[2025] KEHC 1533 (KLR)

Sweet R Us Limited v M’Oriental Bank Limited & another (Civil Suit E054 of 2024) [2025] KEHC 1533 (KLR) (20 February 2025) (Ruling)

Neutral citation: [2025] KEHC 1533 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Suit E054 of 2024

JK Ng'arng'ar, J

February 20, 2025

Between

Sweet R Us Limited

Plaintiff

and

M’Oriental Bank Limited

1st Defendant

Peter N Gichuki t/a Spotlight Intercepts

2nd Defendant

Ruling

1. The Plaintiff filed a Notice of Motion application dated 16th August 2024 under Certificate of Urgency pursuant to Section 90 and 96 (2) of the Land Act, 2012, Sections 1A and 3A of the Civil Procedure Act and Order 40 Rule 1 of the Civil Procedure Rules, 2010.

2. The Plaintiff prays for orders that pending the hearing and determination of this suit, there be an order of injunction to restrain the Defendants either by themselves, officers, agents, employees, assigns or any other person acting for them from auctioning, selling, disposing of or in any other manner interfering with the ownership of any and/or all of the properties known as Land Reference Numbers MOMBASA/BLOCK XIX/281 and MOMBASA/BLOCK XXIII/190 Flat No. 4A. That pending the hearing and determination of this suit, there be an order of temporary injunction to restrain the Defendant either by themselves, officers, agents, employees, assigns or any person acting for them from auctioning, selling, disposing of the Plaintiff’s properties secured by debenture in favour of the 1st Defendant. That costs of this application be borne by the Defendants jointly and severally.

3. The application is premised on grounds on its face and the Supporting Affidavit of Rajesh C. Vora sworn on 16th August 2024 that the 1st Defendant advanced to the Plaintiff various credit facilities which included overdraft and term loans. That however, vide a letter dated 21st January 2021, the Plaintiff’s credit facilities which existed as term loan of Kshs. 40,000,000. 00 and overdraft of Kshs. 64,200,000. 00 were converted into a term loan of Kshs. 170,422,485. 00 to be cleared on or before 31st January 2028. That in the said letter, the 1st Defendant listed the legal charge over land reference number Mombasa/Block XIX/281 and Mombasa/Block XXIII/190 Flat No. 4A as securities but no legal charge over the said properties have ever been registered to secure the credit facilities advanced to the Plaintiff by the 1st Defendant.

4. The Plaintiff stated that without a duly registered legal charge, the Defendants cannot exercise any statutory power of sale over the suit properties. That while Land Reference No. Mombasa/Block XIX/281 is registered in the name of the company known as D. Chandulal K. Vora & Company Limited, Mombasa/Block XXIII/190 Flat No. 4A is registered in the name of an individual called Praksha Kumar Rajesh Vora. That the Defendants did not issue the requisite statutory notices to Praksha Kumar Vora, a registered owner and therefore they cannot sell the said property. That although the Plaintiff always paid the loans timeously, they experienced financial challenges along the way which made it difficult to service the loan. That the Plaintiff approached the 1st Defendant with a view of finding an amicable way of settling the loan, and that negotiations are still ongoing.

5. The Plaintiff averred that despite ongoing negotiations, the 1st Defendant purported to exercise its statutory power of sale and on 12th August 2024, the 2nd Defendant advertised Land Reference No. Mombasa/Block XIX/281 and Mombasa/Block XXIII/190 Flat No. 4A for sale vide a notice published at page 25 of the Daily Nation dated 12th August 2024 with the sale scheduled to take place on 29th August 2024. That the Defendant’s actions of seeking to sell Land Reference No. Mombasa/Block XIX/281 and Mombasa/Block XXIII/190 Flat No. 4A is irregular, illegal, unlawful, null and void. That the Defendants’ actions of purporting to sell the subject properties are in utter bad faith and against the spirit of amicable resolution of the matter at hand. That since no legal and binding charges were created in favour of the 1st Defendant over the subject properties to secure the Plaintiff’s liabilities, the Defendants have no right whatsoever to exercise the power of statutory sale and/or to sell/auction the same.

