https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/8581

Tulsi Construction Limited v Kenwood Property Developers Ltd & another (Miscellaneous Application E334 of 2019) [2026] KEHC 8581 (KLR) (Commercial and Tax) (19 June 2026) (Ruling) Neutral citation: [2026] KEHC 8581 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Miscellaneous Application E334 of 2019 FG Mugambi, J June 19, 2026 Between Tulsi Construction Limited Claimant and Kenwood Property Developers Ltd Respondent and Family Bank Limited Interested Party Ruling Introduction and background 1.On 8th March 2024, this Honourable Court duly recognized the Arbitral Award published by Mr. Stanley Kebathi on 1st March 2019, and consequently granted leave to the Claimant to enforce the said award as a decree of this Court. Subsequent thereto, two applications have been presented for determination. 2.The first application is dated 23rd June 2025 and it was filed by the Interested Party (the Bank). It seeks three principal orders. First, the Bank prays that the prohibitory orders issued on 6th May 2024 in respect of Land Reference Number 8361/30 (originally L.R No. 8361/3 & 4, Thika), (the suit property), together with all consequential steps taken pursuant thereto, be set aside, lifted, or vacated. Secondly, the Bank seeks that this Court declares the said property not liable to attachment or sale in execution of the Arbitral Award. Finally, the Bank urges the Court to affirm that the legal and beneficial interest in the property vests in the Interested Party, by virtue of the registration effected on 8th February 2013. 3.The second application, dated 20th March 2025, was filed by the Claimant in his capacity as decree holder. By this application, the Claimant seeks an order of this Honourable Court authorizing the sale of the suit property belonging to the Judgment Debtor, through Fredrick Otieno Misinjiro trading as M/s Keysian Auctioneers. In addition, the Claimant prays that the Court do settle and prescribe the terms governing such sale. The application is supported by the affidavit of DAVID OYATTA, sworn contemporaneously on the same date. I have also considered the written submissions on record. Analysis and Determination 4.It is trite that where two or more applications are pending before the Court, the one that goes to the root of the dispute and has the potential to dispose of or substantially affect the other must be determined first. In this case, the Bank’s application, which challenges the attachment of the suit property and asserts a prior registered charge, must take precedence. The outcome of that application will necessarily dictate the fate of the decree holder’s application for sale. 5.The Bank’s position is that it extended a substantial financial facility to the Respondent in the sum of Kshs. 93,400,000/= on 1st September 2011 for the purpose of constructing 13 residential units on the suit property. To secure repayment of this facility, a legal charge was duly registered over the property on 8th February 2013. By virtue of that registration, the Bank asserts that it acquired both legal and equitable interests in the property, enforceable against all subsequent claims. 6.The Bank further confirms that the Respondent defaulted in meeting its repayment obligations under the facility agreement. As a result, the Bank’s proprietary rights crystallized, entitling it to pursue remedies available under the Land Act, including the statutory power of sale. The Bank’s argument is that this interest, being prior in time and duly registered, takes precedence over any later encumbrances or prohibitory orders, and cannot be displaced by execution proceedings initiated by the decree holder. 7.The Bank’s case is that by operation of law, its interest cannot be extinguished except upon satisfaction of the Respondent’s obligations under the facility agreement. Consequently, the Bank commenced recovery proceedings by exercising its statutory power of sale pursuant to Section 90 of the Land Act, which process has itself been the subject of litigation. The Bank further argues that the decree holder’s application dated 20th March 2025, which seeks attachment and sale of the suit property, is an impermissible attempt to steal a march on its prior registered interest. The Bank contends that the prohibitory orders issued on 6th May 2024 are prejudicial to its statutory right of sale, as they effectively restrain the Bank from exercising remedies expressly conferred by statute. 8.It its Replying Affidavit sworn by Suryyakant Bhailalbai Patel on 3rd September 2025, the Claimant maintains that the suit property remains amenable to attachment and sale in execution of the arbitral decree. The Claimant’s position is that the existence of a registered charge does not extinguish or bar its right to attach the property, since the charge does not confer ownership upon the Bank but merely creates a security interest. The Claimant invokes the principle of priority of interests, arguing that upon sale, the proceeds would be distributed in accordance with the order of registration, thereby ensuring that the Bank’s claim is satisfied first and leaving any balance available to settle the decree. 