|Miscellaneous Application 828 of 2010
|HARRISHCHA BHOVANBHAI JOBANPUTRA & BHAVNA HARISCHCHANDRA JOBANPUTRA v PARAMOUNT UNIVERSAL BANK LTD, SHREE KRISHNA HARDWARE & PAINTS LTD, SURESH GHEDIA & RAJESH GHEDIA
|08 Apr 2011
|High Court at Nairobi (Milimani Law Courts)
|HARRISHCHA BHOVANBHAI JOBANPUTRA & another v PARAMOUNT UNIVERSAL BANK LTD & 3 others  eKLR
|The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information
The Application is supported by the annexed affidavit of BHAVNA HARISCHCHANDRA JOBANPUTRA, the 2nd Applicant, and is based on the grounds that –
(2) The lending by the 1st Respondent to the 2nd Respondent was fraudulent and was done outside the confines of the law and relevant legal stipulations and the Applicants’ rights under the guarantees were thereby violated.
(4) The Applicants are apprehensive that the 1st Respondent in purported exercise of powers conferred upon it under the charge dated 8th November, 2006 and accompanying personal guarantees dated 8th November, 2006, will sell off the Applicants’ charged property and/or proceed against the Applicants for the 2nd Respondent’s outstanding debts.
(6) The 1st Respondent, through Wagly Auctioneers, has issued notification of sale and threatens to sell the suit property by way of public auction on 8th December, 2010.
In a replying affidavit sworn and filed on 7th December, 2010 by Timothy Kimani, the 1st Respondent’s in-house Legal Consultant, the Respondent’s case is that the Applicants’ application does not make out a prima facie case, and that the consideration for which the charge was given to the 1st Respondent was expressed in the charged document and gave the 1st Respondent authority to advance to the borrower financial accommodation of such nature and in such manner and within such limits as the 1st Respondent may from time to time in its discretion determine. It was further their case that the parties to the charge did not, in the charge, set out the exact facility for which the charge would be security. The deponent also denied that the 1st Respondent had advanced the 2nd Respondent any money fraudulently as alleged by the Applicants, as the documents which were allegedly fraudulently executed to procure advances were neither identified in the supporting affidavit nor exhibited.
Referring to the replying affidavit in which the deponent averred that the 1st Respondent had a discretion to extend the loan to the 2nd Respondent, Counsel submitted that the 1st Respondent was under an obligation to notify the Applicants, but did not do so. In any event, she submitted that the same charged document had set out the limit which the Respondents exceeded without the consent of the Applicants, and had no basis upon which to exercise its power of sale over the property. She therefore urged the court to grant the injunction as prayed.
The main issue for determination in this matter is whether the Applicants have established a prima facie case without a probability of success as espoused in GIELLA v CASSMAN BROWN & CO.,  EA 358 in which Law J.A., said at page 360 –
“The conditions for the grant of an interlocutory injunction are now 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 normally be 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.”
It is common ground that when the Applicants created the charge on their property to secure the repayment of some moneys borrowed by the 2nd Respondent from the 1st Respondent, the agreement was that there would be limit as to the sum or sums to be extended to the2nd Respondent. That part of the deal is captured in Paragraphs 2 and 3 of the preamble in the charged document which reads as follows –
2. Pursuant to a letter of offer dated 15th September, 2006 from the Lender to the borrower (hereinafter called the “Facility Letter”) the Lender has, at the request of the chargor and the Borrower agreed, subject to the terms and conditions set forthwith, to grant to the borrower a term loan facility and/or banking facilities in an aggregate sum not exceeding … Kshs 4,400,000/- exclusive of interest and other charges and upon having repayment thereof with interest and other charges as hereinafter provided secured on the terms and conditions set out in the charge.
NOW IN CONSIDERATION of the Lender agreeing to make or continuing to make advances to the borrower or refraining from demanding immediate payment of sums already advanced to the borrower by way of loan by permitting the Borrower to overdraw his current account or accounts with the Lender or by giving the borrower other financial accommodation of such nature and in such manner and within such limits as the Lender may from time in his discretion determine and the premises …”(emphasis added.)
“…PROVIDED ALWAYS that the total moneys for which this charge constitutes a security (hereinafter called ‘the Mortgage Debt’) shall not at any one time exceed the sum of … Kshs 3 million together with interest at the rate(s) aforesaid from the time of the mortgage debt becoming payable until actual payment thereof AND PROVIDED ALSO that the security hereby constituted shall be continuing security for the payment of the said sum of Kshs 3 million or so much thereof as may from time to time be outstanding…”.
On the facts of this case, it is not clear what amount of debt we are talking about. A copy of the Letter of Demand is not attached, and in its absence it is impossible to surmise the amount claimed by the Respondent. The only semblance of the amount of the debt is found in the Schedule of Immovable Property which merely states that the amount due is Kshs 10,127,181.67 “as at 31st . 2010”. That date does not make sense insomuch as it does not state the month of the year. The rate of interest is also left blank, and therefore, it is not clear whether or not the above amount includes interest.
“A court warrant or letter of instruction shall include, in the case of …immovable property… the reserve price for each separate piece of land based on a professional valuation carried out not more than 12 months prior to the proposed sale.”
Furthermore, Rule 15 (c) of the said Rules states that –
The Schedule of immovable property ostensibly served on the Applicant does not specify the name of the person served, and that person neither signed the said Schedule, nor did the Auctioneer sign a certificate to the effect that the person served refused to sign the said notification. Prima facie, this is an indication that the said notice was not served as required by Rule 15 (c) which is also couched in mandatory terms.
“An advertisement by an Auctioneer shall, in addition to any other matter required by the court, contain –
Although this Rule is also couched in mandatory language, it is notable that the time of the proposed sale is not given in the notification of sale; that there is no information pertaining to the conditions of sale or where they may be obtained; and the time for viewing of the property is also conspicuously omitted. Furthermore, Rule 16 (2) states that –
One does not need to look far to note that this requirement, which is also mandatory, has not been obeyed by the Respondents. There is no evidence that the purported sale was advertised in any newspaper at any time.
The total sum of these irregularities is that it would be procedurally illegal to allow the Applicants’ property to be sold unless and until the laid down procedure has been adhered to. I therefore, find that it would be improper to allow the Applicants to sell the said property without complying with the law, and that the Applicants have established a prima facie case with a probability of success. As the suit property has not been subjected to any valuation, it is difficult to tell what loss the Applicants will suffer, in monetary terms, if the said property is sold.
(i) Prayer 3 of the Application by Chamber Summons dated 25th November, 2010 be and is hereby granted as prayed.
It is so ordered.
DATED and DELIVERED at NAIROBI this 8th day of April, 2011