Corporate News
Pedestrians walk past an Equity Bank branch. FILE
By GALGALLO FAYO
In Summary
- The court dispute first arose in 2009, when the company accused Equity of attempting to appoint receivers to take over the firm while it allegedly had not defaulted on repaying the loan.
A construction company involved in a protracted court case with Equity Bank over a Sh650 million loan has filed a fresh application seeking to stop the lender from demanding the cash.
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Two directors of Capital Construction Limited, a government
contractor, say that Equity Bank acquired a default judgment requiring
them to pay Sh650 million plus interest erroneously. They argue that
they were not served with summons.
The court dispute first arose in 2009, when the
company accused Equity of attempting to appoint receivers to take over
the firm while it allegedly had not defaulted on repaying the loan.loan,
debt,
The case took another turn last year March, when
the High Court directed three of the firm’s directors to pay Equity
Sh650 million plus 24 per cent annual interest from July 2010, until
payment in full. The default judgment was entered after the contractor
failed to appear in court to defend the counter claim.
“Pending the hearing and determination of this suit
there be an order to stay execution of the decree issued on March 20,
2013 and all said consequential orders thereto,” reads an order sought
by three directors of the construction firm.
The bank acquired an order requiring Venkata
Chainulu Ganti, Prasad Ganti and Al Karim Badrudin to pay the cash, on
grounds that they had given personal guarantees for the loan. Mr Venkata
and Mr Badruin, who filed the application, say in court documents that
Mr Prasad died in 2012.
The two want the court to set aside the judgment and allow them to file a defence to counter the claim by the bank.
Contracts
The firm claims in the court documents to have been engaged in government contracts.
In January 2008, the contractor agreed to pay the
loan in 60 monthly installments of Sh14.9 million. Capital Construction
in papers filed in 2009 claims that the loan was guaranteed by a range
of securities, including company lands, cash in its Equity Bank fixed
deposit account totalling Sh217.6 million and directors’ personal
guarantee of Sh665 million.
The firm also undertook that all the payments to
the company from the Ministry of Works for the project it was
undertaking would be channelled to the bank until payment in full.
The firm claims that after the first instalment in
July 2009, it applied to Equity to utilise the entire amount in its
fixed deposit account towards offsetting the loan, which it said could
take care of several monthly installments.
The firm says it further agreed with the bank to the sale of two pieces of land in Nairobi to offset the loan.
The company claims in April 2009, it received
correspondence from Equity demanding Sh735.3 million despite having paid
enough money to cover several monthly installments. The bank allegedly
appointed a receiver forcing the contractor to move to the High Court to
seek relief.
Equity filed a response and counter claim, in which
it said the company defaulted in repaying the loan which made the
entire outstanding loan arrears payable immediately, but denies
appointing a receiver.
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