9.The Claimant further accuses the Bank of indolence, contending that the Bank has failed to exercise its statutory power of sale despite the Respondent’s default. In its view, such delay should not prejudice the decree holder’s right to realize its award. The Claimant relies on the general principle that execution against property is permissible provided the rights of prior encumbrancers are respected. 10.Section 36(5) of the Land Registration Act codifies the principle of priority of interests in registered land. It provides that:“Interests appearing in the register shall have priority according to the order in which the instruments which led to their registration were presented to the registry, irrespective of the dates of the instruments and notwithstanding that the actual entry in the register may be delayed.” 11.The import of this provision is that the register itself is conclusive evidence of priority. The moment an instrument is presented for registration, its priority is secured, regardless of when the entry is formally made. In the present matter, it is uncontested that the Bank’s charge was registered on 8th February 2013, while the prohibitory orders were only registered on 16th May 2024. The chronology is clear, and the Claimant does not dispute this priority. The inevitable consequence is that the Bank’s interest, being first in time and duly registered, must take precedence over the prohibitory orders. 12.The import of this principle is that once a charge is duly registered, it assumes priority over all subsequent encumbrances, and the chargee’s rights cannot be displaced by later claims or prohibitory orders. Judicial pronouncements have consistently affirmed this position. In Luziki Holdings Limited V Elijensons Investment Limited & Another, [2020] KEHC 10414 (KLR) the Court reaffirmed the supremacy of a chargee’s interest, holding that “the bank’s interest in the charged property overrides any other interest in the property for as long as it remains charged to it”. This underscores the fact that the decree holder’s prohibitory orders, being subsequent in time, cannot lawfully interfere with the Bank’s superior interest. 13.Further, in Innercity Properties Limited V Housing Finance & 3 Others, HCCC No. E030 of 2020, the Court emphasized that a chargee’s consent is a prerequisite for any disposition of charged property, stating: “Since the bank is the chargee, it must give consent to the Plaintiff to sell the property. The Interested Parties have not shown that they received the bank’s consent to purchase the apartments or that they paid the Bank any money”. 14.The jurisprudence therefore makes it abundantly clear that the decree holder cannot proceed with attachment and sale of the suit property without the Bank’s consent. It also follows that the Claimant’s submission, that it may proceed with the sale of the suit property on the basis that the Bank’s interest would in any event be secured, is legally untenable. The jurisprudence is clear that a chargee’s rights are proprietary, superior, and cannot be overridden by execution proceedings without the chargee’s consent. No evidence has been placed before this Court to show that the Bank has consented to the proposed sale. 15.The existence of pending litigation between the Bank and the Respondent does not confer upon the Claimant a right to displace or override the Bank’s interest.In effect, the decree holder’s remedy lies not in overriding the Bank’s interest, but in waiting for the Bank to exercise its statutory power of sale under Section 90 of the Land Act, after which any surplus proceeds may be applied towards satisfaction of the decree. 16.Having so found, it follows that the application filed by the decree holder therefore falls on the wayside. Disposition 17.Accordingly, I make the following orders:i.The application dated 23rd June 2025 filed by the Bank is hereby allowed.ii.The prohibitory orders issued on 6th May 2024 in respect of L.R No. 8361/30 (Original L.R No. 8361/3 & 4, Thika), together with all consequential steps undertaken pursuant thereto, are hereby set aside and vacated.iii.It is hereby declared that L.R No. 8361/30 (Original L.R No. 8361/3 & 4, Thika) is not available for attachment and sale in execution of the arbitral award dated 1st March 2019.iv.It is further declared that the legal and beneficial interest in L.R No. 8361/30 vests in the Bank by virtue of the charge registered on 8th February 2013.v.The application dated 20th March 2025 filed by the decree holder is dismissed.vi.Costs of both applications shall be borne by the decree holder. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 19TH DAY OF JUNE 2026.F. MUGAMBIJUDGEDelivered in presence of:Macharia for the IP/ObjectorGachugi for the respondentOyatta for the applicantCourt Assistants: Lillian & Gloria