A court has granted a reprieve to a Nairobi-based firm over the auction of its property as it challenges inflated loan interest payments against I&M bank.

Justice Margaret Muigai overruled I&M’s notice of the sale of property which was due on July 23 2019 and ordered the bank to cease from advertising the property for grabs.

Hi-Plast Limited whose operations were clamped by the ban on manufacture plastic bags has accused I & M Bank of inflating interest payment to KSh53 million after pricing its loan above the legal cap of four per cent points above the Central Bank rate that currently stands at nine per cent.

The fact that the creditor has  been overcharging illegal and fraudulent interest on the charge account and the willingness to  dispose of the securities at a price  lower than the market value shows that the bank has “bad faith and are only interested in clogging the petitioners right to redeem its property,” suit papers read.

The firm also accuses the lender of seeking to auction its properties cheaply based on valuations done three years ago to recover the outstanding loan of Ksh373 million.

Official receiver

Justice Muigai has also directed parties to return to court on June 11 2019 upon which a decision will be made on whether to pursue a case of insolvency first or the separate one for administration.

Hi-plast wants the court to allow an official receiver to come on board to ensure that the debt is settled.The company wants an administrator appointed to manage the firm in the pendency of the suit.

The firm has made a valuation of the property in question as directed by court which is now  at variance with the one the bank did.

According to Hi-Plast  the secured creditor(I&M) has illegally, fraudulently and negligently been overcharging interest on the charge account with an aim of clogging the petitioner’s equity of redemption.

The company  ran into financial trouble after the government banned the use, manufacture and importation of plastic bags for household and commercial packaging in Kenya from August 28, 2017.

It had  borrowed Ksh300 million from the bank in 2015.

Status quo

The firm reckons the ban has caused it losses, having invested heavily in machinery and raw materials as well as defaulted on loan repayments, prompting it to sue the State in a  separate case of compensation.

Hi-Plast wants the sale and transfer of its assets stopped, and the bank barred from charging interest on the accounts pending conclusion of the interest rate dispute and appointment of the administrator for the business.

The judge ruled that to mitigate against the property being sold before the case is determined, a preservation of the status quo was warranted.

“Nothing should happen in between, it is not advisable to continue with adverts,” justice Muigai ruled.