Kenya: KCB Files Suit Seeking to Compel City Hall to Pay Sh4.3 Billion Debt

12 November 2020

Nairobi — Kenya Commercial Bank (KCB) has moved to the High Court seeking to enforce a Sh4.3 billion award against Nairobi County arising from a longstanding loan dispute the lender took over from Equity Bank.

In an application filed before the High Court at the Milimani Law Courts on Thursday, KCB wants the court to recognize the award as a judgment and compel Government Mike Sonko's government to pay the money.

But the county government through lawyer Steve Mogaka pleaded for more time to file an objection and also enlist the National Treasury and the Controller of Budget in the case.

The county government was directed to pay KCB Sh4.2 billion in November 2019 after the matter was referred to Phillip Bliss Aliker, an arbitrator.

"Leave be and is hereby granted to the applicant to enforce both the third interim award and the final award as a decree of this honourable court," KCB had pleaded through Mohammed Muigai.

Evidence presented before the court showed that Equity Bank loaned the defunct City Council Sh5 billion in 2011, a debt subsequently inherited by Nairobi City County.

In 2014, Equity said City Hall owed it more than Sh3.3 billion and an overdraft of Sh1.45 billion.

In another agreement dated September 2014, KCB later bought over the loan and interests. KCB bought out the loan, giving the county more time to repay the debt by increasing the maturity period to eight years at a lending rate of 13 per cent.

The lender also extended a six-month grace period to the county before it could start paying the debt.

But a dispute later arose and the matter was referred to an arbitrator where a determination was issued on November 12, 2019.

In his decision, the arbitrator said Nairobi county government had an outstanding debt of Sh4.29 billion.

Further, Bliss directed the county to pay Sh6 million as additional costs incurred while trying to pursue the debt and a further Sh3 million for tribunal costs.

"The sums awarded to the applicant are significant. As such, it is necessary for the applicant to recover these amounts," the lender said adding that the county government had been unwilling to settle the amount.

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