Savannah Cement Chairman Mr Benson Ndeta. PHOTO | DIANA NGILA | NMG
KCB Group and Absa Bank have been blocked from seizing assets of Savanna Cement Ltd pending the determination of a review the firm has filed at the High Court.
The cement maker obtained the temporary order blocking any seizure of its assets or the lenders from appointing an administrator or liquidator to manage its properties.
Justice Alfred Mabeya said the status quo be maintained pending further directions.
“For the avoidance of doubt, the status quo is that no peremptory action whatsoever should be taken until the aforesaid date,” the judge said.
The cement maker moved to court to forestall any plans by the two lenders from taking adverse steps against it, over a debt running into millions.
READ: KCB, Absa get nod to seize Savanna Cement assets over debt
The judge also directed Savanna to pay Absa Sh10 million within seven days from the date of the ruling.
An earlier application by the firm was rejected by Justice Wilfrida Okwany but the cement firm alleges that it had sought the judge to disqualify herself from the case before the ruling was made.
In the ruling, the judge said Savanna admitted the debt, which is substantial and banks are the parties on the receiving end as they are likely to suffer losses.
Justice Mabeya directed the matter to be handled by judge Abigail Mshila.
Court filings show the cement maker has defaulted on the loan repayment and KCB said interest alone stands at Sh297 million plus a penalty of Sh13.5 million.
The firm’s director Benson Sande Ndeta admitted that the company borrowed several loans from KCB and Absa, which it has been repaying.
He said the firm was working on clearing the debt and even asked the lenders to restructure the loan repayment terms.
But in the process, KCB allegedly increased the amount in breach of the in duplum rule, which bars banks from charging interest that exceeds the principal amount.
Mr Ndeta said Savanna asked KCB to provide it with a statement of account to ascertain how the balances reached “astronomical levels” but the lender allegedly threatened to seize its assets.
He said the company was coerced to repay loans of Sh5 billion by the two banks to forestall the seizure.
Mr Ndeta said the planned recovery was in breach of the company’s rights and a bid by the banks to unjustly enrich itself at the expense of its shareholders.
The company said it will suffer losses that cannot be compensated as the assets to be seized include machinery and land, which might never be recovered.
The firm said it has entered into several contracts to supply cement to various government projects, which will automatically be terminated if the bank made good the threat.
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He further said the firm is working to complete the funding of its clinker project, which will allow it to get all the funds necessary to clear the debts.
On the other hand, seizing its assets will jeopardise the process and employees will lose their jobs.
Mr Ndeta said the company has proposed to pay the balance after it is given the statement for verification.
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