Nairobi — The Court of Appeal of Kenya has cleared Equity Bank Kenya Limited to auction the former headquarters of Chase Bank Kenya Limited, paving the way for recovery of a debt exceeding Sh1.3 billion.

In a ruling delivered on March 13, the court dismissed an application by Chase Bank (in liquidation) seeking to stop the sale of the Riverside Office Block in Nairobi.

The lender is pursuing recovery of a $9.5 million (Sh1.3 billion) loan advanced to Riverside Mews Limited, which was secured using the property and rental income from the building.

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The loan, issued in 2012 and later restructured, fell into default, prompting Equity Bank to issue statutory notices and initiate auction proceedings.

Chase Bank, currently under liquidation by the Kenya Deposit Insurance Corporation (KDIC), had argued the property was acquired using misappropriated depositor funds and should be preserved pending a separate recovery case against former directors led by Zafrullah Khan.

However, the appellate court ruled that although the intended appeal raised arguable issues, there was no basis to stop the sale.

"It is not in dispute that the respondent is a tier one bank, and in the event that the appeal succeeds, it is capable of compensating the applicant for any loss," the court said.

The judges also noted that the outstanding loan continues to accrue interest and delays in selling the property could push the debt beyond the asset's value.

The High Court of Kenya had earlier upheld Equity Bank's right to exercise its statutory power of sale, citing a valid charge over the property.

With the dismissal of the injunction application, Equity Bank is now free to proceed with the auction to recover the debt.