an injunction. The Bank denies Sobetra’s claim of overcharged interest and it asserts that all interest charged is in line with the Letters of Offer and that Sobetra have not provided any evidence to support their claim of an overcharge and the Bank states that a mere dispute on the amount owed does not stop a chargee from exercising its power of sale. 4. The Bank refutes the claim that it failed to serve statutory notices and it details a history of multiple demands, loan recall notices and the service of both the 90-day and 40-day Statutory Notices as required by law. The Bank points out that Sobetra admitted to receiving the 90-day notice and the others were served in the same manner by registered post. It also notes that Sobetra received and responded to the Auctioneer's notices. 5. The Bank dismisses Sobetra’s position that it should wait for payments from KeRRA and *ICM SpA* and it states that Sobetra’s obligation was to repay the loan on its due date, not upon receipt of payments from third parties. Therefore, the Bank is entitled to proceed with the sale of the security due to Sobetra’s persistent default and it admits receiving the request for statements but states that it advised Sobetra to visit the Bank to collect them, which they did and it has also annexed the statements to its affidavit to refute this claim. The Bank denies secretly varying the contract terms and it avers that all notices for changes in interest rates were served in compliance with the loan agreement and standard banking practice, which is subject to Central Bank of Kenya rate adjustments. 6. The Bank provides a detailed chronology to show Sobetra’s history of non-payment and the Bank's patience. That the initial loans were granted in October 2018, Sobetra defaulted, leading to an addendum in April 2020 and a renewal in January 2021.They defaulted again, prompting a restructuring of the facilities in September 2023 but despite this restructuring, Sobetra again defaulted. The Bank then issued loan recall notices in November 2023 and demand letters in March 2024 before proceeding with the statutory notices. 7. The Bank avers that Sobetra have not met the legal requirements for an injunction for reasons that they have acknowledged the debt and are in default and the Bank has complied with all statutory procedures, so there is no serious question to be tried. That the debt is substantial and continues to accrue interest and if the sale is stopped, the debt may exceed the value of the security, to the detriment of the Bank. The Bank accuses Sobetra of coming to court with unclean hands by peddling falsehoods and misrepresentations to avoid their obligations. The Bank states the outstanding balances as of 14th January 14, 2025, are Kshs. 610,898,134.93 for Sobetra Kenya and Kshs.109,611,780.67/- for Sobetra Uganda. 8. Overall, the Bank asserts that it has followed all legal procedures and that Sobetra, having breached the contract and failed to honor numerous accommodations are now abusing the court process to avoid their contractual obligations. It therefore urges the court to dismiss Sobetra’s application. 9. Based on Sobetra’s position of non-payment, the Bank filed the Notice of Motion dated 9th May 2025 to restrain Sobetra from withdrawing, transferring, or dealing with funds in their accounts at *Ecobank, I&M Bank, DTB*, and *Stanbic Bank* and the Bank has listed the account numbers it wishes to freeze. It further seeks the court to compel the banks to provide statements for Sobetra’s accounts held with them and to have the funds preserved pending the conclusion of court-ordered negotiations or further orders from the court. This application is supported by grounds on its face and the affidavits of **Lucy Mugi** sworn on 9th May 2025, 28th May 2025, 24th June 2025 and 16th October 2025. 10. Sobetra responded to the suit through the Grounds of Opposition dated 26th May 2025 and the replying affidavit of **Petrangeli Georgio Ceaser Antonio** sworn on 18th June 2025 and by *Stanbic Bank* responded through the replying affidavit of its Manager-Business Support & Resolution Business and Commercial Clients, **Collins Sabatia,** sworn on 28th May 2025. *I&M Bank* also responded through the replying affidavit of its Assistant General Manager, **Andrew Muchina** sworn on 28th May 2025 whereas *Ecobank* responded through the replying affidavit of its Branch Operations Manager, **Phylis Sibolo**, sworn on 9th September 2025 and that of the Branch Manager, Upperhill Branch, **Martha Muraya,** sworn on 28th January 2026. 11. The Bank also filed another application dated 3rd October 2025 seeking an injunction preventing KeRRA from remitting any further funds under the contract to any account other than Sobetra’s account at the Bank. It also seeks orders to compel KeRRA to provide a full account of all monies already paid to Sobetra Kenya under their contract, that KeRRA be directed to remit the sum of Kshs. 401,314,062.81 as per the final certificate dated 31st August 2023 to Sobetra’s account at the Bank and that *Ecobank* should remit the same sum to Sobetra’s account at Sidian Bank. The Bank also urges the court to hold KeRRA and *Ecobank* be made liable for the payment of the Kshs.401,314,062.81/- if they fail to comply with the court orders and in the alternative, to discharge the existing interim orders of injunction that protect Sobetra thereby allowing the Bank to exercise its power of sale over the charged properties to recover the debt. 12. This application is supported by the grounds set out on its face and the supporting affidavit of the Bank’s Senior Officer-Debt Recovery & Remedial Management, **Anthony Kimani**, sworn on 3rd October 2025. It is opposed by Sobetra through the Grounds of Opposition dated 3rd November 2025, by *Ecobank* through the replying affidavit of **Phylis Sibolo** sworn on 4th November 2025 and by KeRRA through the replying affidavit of its Principal Accountant, **CPA William Abung’u** sworn on 28th November 2025. 