The SBM Bank has lost a bid to be enjoined in a case which had been filed by EcoBank against East African Cables Limited. Consequently, EcoBank will now be the only lender that is allowed to place East African Cables under receivership over a Ksh 190 million loan obtained by the cables manufacturer in the form of banking facilities between 2011 and 2013.
In the ruling made, Justice David Majanja cited that SBM Bank was an unsecured creditor and as such, he could not connect any interest between the bank and the firm’s property which had already been secured in favour of EcoBank.
“Neither administrator nor liquidator, if appointed in the insolvency petition would have an interest in the secured property of the company (cable firm),” the judge said. “I therefore find and hold that the SBM Bank has not established a legally recognized interest in these proceedings… There are no common issues of law and fact and interest in relief…hence SBM cannot be joined to these proceedings,” ruled justice Majanja.
EcoBank was the first to file a suit against East African cable company seeking to recover a Ksh 190 million loan. Thereafter, SBM Bank wished to be enjoined in the suit as it sought to recover Ksh 285 million and also stop the receivership in preference to a suit it had filed seeking to liquidate the cable manufacturer. However, due to the former’s legal action been taken pursuant to the equity maxim ‘Equity follows the law’ and also being based on legal provisions in the Insolvency Act 2015 which dictate on how to resolve disputes among companies unable to honor loan obligations, their legal action was claimed to be valid.
Further in the ruling, the learned judge took judicial notice of the fact that EA Cables was part of a group of companies owned by an investment firm called TransCentury. He noted that this particular firm had struggled to pay various creditors including bondholders and banks.
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