NCBA Bank gets nod to auction road contractor
NCBA Bank has been allowed to seize property belonging to a local contractor, who failed to finish tarmacking of two roads in Tharaka Nithi County seven years after it was awarded the contract.
High Court Judge David Majanja on December 22, 2021, dismissed an application by Westbuild General Contractors that sought to restrain the bank from repossessing and auctioning its assets.
The assets, valued at over Sh800 million, were part of the collateral used by the contractor to secure financing for the tarmacking of the Kyeni-Kathanjure-Karurumo and Chuka-Kaanwa-Kareni roads.
The tender was awarded in 2014 by the State Department of Infrastructure, which then appointed Kenya Rural Roads Authority (KeRRA) as the supervisor.
“The debt by the plaintiff owed to the bank is outrightly and expressly admitted and there is no reason why the bank should be restrained from exercising its power of sale in a bid to realise its debt,” Justice Majanja said.
This paves the way for the bank to confiscate Westbuild’s vehicles and machinery including an excavator, two rollers, two water bowsers, a motor grader, a Nissan truck, and two other vehicles.
In 2014, Westbuild was awarded a tender to build the two roads.
NIC Bank, which has since merged with Commercial Bank of Africa to form NCBA, issued Westbuild with short-term advance payments of Sh53,726,408.70 and a surety bond of Sh11,578,528.55 to enable the contractor to carry out the project.
The bank also gave the contractor additional loans of Sh789 million secured against the company’s assets including rental income from a property in Thika town, hire purchase agreements and joint registration of the financed vehicles.
But six years later, the company had not finished tarmacking the roads. Consequently, the State Department of Infrastructure wrote to the bank recalling the guarantees worth Sh225.5 million, which included the surety bond of Sh11.6 million.
The State alleged default by the contractor in the performance of the project, leading to stalling of construction work.
The bank wired the Sh11.6 million surety bond to the government.
Westbuild then instituted arbitration proceedings against termination of the contract even as it filed a high court case against the Infrastructure Principal secretary, KeRRA and NIC Bank.
It wanted the State stopped from advertising and, or retendering the contract pending the hearing and determination of the arbitration.
The firm also alleged contempt by the PS, who went ahead to recall the guarantees despite restraining orders from the court.
The contractor also wanted Majanja to issue an injunction restraining the bank from selling the secured motor vehicles pending the hearing and determination of the suit.
However, the judge found that the injunction application came after the process of recalling the guarantee had already been initiated.
Majanja said Westbuild did not demonstrate that the bank had not followed the correct procedure or had infringed on its rights in the process of exercising that power. “All I hear the plaintiff say is that the bank has not accepted its proposals for repaying the debt,” the judge said.
He said it is not within the court’s jurisdiction to vary the terms of payment of the debt due under a facility.
“The court cannot compel the bank to accept the plaintiffs’ proposals to restructure the facilities by restraining it from exercising its legal remedies as this would amount to re-writing the parties’ bargain,” Majanja said.