6. The Plaintiff further stated that the interest charged by the 1st Defendant on the loans advanced to the Plaintiff is illegal, null and void for the reason that the 1st Defendant increased the interest rate without seeking the consent of the Minister/Cabinet Secretary. That the Plaintiff engaged Interest Rates Advisory Center (IRAC) to ascertain the extent of the interest charged by the 1st Defendant which revealed that the Plaintiff was overcharged by Kshs. 20,155,910. 04. That sometime in early 2021, the Plaintiff undertook to reduce its liability exposure by securing a buyer called Revital Healthcare (EPZ) Limited who committed to purchase some of the security properties by paying a total of Kshs. 70 million to reduce the Plaintiff’s liability. That the 1st Defendant was reluctant by asking that the offer be increased slightly above the proposed amount. That the Plaintiff’s loan would have been reduced by Kshs. 70 million in September 2021 and thereby substantially reducing the interest charged.

7. The Plaintiff stated that no amount of damages can compensate loss of the only home known by Praksha Kumar Rajesh Vora and no damages can be adequate to compensate being rendered homeless and destitute. That the Plaintiff will suffer immense loss and damage if the sale of the suit properties is allowed to continue and it is in the interest of justice that this court grants the orders sought.

8. The 1st Defendant filed a Replying Affidavit sworn by Arif Gulamhusein that the Plaintiff and the 1st Defendant had a customer – banker relationship with effect from the year 2014. That by a letter of offer dated 21st January 2021, the 1st Defendant sanctioned the renewal and restructuring of various facilities that the Plaintiff had into a new term loan on terms and conditions set out in the offer letter. That the Plaintiff accepted the terms and conditions of the aforesaid offer letter and executed an acceptance form. That pursuant to various financial facilities afforded to the Plaintiff, the Plaintiff executed an all assets debenture over the assets of Sweet R Us Limited dated 9th December 2014 stamped at Kshs. 90,000,000as security for the financial accommodation granted to it by the 1st Defendant.

9. The 1st Defendant stated that the Plaintiff requested the 1st Defendant to create a sublease in its favour and a charge in favour of the 1st Defendant over title number Mombasa/Block XIX/281 to secure an advance of Kshs. 45,000,000. That the property was already charged to the 1st Defendant to secure advances made to DCK Vora & Company Limited. However, the registration and creation of sublease and charge was not concluded because the Plaintiff failed to pay the requisite stamp duty. That prior to the restructuring and renewal of the Plaintiff’s financial facilities with the 1st Defendant vide the letter dated 21st January 2021, DCK Vora & Company Limited, an affiliate of the Plaintiff company had charged all that property known as Flat No. 4A on Title Number Mombasa Block/XXIII/190 to secure all previous and continuing advances to it by the 1st Defendant. That to further secure the Plaintiff’s loan amount from the 1st Defendant, the Plaintiff’s director Rajesh Vora executed a personal guarantee of Kshs. 170,500,000.

10. The 1st Defendant deposed that throughout the tenure of the aforesaid financial facility to the Plaintiff, the Plaintiff has been in default of repayment of the principal and interest amount as and when they have fallen due. That to that extent, the 1st Defendant on several occasions reached out to the Plaintiff requesting it to regularize its loan account and the Plaintiff would make promises which promises it never observed. That the Plaintiff made an offer for part settlement of its loan with the 1st Defendant by payment of part disposal of the collateral securing banking facilities to the Plaintiff. That by a letter dated 22nd December 2021, the 1st Defendant accepted the Plaintiff’s proposal for part disposal of its assets to partially pay off the loan which was ballooning due to the default. That by a letter dated 25th March 2024, the Plaintiff’s director, Rajesh Vora, wrote to the 1st Defendant and offered a proposal to settle the Plaintiff’s indebted ness to the 1st Defendant. That the Plaintiff’s director proposed a partial sale of assets and machinery of the Plaintiff under the instrument of debenture in force in favour of the 1st Defendant but none of the proposals were honoured. That as at 31st August 2024, the due and outstanding amount owed to the 1st Defendant stood at Kshs. 249,424,132.

