How Diamond Lalji became a bankrupt millionaire

Mr Diamond Hasham Lalji has filed an appeal against a bankruptcy order sought against him by creditor Cargill. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • This scenario is now real for thousands of Kenyans following a court judgement that declared former Cereal Millers Association chairman Diamond Hasham Lalji bankrupt on March 1.
  • The tycoon, whose business empire boasts no fewer than 16 companies in various industries, failed to repay a $4.8 million (Sh480 million) debt three of his companies owed American grain bulk handler, Cargill.

Picture this: Your friend asks you to guarantee his/her sacco loan. You automatically agree because you know him/her well. Besides, the sacco is known to be flexible with defaulters.

Sadly, things don’t go according to plan, life gets tough and your friend defaults. But his/her assets are not enough to recover the loan, so the sacco comes after you and other guarantors.

PETITION

Unfortunately, you can’t pay up, so the sacco files a bankruptcy petition against you and succeeds.

Within no time, you’re declared flat broke and an insolvency practitioner appointed to run whatever little exists of your estate.

This scenario is now real for thousands of Kenyans following a court judgement that declared former Cereal Millers Association chairman Diamond Hasham Lalji bankrupt on March 1.

The tycoon, whose business empire boasts no fewer than 16 companies in various industries, failed to repay a $4.8 million (Sh480 million) debt three of his companies owed American grain bulk handler, Cargill.

On January 16, 2017, Mr Lalji agreed to guarantee three of his flour milling companies — Premier Flour Mills, Maize Milling Company and Milling Corporation of Kenya — which had owed Cargill since it supplied them with maize in 2012.

At the time, the three firms owed $5.2 million (Sh520 million). Milling Corporation owed Sh274.95 million, Premier Flour Mills Sh192.25 million and Maize Milling Sh48.95 million.

But after the businessman failed to pay up as agreed, Cargill filed an insolvency petition against him.

TITLE DEEDS

Mr Lalji on Friday filed an appeal against the bankruptcy order issued by Justice Francis Tuiyott.

The Court of Appeal will mention the case Monday and decide whether to suspend Justice Tuiyott’s order, as Mr Lalji looks to convince the appellate judges to dismiss the order permanently. Justice Tuiyott’s ruling is likely to create anxiety among loan guarantors, since they could meet a fate similar to Mr Lalji’s.

Justice Tuiyott ordered that Anthony Makenzi Muthui of Ernst & Young take the over management of Mr Lalji’s estate as a receiver manager to recover Cargill’s debt.

Usually, the appointment of a statutory manager to handle a bankrupt individual’s estate is left to the official receiver. But Justice Tuiyott held that the official receiver had accepted Cargill’s nomination of Mr Muthusi, and that Mr Lalji did not contest the arrangement.

Justice Tuiyott agreed with Cargill’s argument that Mr Lalji did not give adequate details on six parcels of land worth Sh330 million that he offered to sell to offset part of Cargill’s debt. The businessman faulted Cargill for turning down his repayment proposal, which included the six title deeds as security.

DISCLOSURE

He also asked Justice Tuiyott to consider that his three firms had repaid Sh34 million since the insolvency petition was filed. But Cargill insisted that the Sh30 million was too little, since Mr Lalji had promised to pay Sh100 million.

Justice Tuiyott ruled that there was no evidence to verify the value of the land Mr Lalji pledged as security. “The identity of the properties to be sold is not disclosed and neither is a professional opinion of the value demonstrated. In the circumstances, a creditor would be rightly entitled to doubt the credibility of the proposal made.”

The court added that Mr Lalji’s failure to make a disclosure of all his assets and liabilities did not help his argument, because it is only upon such disclosure that the court can evaluate his ability to meet the offer. “And it cannot be ignored that the promise to pay the debt is by the very companies whose default led to the guarantee that has given rise to Mr Lalji’s apparent insolvency” Justice Tuiyott ruled.

Justice Tuiyott had ruled that Cargill was not unreasonable in turning down a repayment proposal by Mr Laji, which would have seen the debt repaid in instalments running through to April, 2023. After Cargill filed the insolvency petition, Mr Lalji proposed to give the firm the six pieces of land, which he was ready to sell, as security.