City Residents walk past the closed Nakumatt Lifestyle branch located along Monrovia Street at Hazina Towers. PHOTO | FRANCIS NDERITU | NMG
More than 30 debt investors who held commercial papers with collapsed giant retailer Nakumatt Holdings have suffered a blow after their quest to be paid more than Sh508 million by an insurer was rejected by a tribunal.
The investors wanted Mayfair Insurance Company Ltd to compensate them after Nakumatt sank with their millions.
But a tribunal chaired by senior counsel Njoroge Regeru together with retired judge Aaron Ringera and John Ohaga ruled that there was no valid policy between the investors and the underwriter since there is no evidence that the premium had been paid.
“The upshot of the totality of the foregoing analysis is that the Claimants (note holders) did not provide credible prima facie evidence of payment of the premium to shift the evidential burden of proof to the Respondent,” the tribunal ruled.
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A commercial paper refers to a short-term unsecured debt instrument that is issued to meet short-term liabilities, among others.
The note holders claimed that they took an insurance policy in May 2017 on behalf of various investors in connection with advancements to Nakumatt Holdings Limited.
Through lawyer Elijah Mwangi, the investors claimed the underwriter guaranteed payment to the noteholders of up to 80 percent of the invested amount in the event of default by Nakumatt.
The lawyer said after Nakumatt was placed under administration, the underwriter refused to pay the noteholders under the policy.
They sought payment of Sh508.9 million plus interest.
Some of the investors who testified in the tribunal are James Dry of Dry Associates, Peter Obondo Kahi and Bimal Shah, the MD of Broadway Bakery.
The tribunal heard that around July and November 2017, the note holders and their beneficiaries notified the insurance firm of Nakumatt’s default to pay the commercial paper notes, which had matured.
They accused the insurance firm of failing to honour their claim expeditiously and purporting to divert liability.
The tribunal heard that being a trade insurance policy, the policy amounted to an indemnity policy and a guarantee, under which they are entitled to full compensation plus interest from February 2018.
READ: Rajesh Shah sues insurer, broker over Nakumatt debt paper
The underwriter through lawyer James Singh denied having issued a comprehensive insurance policy and contended that if any such policy was issued, it was to the Note Trustee and not to the claimants in their individual capacities.
Mr Singh further contended that the insurer was not bound to honour any claims that did not comply with the policy and the company did not receive any valid claim or valid notice of default.
He said the investors were at all times aware that Nakumatt was not in a position to pay its creditors.
The tribunal ruled that the policy could not have come into force without payment of the first premium and commitment fee.
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