11. The 1st Defendant stated that the only security perfected over the facility advanced to the Plaintiff is an all assets debenture of Kshs. 90,000,000 dated 9th December 2014 and that the Plaintiff has no proprietary interest in the suit properties Title Number Mombasa/Block XIX/281 and Mombasa/Block XXIII/190 Flat No. 4A. That the Plaintiff has rushed to this court seeking to restrain the 1st Defendant from exercising its statutory power of sale over the charged properties on the ground that it was not served with the requisite statutory notices of sale, notifications of sale and the auctioneer’s notices as required by law. That in view of the fact that no charge was registered in favour of the Plaintiff, it is not entitled to receive the DCK Vora & Co. Ltd statutory notices of sale. That the only party entitled to the notices are DCK Vora Group and its directors and guarantors who were duly served with the statutory notices. That by a statutory notice dated 24th January 2024 sent by registered post to the Plaintiff and its director Darshan Dipak Vora to their known postal address P.O. Box 80713 – 00100 Mombasa, the 1st Defendant demanded that DCK Vora & Co. Ltd rectify its default in repayment of the loan failing which it would exercise its statutory power of sale over Title Number Mombasa/Block XIX/281.

12. The 1st Defendant averred that by a statutory notice dated 25th January 2024 sent by registered post to DCK Vora & Co. Ltd and Praksha Kumar Rajesh Vora, the 1st Defendant informed them to rectify the default on their loan and overdraft facility failing to which it would exercise its statutory power of sale over Title Number Mombasa/Block XXIII/190 Flat No. 4A. That upon expiry of the statutory notices sent to DCK Vora & Co. Ltd and its guarantors, the 1st Defendant served the 40 days notification of sale vide the letter dated 30th April 2024 upon DCK Vora & Co. Ltd and Darshan Dipak Vora. That similarly upon expiry of the statutory notice dated 25th January 2024 served on the Plaintiff and its guarantor Praksha Kumar Rajesh Vora, the 1st Defendant served the 40 days’ notification of sale. That the notices were also served by email to the Plaintiff and its guarantors out of abundance of caution. That upon expiry of the 40 days notification of sale, the 1st Defendant through its auctioneer’s M/s Spotlight Intercepts served upon the Plaintiff and its directors and guarantors by registered post the 45 days notification of sale, the 1st Defendant duly placed an advertisement in the Daily Newspaper dated 12th August 2024 advertising the charged properties for auction on 29th August 2024.

13. The application was canvassed by way of written submissions. The Plaintiff filed submissions dated 18th December 2024 and pointed out that the main issues for determination are whether the 1st Defendant’s Replying Affidavit is fatally defective for failing to indicate the date when it was sworn and whether the application for injunction is merited. On the former issue, the Plaintiff submitted that failure to date the Replying Affidavit is fatal and contrary to Section 5 of the Oaths and Statutory Declarations Act. The Plaintiff relied on the case of Mulusiah Land Consultants & Another v Industrial Development Bank Ltd & 2 Others (2005) eKLR where the high court dealt with the undated affidavit. That the Replying Affidavit cannot be relied upon, it must be struck out and the Plaintiff’s application is therefore unopposed and the same should be allowed.

