Kambi ordered to pay bank Sh304m loan

The High Court has ordered Labour Secretary Kazungu Kambi and his two business associates to pay the Development Bank of Kenya a debt of Sh304 million.

Development Bank accused Mr Kambi, Mr Ezekiel Karisa and Mr David Komen of reneging on repaying a loan of Sh250 million guaranteed to Riva Oils Company in 2007. The three are named in court papers as directors of the collapsed oil marketer.

Justice Jonathan Havelock said the Sh304 million will attract an annual interest of 17 per cent from February 28, 2010 until the entire debt is paid in full. This is likely to push the amount to nearly Sh400 million as the bank was also awarded costs of the suit.

The bank moved to court after Riva Oils directors declined to settle the outstanding loan secured by a charge over a parcel of land in Kilifi County and personal guarantees by Mr Kambi, Mr Karisa and Mr Komen.

Before moving to court, the bank said it had notified the company directors of the default in servicing the loan and wrote a demand letter on March 27, 2010 which the bank claims was neither responded to nor was payment made.

Development Bank argued that following the breach of the loan agreement, it suffered great loss and damage and urged the court to compel the directors to settle the principal amount together with accrued interest and costs of filing the suit.

The directors first borrowed Sh60 million on January 11, 2007 and subsequently applied for another loan of Sh190 million on July 4, 2007 to keep the troubled firm afloat. However, the bank said the company was suddenly closed down without its notice.

While applying for the Sh190 million loan, Mr Kambi and Mr Komen wrote to Development Bank on July 4, 2007, saying they had secured additional contracts with the Department of Defence for Sh432 million, Kenyatta National Hospital Sh143 million and Telkom Kenya Sh174 million to supply petroleum products for one year and, therefore, required an enhanced working capital.

The oil marketer also said it was constructing two petrol stations at Miritini in Mombasa and another on Mombasa-Nairobi Road, which also required additional banking facilities.

Mr Kambi and the co-directors opposed the suit arguing that they were not the principal debtors but guarantors and that the bank had not made efforts to recover its debt from Riva Oils, which had operations in Tanzania, Uganda and Zambia.

Mr Karisa acknowledged his debt in 2011 and instructed his lawyers to have the charged parcel of land sub-divided and his proportionate share sold to repay the debt.

But the bank said it was impossible to sell the land owing to the conditions attached to the title deed, which barred the owner from any sub-division. Mr Karisa also complained that the bank did not provide the directors with proper statements of accounts to know their indebtedness.

Mr Kambi was accused of failing to file his defence within the prescribed mandatory period after being served with court documents. Development Bank urged the court to enter a summary judgment against him.

Justice Havelock said the principal amount of Sh250 million advanced to Rival Oils was acknowledged by the company directors after letters of offer for Sh90 million and Sh160 were tabled in court as exhibits by the bank to justify its liquidated claim.

The judge further observed that after Riva Oils closed down its operations and considering that the amount claimed was colossal, the bank was left with no alternative but to pursue the directors who had given irrevocable, personal and unconditional guarantees to repay the loan facilities.

“It therefore falls upon the directors, being guarantors, to satisfy the loan facilities advanced to the company plus any other charges occasioned from the loan agreement, including any interest, fees and charges,” said the judge.

Justice Havelock also noted that the directors did not file any defence or replying affidavits challenging the allegations made by the bank, saying the only document they adduced in court to deny the bank’s claims were grounds of opposition.