A tea processing firm, Korara Highlands Tea Factory, has been dealt a blow after the High Court allowed KCB to auction its assets over a Sh1 billion debt.
The Kericho-based tea processing company, producer of the Cyrus Premium Tea brand, had sought to stop the sale, arguing that it had secured a prospective buyer in a deal worth up to $10 million (Sh1.29 billion), which would allow it to settle the debt.
However, the court ruled that anticipated transactions could not override a lender’s accrued rights and that the borrower had failed to justify an injunction.
The court dismissed an application by Korara and two of its directors, Titus Kigen and Victor Kipkosgei Kigen, seeking to prevent KCB from exercising its statutory power of sale over several properties pledged as security.
The dispute stemmed from credit facilities extended by the bank in June 2023, including an overdraft, term loan, asset-based finance and insurance premium finance, totalling Sh128.1 million and $2.67 million (Sh345.5 million). These facilities were secured by seven properties in Kajiado and Kericho.
Korara moved to court after KCB issued a statutory notice demanding Sh281 million and indicating an outstanding balance exceeding Sh1.05 billion as of March 6, 2025. This was followed by a redemption notice issued through auctioneers.
The tea processor claimed it had continued servicing the loans and accused the bank of issuing defective statutory notices, imposing ‘illegal, unconscionable, and usurious’ interest rates, and obstructing a planned sale to an investor valued at up to $10 million (Sh1.29 billion).
Korara argued that this deal would allow it to clear its debt and that KCB’s actions would cause irreparable harm unless restrained.
The company, which was placed under administration last year amid financial distress, also contended that the statutory notice was not served on the two principal debtors and their spouses.
KCB opposed the application, stating that Korara had persistently defaulted despite repeated restructuring discussions. The bank maintained that all notices under the Land Act were lawfully issued, served and acknowledged, accusing the borrower of using litigation to delay recovery.
In dismissing the application, the court found that Korara had not met the legal threshold for an injunction.
‘It is not in dispute that the applicant obtained the loan facilities from the interested party (KCB) and charged the suit properties as security,’ the court said. ‘It is equally not contested that the loan accounts are in arrears.’
Regarding the challenge to statutory notices, the court ruled that the bank had complied with legal requirements.
‘The court is not persuaded that the applicants have demonstrated any patent or fundamental non-compliance sufficient to invalidate the statutory power of sale,’ the judge ruled.
The court also rejected claims of illegal interest, noting that Korara had made broad allegations without providing evidence.
‘No expert evidence or detailed computations have been placed before the court to demonstrate that the interest charged was unlawful or outside the contractual framework,’ the court ruled.
It emphasised that disputes over loan accounts do not warrant injunctive relief. Allegations of overcharging, the court noted, are compensable through damages and cannot prevent a lender from realising security.
On the issue of irreparable harm, the court dismissed arguments that the charged land was unique. ‘Once land is offered as security for commercial borrowing, it becomes a commodity for sale,’ the ruling stated.
The court also rejected reliance on a potential investor, stating: ‘Courts cannot rewrite contracts for parties or suspend contractual rights based on hoped-for future arrangements.’