13. I have considered the three applications which were canvassed by way of written submissions on record and in making this determination below, I will refer to the relevant parts thereof. **Analysis and Determination** 1. Sobetra’s application is grounded under inter alia **Order 40 Rules 1 & 2** of the ***Civil Procedure Rules*** which provide as follows:- ***1. Cases in which temporary injunction may be granted*** *Where in any suit it is proved by affidavit or otherwise—* *(a) that any property in dispute in a suit is in danger of being wasted, damaged, or alienated by any party to the suit, or wrongfully sold in execution of a decree; or* *(b) that the defendant threatens or intends to remove or dispose of his property in circumstances affording reasonable probability that the plaintiff will or may be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit,* *the court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal, or disposition of the property as the court thinks fit until the disposal of the suit or until further orders.* ***2. Injunction to restrain breach of contract or other injury*** *(1) In any suit for restraining the defendant from committing a breach of contract or other injury of any kind, whether compensation is claimed in the suit or not, the plaintiff may, at any time after the commencement of the suit, and either before or after judgment, apply to the court for a temporary injunction to restrain the defendant from committing the breach of contract or injury complained of, or any injury of a like kind arising out of the same contract or relating to the same property or right.* *(2) The court may by order grant such injunction on such terms as to an inquiry as to damages, the duration of the injunction, keeping an account, giving security or otherwise, as the court deems fit.* *…….* 1. As submitted by the parties, for an applicant to meet the threshold for the grant of an injunction, they must satisfy the test set out in the case of **Giella v Cassman Brown & Co., Ltd. [1973] E.A. 358**. Sobetra is required to demonstrate a prima facie case with a probability of success, that they will suffer irreparable injury which would not adequately be compensated by an award of damagesand that if the Court is in doubt, it should decide the application on the balance of convenience. These conditions are to be applied as separate, distinct and logical hurdles which Sobetra are expected to surmount sequentially which means that if they do not establish a prima faciecase then irreparable injury and balance of convenience do not require consideration (see **Nguruman Limited v Jan Bonde Nielsen& 2 others [2013] KECA 347 (KLR**) 2. As to what constitutes a prima facie case, I am in further agreement that the Court of Appeal in **Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KECA 175 (KLR)** explained that it is, *“….a case in which on the material presented to the Court, a tribunal properly directing itself will conclude that there* *exists a right which has apparently been infringed by the opposite party to call* *for an explanation or rebuttal from the latter.”* 1. From the pleadings and submissions, Sobetra is evidently and undeniably indebted to the Bank. A submitted by the Bank, its right to exercise its power to sell the charged properties arises the moment there is a debt which remains outstanding despite demand and it is upon Sobetra to prove that there is in fact no debt due to the Bank, which is not the case herein. After default, the Bank issued the 90-day Statutory Notice under **section 90** of the ***Land Act*** on 12th April 2024 and served by registered post and there is a Certificate of Postage annexed. It also issued the 40-day Notice under **section 96(2)** on 23rd September 2024 and served by registered post and a Certificate of Postage and *DHL* receipts to Kampala have also been annexed. The 45-day Redemption Notice by the Auctioneer was also issued and served. Sobetra admitted receiving the 90-day notice and the Auctioneer's notices. It is trite that service by registered post to the last known address is valid service and certificates of postage are *prima facie* proof that the notices were served upon Sobetra as the addresses admittedly belong to them and the postage list confirms that they were received or deemed to have been received by them (see **Nyangilo Ochieng & another v Fanuel B. Ochieng & 2 others [1996] KECA 205 (KLR)]** 2. I therefore find that there is no procedural irregularity to challenge as the Bank has done everything required of it by law by issuing the requisite notices. I also agree with the Bank that it appears that Sobetra seek to delay the recovery proceedings until such a time that the proceeds from KeRRA and *ICM SpA* are paid. KeRRA indicated that it has fully paid all amounts due under its contract with Sobetra and that the final certificate amount of Kshs.401,314,062.81/- was paid to them in three tranches. It has also not been disputed that it is Sobetra itself that diverted the funds received by changing bank accounts multiple times. 3. It therefore follows that to give an injunction to restrain a party from exercising a statutory power of sale which has clearly arisen and is exercisable on the basis that a party has not been paid by a third party or for whatever reason would be to shirk judicial responsibility to enforce contractual rights and would be to render securities useless. Furthermore, I am in agreement with the Bank that it is only, **Bemuda Holdings**, as the chargor who can legitimately seek relief against the exercise by the charge of its power of sale by the Bank and not Sobetra as borrowers. The charged properties belong to ***Bemuda Holdings Limited***and not Sobetra which is not even the registered owner of the properties they seek to protect. 