14. On whether the application is merited, the Plaintiff submitted that the principles which should guide the court in determining an application for interlocutory injunction were laid out in the case of Giella v Cassman Brown & Co. Ltd (1973) EA 358 to the effect that the applicant must show a prima facie case with a probability of success or that if the injunction is not granted the applicant will suffer irreparable injury that cannot be compensated by an award of damages, and if in doubt, the court should decide the application on a balance of convenience. On whether a prima facie case had been established, the Plaintiff cited the case of Mrao Ltd v First American Bank of Kenya Ltd & 2 Others (2003) KLR 125, highlighted the grounds on the face of their application and submitted that they had established a prima facie case. On whether there will be irreparable injury, the Plaintiff argued that the property that is due for auction namely Land Reference Number Mombasa/Block XXIII/190 Flat No. 4A is owned by Praksha Kumar Rajesh Vora who is a very old lady and who uses the said property as her only home and that if the said property is sold she will be rendered homeless, which cannot be compensated by an award of damages. The Plaintiff cited the case of Joseph Siro Musioma v Housing Finance Company of Kenya & 3 Others (2008) eKLR which clearly shows that the financial strength of a party is not a reason to refuse injunction. On the balance of convenience, the Plaintiff submitted that the same tilts in favour of granting the injunction as the intended sale is illegal, unprocedural and in breach of the Plaintiff’s rights which should not be permitted to continue.

15. The 1st Defendant filed submissions dated 6th January 2025 that the Plaintiffs are not entitled to any injunctive orders for reasons that they have not established a prima facie case with probability of success as was held in the case of Mrao Ltd v First American Bank of Kenya Ltd & 2 Others (2003) eKLR. The 1st Defendant states that statutory notices were issued to DCK Vora & Company Ltd.’s last known postal address 80713-80100 Mombasa evidenced by the certificates of postage. That pursuant to Section 90 and 96 of the Land Act, 2012, the 1st Defendant procedurally and lawfully has a right to sell the suit properties following the default of DCK Vora & Co. Ltd to repay the same.

16. The 1st Defendant placed reliance on the case of Kenya Revenue Authority v Kenya Bankers Association (2020) eKLR and Beatrice Atieno Onyango v Housing Finance Company Limited & 3 Others (2020) eKLR. The 1st Defendant further cited the cases of Mrao Ltd case (supra), Housing Finance Company of Kenya v Ngige Kitson Mondo (2006) eKLR and Daniel Kamau Mugambi v Housing Finance Company of Kenya Limited (2006) eKLR and submitted that the Plaintiff admits being indebted to the 1st Defendant who ought to be allowed to exercise its statutory power of sale. That further, the 1st Defendant is a financially stable bank capable of meeting an award of damages. The balance of convenience therefore tilts in their favour.

17. I have considered the Notice of Motion application dated 16th August 2024, the 1st Defendant’s Replying Affidavit and submissions by the parties. The issues for determination are: -a.Whether the 1st Defendant’s Replying Affidavit is fatally defective for failing to indicate the date when it was swornb.Whether the application for temporary injunction is merited

18. On the first issues, the Plaintiff submitted that failure to date the Replying Affidavit is fatal, that the Replying Affidavit cannot be relied upon, it must be struck out.

19. Section 5 of the Oaths & Statutory Declarations Act provides: -Every commissioner for oaths before whom any oath or affidavit is taken or made under the Act shall state truly in the jurat or attestation at what place and date the oath is taken or made.

20. The above provision is mandatory. This court relies on the holding in the case of Charles Muturi Mwangi v Invesco Assurance Co. Ltd (2014) eKLR as follows: -“These are mandatory provisions. There is no discretion for this court to vary these provisions as these are statutory provisions with regard to what constitutes a valid disposition to matters before court. The omission to indicate the date of swearing of the affidavit attached to the application before the court renders the same defective… The defect on the affidavit is not a mere technicality that can be addressed as under Article 159 of the Constitution. The undated affidavit violates a statutory mandatory provision and thus the striking out.”

21. The omission by the Defendants/Respondents to date the Replying Affidavit renders it defective and the same should therefore be struck out.

22. On the second issue, the Defendants/Respondents’ Replying Affidavit having been struck out renders the Plaintiff/Applicant’s application unopposed. However, this court will still consider whether the threshold for grant of temporary injunction has been met.

