National Bank and school lock horns over loan arrears

National Bank has denied it failed to account for fees paid through an account held at one of its branches in a dispute with a school over loan repayment.

Instead, the lender has told the courts that St Elizabeth Academy— which is seeking to bar the bank from disposing of the school’s land in a public auction linked to the transaction— is engaging in sideshows.

The bank seeks to sell the institution’s property over alleged mortgage arrears amounting to Sh380.1 million from a Sh281 million loan taken in 2009.

The academy accused the bank of failing to disclose the fees payment made by students through the school account.

“I wish to state that there is a fool-proof existing arrangement in place through which the plaintiff students pay fees into an account with the defendant (National Bank) and immediately present the banking deposit slips for fees paid to the plaintiff (the Academy),” says Paul Chelanga, the National Bank loan recovery officer.

STOP AUCTION

Mr Chelanga said the school fees was a sideshow since the dispute is about outstanding loan arrears.

St Elizabeth Academy asked the court to stop the auction on grounds that it had found a buyer who is ready to pay Sh381 million for one of the two pieces of land, arguing that the amount is enough to clear the loan.

(READ: Academy in bid to bar National Bank from selling its land)

The school argues the auction would lead to its closure and jeopardise the education of 1,374 students including those preparing to sit national examinations in October.

But the bank said it had given enough time for the school to clear the arrears and that the two plots it plans to auction are not developed and, therefore, the sale would not hurt learning.

“The two vacant and undeveloped plots are not core learning assets for reason that the same are neither used for any usual learning activities of the school nor for any activity,” says Mr Chelanga.

USED AS PLAYGROUND

But the academy says the two plots measure 13.92 acres and are partly used as a playground and for horticulture.

The Sh281 million loan was split into Sh252.8 million and Sh28.8 million.

The Sh252.8 million was to be repaid thrice in a year after every four months at an instalment of Sh14.6 million, while the Sh28.8 million loan was repayable at Sh464,645 a month.

St Elizabeth Academy said high inflation rates forced the bank to increase the interest rate from 17 per cent to 22 per cent, making it difficult to meet the scheduled repayments.

It added that the two titles are valued at more than Sh580 million and is seeking court orders to freeze the auction to facilitate the sale to a private investor it has identified.

By GALGALLO FAYO

This article first appeared in the Business Daily.