4. Whereas Sobetra have an interest in the charged properties for it is the security for its indebtedness, such an interest does not suffice to give it locus standi to obtain an injunction against the chargee. Sobetra’s interest in the charged properties is not a proprietary interest therein and it does not in my view give it standing to question the exercise of the power of sale (see **Bank of Africa Kenya Limited & another v TSS Investment Limited & 2 others [2024] KECA 410 (KLR)]** 5. It therefore follows that Sobetra have not demonstrated a prima facie case and its quest for an injunction ends at this point in line with the dicta in ***Nguruman(supra)***. Even if I am to consider other conditions, the injunction would still not be available for Sobetra. The charged properties belong to *Bemuda Holdings Limited* as the chargor and not Sobetra who are not even the registered owners of the charged properties they seek to protect. The loss is purely financial and the debt continues to accrue interest and a purely monetary loss does not constitute irreparable harm. Thus, Sobetra have not demonstrated any loss that cannot be compensated by damages. 6. On a balance of convenience, the debt is substantial and growing daily, the Bank, as a financial institution, holds public deposits and must recover its funds. Sobetra have already received the KeRRA funds and chosen not to pay the Bank and the Bank faces the real risk that the debt will outstrip the value of the security. 7. In summary, the Bank has a crystallized statutory power of sale as Sobetra is in undisputed default. Statutory notices were properly issued and admittedly served, KeRRA has confirmed that all payments were made and Sobetra diverted those funds. It is clear that Sobetra did not come to court with clean hands in seeking and being issued with the *ex-parte* injunction orders. The dispute is primarily about money owed which is not a ground for an injunction. Sobetra's application now stands dismissed with costs and the Bank is at liberty to proceed with the sale of the charged properties. 8. However, since I am aware the parties have been negotiating on a payment plan for the outstanding debt, the court will grant Sobetra a chance to pay the said sums within 180 days of this ruling, failure to which, execution will proceed. Turning to the Bank’s applications, it follows that the same are overtaken by events since KeRRA has explained how the amounts were paid to Sobetra and it has provided a full account of all payments made to Sobetra Kenya under their Contract confirming that all sums due have been fully settled. The orders compelling KeRRA to account for and remit funds are no longer necessary. The other banks have deponed that they hold no sums on behalf of Sobetra to remit to the Bank. **Conclusion & Disposition** 1. In the foregoing, I now make the following dispositive orders: - 2. **Notwithstanding the courts findings on the Plaintiffs' application the court grants the Plaintiffs a final opportunity to settle the outstanding debt. The Plaintiffs' application dated 10th January 2025 is hereby allowed subject however to the following conditions; -** 1. **The Plaintiffs shall pay the 1st Defendant the sum of Kshs.100,000,000.00/- (Kenya Shillings One Hundred Million Only) within thirty (90) days from the date of this ruling.** 2. **The Defendant shall within 90 days from today carry out a reconciliation of the Plaintiffs loan Accounts with it and furnish the Plaintiffs with the said accounts establishing the actual amount due on the outstanding on the loans. Upon conclusion of the reconciliation exercise, the Plaintiffs shall pay the 1st Defendant the remaining entire balance of the outstanding debt (as established after reconciliation), being the total principal sum outstanding together with all accrued interest, penalties, and charges within ninety (180) days from the date of this ruling. The payments shall be made directly to the Plaintiffs' loan accounts held at the 1st Defendant's Bank and interest on the outstanding debt shall continue to accrue at the contractual rates until the full amount is paid.** 3. **In the event that the Plaintiffs fail to make the payment of Kshs.100,000,000.00/- within thirty (90) days and /or fail to pay the entire outstanding balance within ninety (180) days, the 1st Defendant shall be at liberty to immediately proceed with the realization of the securities, including the exercise of its statutory power of sale over the charged properties, without any further reference to the Plaintiffs or application to this court;** 4. **The Defendants’ applications dated 9th May 2025 and 3rd October 2025 are struck out.** 5. **The Plaintiffs shall bear the costs of the three applications which are hereby awarded to the 1st Defendant.** 6. **The interim orders previously granted by this court shall remain in force for a period of 90 days and if the first payments of Kshs.100,000,000/- is made, they shall be extended upto and until the expiry of the 180 days. if no payment is received within 90 days, the said interim orders shall stand discharged and the Plaintiffs shall not be entitled to any further injunctive relief from this court in respect of the realization of the securities if the above conditions are not met.** **DATED SIGNED AND DELIVERED virtually at NAIROBI this 17TH DAY OF JULY 2026** **............................................................................** **J.W.W. MONG’ARE** **JUDGE** **IN THE PRESENCE OF** 1. Mr. Chacha holding for Mr. Kelvin Mogeni for the Plaintiffs. 2. Mr. Nyongesa holding brief for Mr. Maondo for the Defendants. 3. Amos- Court Assistant