US firm sues coffee society over Sh29.6mn loan

A US firm has sued a coffee cooperative society in Nyeri for defaulting on a Sh29.6 million accumulated loan it had borrowed for construction of a processing plant in Mathira.

Root Capital, which has a branch in Nairobi, wants the High Court in Nyeri to issue orders to have two accounts owned by Tekangu Coffee Farmers Co-operative Society at Co-operative Bank of Kenya frozen for defaulting on the loan.

Through lawyer Bernard Otieno, the firm on Wednesday told Justice Jairus Ngaah that Tekangu farmers’ cooperative society borrowed the loan amounting to Sh24,069,675 million after which it defaulted on its payment.

According to the regional risk manager of the company Peter Onguka in his affidavit, the officials of the coffee society approached the company in April 2013 requesting for a loan.

According to him, they said the loan was to be used to construct a coffee processing plant in Mutathiini and also for acquisition of necessary machinery and equipment.

Mr Otieno said the society was to repay the loan at an interest rate of 11 per cent annually on simple reducing balance subject to additional default interest of 5.5pc over and above the contractual interest in the event of default.

He said an agreement was made with the cooperative society on November 29, 2013 and the money was deposited into a Mutathini buying Centre account, which is owned by the coffee cooperative society.

“The said amount had accumulated interest in the sum of Sh6,383702.87 million as at July 5,2016,” said Mr Otieno.

According to the firm, the amount has accumulated to Sh29,631,085.25 million with default interest at the rate of 16 percent per annum.

However Tekangu coffee farmer’s cooperative society through lawyer Wahome Gikonyo opposed the application.

Mr Gikonyo told the court that the foreign company did not follow the public procurement and proposal act before giving out the loan.

He said the loan was a deliberate ploy and was made to fleece innocent poor coffee farmers.

“The company did not comply with the law before lending the money and therefore it cannot be allowed to benefit from its own criminal act,” said Mr Gikonyo.

The society asked the court to dismiss the application with costs to the foreign company.

Justice Jairus Ngaah will give a ruling on August 19.