A court has barred I&M Bank from auctioning a company’s property to recover an outstanding loan of more than Sh300 million, pending determination of the actual amount owed.
In a ruling on Tuesday, justice Margaret Muigai asked the bank to submit to the court a report on the reconciliation of Hi Plast Limited’s accounts before exercising power to auction the securities it offered.
The judge said so after lawyer Eddy Orinde told the court that Hi Plast contested the amount the lender demanded, saying the interest was overstated by Sh53 million.
Dr Orinde said Hi Plast learned of the overcharge following an analysis by Audit Focus Advisory, the audit firm it engaged.
“The bank has advertised the company’s securities for sale but the amount owed has been contested,” he said.
Its prudent to know how much the bank wants from Hi Plast, whose production was rocked by the government’s 2018 ban on plastics.
The lawyer also noted the existence of unsecured creditors who must be paid, and that the dispute entails liquidation and administration of the company by creditors.
The liquidation case against Hi Plast was instituted by an unsecured creditor and is being heard by another judge.
“There are secured and unsecured creditors. Every one is entitled to payment,” the judge was told.
Dr Orinde asked the court to order appointment of a receiver manager to ensure these creditors’ interests are taken into account.
Justice Muigai said she would peruse the two cases relating to the loan repayment then avail summaries to confirm whether the matter is one to do with administration or insolvency.
To preserve the property pledged as security, Ms Muigai directed maintenance of the status quo and for auctioneers Garam and Purple to suspend the process.
The case will be mentioned and directions given on June 11.