Nine companies under the Milly Group that are linked to a former Kanu kingpin have lost a case in which they challenged a decision by Imperial Bank and the Kenya Deposit Insurance Corporation to offset a $1,797,174 (Sh183.6 million at current rates) loan advanced to another firm using their funds.
According to the companies, KDIC had notified eight of the companies that their applications for release of their cash amounting to Sh13.2 million held in the collapsed bank (in receivership) had been allowed but would instead be used to offset a hire purchase loan advanced to Farm Africa Mills Investment Ltd in 2014.
The High Court in Mombasa ruled it was evident that the companies entered into a contract in which assets of the group of companies became additional security to the loan advanced to Farm Africa Mills Investment.
“It is therefore improper for the petitioners to turn against the very contract they entered into free of undue influence, fraud or coercion and under the cover of a constitutional petition seek to run away from their lawful obligations,” said Justice Eric Ogola.
The judge ruled that the companies are deemed to have always been aware through their common shareholding that Farm Africa Mills Investment was not repaying the loan.
The court said there was also no dispute that the petitioners are a group of companies with common directorship and have different accounts with Imperial Bank Ltd.
“It is easy to infer that there was no issue of lifting the corporate veil, it appears to me that the parties at the time of taking the loan had themselves lifted the veil and decided that in the group of companies, accounts or liabilities can be settled through set-off,” said Justice Ogola.
The companies are Embakasi Management, Kimakia Estates, Masindeni Estates, Old Town Property Development, Pwani Warehousing, Saku Development, Siben Estates, Turuma Properties, and Airport Warehousing.
They argued that they do not have any other connection with Farm Africa Mills Investments other than being a common shareholder and have not guaranteed or offered security for the company’s loan.
KDIC and Imperial Bank argued that the companies and Farm Africa Mills Investments are controlled and directed by Mohamed Azim Sajjad Rashid and Mohamed Raza Sajjad.