EADB loses Sh1.3 billion debt recovery case against Kenya Bus Service

Appeals Court says abortion is not a fundamental right

The East African Development Bank (EADB) has lost its bid to recover Sh1.3 billion from Kenya Bus Service (Mombasa) Limited and several guarantors after the High Court dismissed the lender’s claim, bringing to a close a legal dispute that has lasted more than two decades.

In a ruling delivered on June 13, the court found that EADB had failed to provide sufficient evidence and documentation to explain how the original loan amount and accrued charges grew to the sums it was seeking to recover.

The court held that the lender did not adequately account for the increase in the debt from the initial loan facility to the nearly $10 million claim presented before the court.

“The bank cannot, in a liquidated demand, simply throw figures at the court. There is no indication or documentation showing how the loan amount ballooned to $9.9 million within six years. In the circumstances, the suit lacks merit and is hereby dismissed,” the court ruled.

According to court records, EADB entered into a loan agreement with Kenya Bus Service (Mombasa) Limited on October 1, 1998, extending financing equivalent to Special Drawing Rights (SDR) 1.6 million, then valued at approximately Sh126 million.

As part of the agreement, the company was required to provide personal guarantees acceptable to the lender to secure repayment of the facility and related obligations.

The bank argued that under the guarantee agreements, the guarantors had irrevocably and unconditionally undertaken to repay the loan, together with interest, fees and other charges, in the event of default.

However, the court questioned how the original SDR-denominated loan translated into the $3.5 million that EADB claimed was outstanding as of February 28, 2003. The lender later amended its claim, increasing the amount sought to $9.9 million, currently equivalent to about Sh1.3 billion.

“First, the principal amount was SDR 1,600,000. There is no indication as to when the SDR loan was converted into a US dollar account. To make matters worse, the sum of $3.5 million was allegedly outstanding as of February 28, 2003,” the court observed.

The judge concluded that EADB had failed to prove, on a balance of probabilities, how the debt had accumulated to the amount claimed and therefore did not establish a valid basis for recovery.

The dispute dates back to 1998 and arose after Kenya Bus Service (Mombasa) Limited defaulted on its repayment obligations under the loan agreement.

In 2003, EADB moved to court seeking to enforce personal guarantees against several individuals it held responsible for the outstanding debt.

The lender sued Mutjaba Jaffer, Manoj Shah, Sachin Amritlal Purshottam Bhmji Devan and Reena Amritlal. Sachin and Reena were sued in their capacity as legal administrators of the estate of Amritlal Purshottam Bhmji Devan, also known as Amritlal Devani.

EADB maintained throughout the proceedings that the defendants were personally liable for repayment of the outstanding facility.

Following the company’s default, the bank appointed receivers and managers in April 2001 to take control of charged assets and facilitate recovery of the debt.