23. The court in Giella v Cassman Brown (1973) EA 358 set out conditions for grant of temporary injunction as follows: -“The conditions for the grant of an interlocutory injunction are now, I think, well settled in East Africa. First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not be normally granted unless the applicant might otherwise suffer irreparable injury which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”

24. On whether the Plaintiff/Applicant has established a prima facie case with a probability of success, the court in Mrao Ltd v First American Bank of Kenya Ltd & 2 Others (2003) eKLR held that: -“a prima facie case in a civil application includes but is not confined to a ‘genuine and arguable case’. It is a case 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 as to call for an explanation or rebuttal from the latter.”

25. The Plaintiff/Applicant stated that the 1st Defendant advanced to the Plaintiff various credit facilities which included overdraft and term loans. That vide a letter dated 21st January 2021, the Plaintiff’s credit facilities which existed as term loan of Ksh. 40,000,000and overdraft of Kshs. 64,200,000 were converted into a term loan of Kshs. 170,422,485 to be cleared on or before 28th January 2028. That in the said letter, the 1st Defendant listed legal charge over Land Reference No. Mombasa/Block XIX/281 and Mombasa/Block XXIII/190 Flat No. 4A as securities but no legal charge over the said properties have ever been registered to secure the credit facilities advanced to the Plaintiff by the 1st Defendant. That the Defendants cannot exercise any statutory power of sale over the properties.

26. The Plaintiff stated that while Land Reference No. Mombasa/Block XIX/281 is registered in the name of the company known as D. Chandulal K. Vora & Company Limited, Mombasa/Block XXIII/190 Flat No. 4A is registered in the name of an individual known as Praksha Kumar Rajesh Vora who was not issued with the requisite statutory notices. Therefore, the Defendants cannot sale the said property. That further, the interest charged by the 1st Defendant on the loans advanced to the Plaintiff is illegal, null and void as the 1st Defendant increased the rate without seeking consent of the Minister/Cabinet Secretary.

27. I am satisfied that the Applicant has established a prima facie case with a probability of success.

28. On whether the Plaintiff/Applicant may suffer irreparable injury which would not adequately be compensated by an award of damages, the Plaintiff/Applicant stated that Land Reference Number Mombasa/Block XXIII/190 Flat No. 4A is owned by Praksha Kumar Rajesh Vora who is a very old lady and who uses the said property as her only home which if it is sold she will be rendered homeless. I find that the Plaintiff/Applicant has established irreparable harm which cannot adequately be compensated by an award of damages.

29. On whose favour the balance of convenience tilts, the Plaintiff/Applicant submitted that the intended sale is illegal, unprocedural and in breach of the Plaintiff’s rights which should not be permitted to continue. I find that the balance of convenience tilts in favour of the Plaintiff/Applicant.

30. The upshot of the foregoing is that the Notice of Motion application dated 16th August 2024 is merited and allowed in the following terms: -a.Pending the hearing and determination of the suit, this court grants an order of temporary injunction to restrain the Defendants either by themselves, officers, agents, employees, assigns or any other person acting for them from auctioning, selling, disposing of or in any other manner interfering with the ownership of any and/or all of the properties known as Land Reference Numbers Mombasa/Block XIX/281 and Mombasa/Block XXIII/190 Flat No. 4A.b.Pending the hearing and determination of the suit, this court grants an order of temporary injunction to restrain the Defendant either by themselves, officers, agents, employees, assigns or any person acting for them from auctioning, selling, disposing of the Plaintiff’s properties secured by debenture in favour of the 1st Defendant.c.Costs be in the cause.

DATED AND DELIVERED VIRTUALLY AT MOMBASA THIS 20TH DAY OF FEBRUARY, 2025. ………………………J.K. NG’ARNG’AR, HSCJUDGEIn the presence of: -………………………. Advocate for the Plaintiff………………………. Advocate for the 1st Defendant………………………. Advocate for the 2nd DefendantCourt Assistant – ShitemiJ.K. NG’ARNG’AR, J.