Assets belonging to medical facility Savannah Healthcare Services are now set to be auctioned over a Sh. 1.4 billion KCB loan which the hospital has defaulted. The auctioning has received the greenlight from the High Court after a petition by Savannah hospital to have KCB Bank Kenya stopped from auctioning its assets was denied.
The High Court had heard that KCB Bank Kenya had advanced numerous loans to Savannah that amounted to Sh. 1.1856 billion. These loans included an overdraft facility of Sh. 20 million, asset-based financing, and a term loan of Sh. 1.001 billion.
In its petition against the bank, the hospital told High Court judge Justice Alfred Mabeya that KCB Bank had failed to disburse Sh. 21 million from the term loan. The hospital further told the court that the bank’s demand for Sh. 89.3 million in arrears was based on an invalid statutory notice.
However, KCB opposed the petition and told the court that whereas the lender [KCB] and the borrower [Savannah hospital] had a repayment agreement, the borrower had failed to make the monthly installments.
The High Court heard that the two had agreed that the borrower would make monthly installments of Sh. 3 million into an escrow account, which had not happened.
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In addition, KCB Bank told the court that it had conducted a property valuation on Savannah in accordance with the Land Act, and then issued a 90-day statutory demand notice which was followed by a 40-day auction notice and a 45-day redemption notice.
The default by Savannah hospital had seen the loan accumulate to Sh. 1.416 billion in principal, interest and penalties.
In addition, the hospital informed the court that a decision allowing for the auctioning of its property by the bank would force it to declare insolvency. However, the High Court disagreed and ruled that it was evident that the hospital owed the bank and had a duty to fulfill its loan obligations, failure to which the bank was entitled to a recovery.
“I do not find that the plaintiffs have established a prima facie case with a probability of success, as they are truly indebted to the bank. In the upshot, I find no merit in the application dated 29/5/2023 and the same is dismissed with costs,” the High Court declared in the ruling that was made on February 3, 2025. “The statutory power of sale is a contractual right that is activated upon default.”
