The High Court has stopped KCB Bank from putting a cereals manufacturing firm under receivership owing to a debt of Sh4.9 billion.
High Court judge Njoki Mwangi has issued orders stopping the bank from appointing receiver managers for Proctor & Allan Limited.
The giant cereals manufacturer took a Sh1,676,500,000 loan from the bank in 2013 and has since repaid Sh506,000,000.
On February 21, KCB wrote to the firm demanding an immediate payment of Sh4,918,591,477, being the outstanding loan, accrued interest and charges.
Three days later, the bank appointed Swaroop Rao Ponangipalli and Ponangipalli Venkata Ramana Rao as receiver managers of Proctor & Allan Limited.
Proctor then moved to court seeking orders to block the receiver managers and preserve the status quo as the loan issue is ironed out.
The company says it agreed with the bank to pay Sh1 billion by the end of December but was not able to honour its bargain, owing to challenges experienced by its investors.
“A temporary injunction be and is hereby issued restraining the first respondent (KCB Bank) from appointing receivers in respect of the applicant (Proctor & Allan) pending hearing and determination of the application,” Justice Njoki Mwangi ordered.
She also certified the case urgent in the orders issued on February 28.
The court also directed that authorized officials of the firm, including its directors, be given unfettered access to the applicant’s assets, offices, security keys, all company records, all bank accounts, all contracts and attendant documents and all other matters pertaining to its business.
Proctor argues that in appointing the receiver managers, KCB acted in an unprocedural and unlawful manner, given no notice was issued prior to the move.
“The appointment of the second and third respondent (the receiver managers) immediately after the issuance of the notice of demand was in bad faith and premeditated.
It is Proctor’s case that KCB advanced to its credit facilities amounting to Sh1,676,500,000 pursuant to debenture dated November 1, 2013and a supplemental debenture dated October 28, 2015.
Of that amount, the company has paid back Sh506,000,000 in interest payments and penalties as it continues to service the loan.
A legal mortgage over all the freehold and leasehold property of land on LR No209/5406 was put as security for the loan.
On August 27, 2024, Proctor and KCB agreed to a proposal of net payment of Sh1 billion by November 30, 2024, being a final and full settlement of the credit facility.
“The plaintiff avers that the bank was well aware that the plaintiff was undergoing a strategic investor process of acquisition to raise capital to fully settle the outstanding credit facility,” Proctor says in its affidavits.
On June 18, 2024, Proctor notified KCB of an offer of Sh1.25 billion that was subject to due diligence.
In a letter dated December 10, 2024 and copied to KCB, the firm informed the bank that it had completed the due diligence exercise to finalise the investment.
KCB then acknowledged the investor's interest in continuing with the transaction and also approved a request for a 30-day extension to complete the process in a letter dated December 11, 2024.
However, the bank issued the firm with a demand letter on January 24, 2025, demanding full settlement of the Sh1 billion by January 31, 2025.
Proctor then fully disclosed to KCB the reason for the slow progress of the transaction with their investors and explained that it was also exploring another capital investment option.
“Importantly, the plaintiff and the investor were still committed to the successful completion of the transaction, and the bank was at all times appraised of the progress,” Proctor says in its affidavits.
However, on Friday, February 21, 2025, KCB issued the firm with a demand notice for the immediate payment of Sh4.9 billion, being the outstanding loan, accrued interest and charges.
Three days later, the bank appointed two receiver managers to take over Proctor & Allan Limited, leading to the instant case.
The case will be mentioned for further directions on March 13.
