The High Court has blocked the transfer or dealings of several townhouses allegedly developed from funds siphoned by directors of a company that owns the property where DusitD2 hotel stands.
Justice Dorah Chepkwony ruled that Synergy Industrial Credit Ltd had made out a case for the grant of orders prohibiting the transfer of the property, pending further orders of the court.
The court was informed that the properties registered in the names of several persons including Jaysukhlal Bhaichand Sanghrajka were developed using funds withdrawn from the accounts belonging to Cape Holdings Ltd (CPL), which is under administration.
Synergy Industrial Credit Ltd has been trying to auction the property belonging to CPL to recover a debt that now stands at Sh5.5 billion, arising from an award over a botched deal.
That creditor claimed that the directors allegedly withdrew Sh555 million from CPL’s accounts when it was heard that they would attach the bank accounts, to satisfy the debt.
“In this court’s view, it would be an act of dishonesty to withdraw all funds held in a company for private use once one is alerted of an impending execution on the company. Such acts of dishonesty are committed by the company directors through its directors and shareholders who are shielding themselves through its directors and shareholders who are shielding themselves from their legal obligation to pay the debt using the corporate veil,” the judge said.
The judge said the creditor has every right to follow up and trace the funds and or employ any other possible legal right to realise the fruits of its judgement.
Synergy Industrial Credit had claimed that the withdrawals were concerted and aimed at defeating its case.
The court heard that the developments were supposed to be completed at a cost of Sh624 million, after being approved by the National Construction Authority. Further, it was alleged that 88.9 percent of the funds used in the construction, were sourced from the accounts.
The court was informed that if they are not stopped, the directors may proceed with the sale and transfer the development to third parties and there would be no other assets available for execution against the debtor.
Synergy Industrial Credit
Synergy Industrial Credit had also asked for the lifting of the corporate veil and the summoning of the directors of CPL to show cause why they should not be held liable to pay the debt.
The application was opposed because the court allegedly lacks jurisdiction since the company had been placed under administration and no execution can be made against the company unless with the permission of the administrator or the court.
Secondly, the court heard that proceedings were pending before the Court of Appeal, which was not disclosed to the judge.
The court allowed the prayer for the lifting of the corporate veil but held it in abeyance pending further directions regarding a report on the management of the company’s assets by the administrator.
The court at the same time joined Mr Jaysukhlal as an interested party saying he is a necessary party in the case so that he can defend and guide the court on his portion of share in the subject land.
Cape Holdings Ltd has been embroiled in a dispute since 2011 over a botched sale deal with Synergy after the latter paid more than Sh700 million to acquire part of the apartments but the deal fell through.
The deal to purchase part of the building started in 2011 when Synergy sought two blocks in the complex, once it was complete.
The parties negotiated a total of 14 agreements and in the end, agreed that Synergy could have an office block known as Grosvenor plus 104 parking bays for Sh703 million.
In 2015, the arbitrator ordered the developer to refund the principal amount and interest totaling Sh1.66 billion.
The debt has since risen to more than Sh5.5 billion and High Court had last year allowed Synergy to sell the property but I&M Bank rushed to the Court of Appeal and stopped the auction, saying the property is charged to the lender for a loan of Sh2.82 billion.
CPL has also filed for a review of the award downwards, in an application that is also pending at the Court of Appeal.
