The Supreme Court is set to issue a landmark judgment on whether borrowers can recover property auctioned by banks irregularly or through fraud and asset undervaluation.
The Court of Appeal has allowed former Limuru MP George Nyanja to seek the Supreme Court’s intervention in recovering his Karen matrimonial home that City Finance Limited auctioned in 2011.
The former lawmaker wants the Supreme Court to hand back the property, arguing the lender sold it for Sh60 million against a market value of Sh295 million from an initial Sh8 million loan and a Sh3 million overdraft.
Past trends, including court decisions, have often awarded damages to aggrieved borrowers but have been hesitant to reverse completed property sales.
Nyanja alleges irregularities in interest computation, accounting, valuation and the manner in which the land was sold through a private treaty.
‘The purchaser, Redmars Limited, a newly incorporated special purpose vehicle linked to a business associate of the bank’s advocate, allegedly acquired the property at a gross undervalue of Sh60 million without a valid forced sale valuation,’ argued Nyanja.
‘There was no evidence the alleged purchase price was paid by Redmars or that it was credited to the loan account. Instead, the bank kept charging interest on the account,’ he added.
The bank and the purchaser defended the sale, denying the allegations and arguing that even if the transaction was irregular, damages were the only available remedy.
In a ruling delivered in Nairobi, the appellate bench certified that the dispute between Nyanja Holdings Limited and City Finance Limited raises ‘matters of general public importance’ affecting borrowers, lenders and property buyers across the country.
The judges said the case raises unresolved questions on the ‘legal consequences of unlawful or fraudulent exercise of a bank’s statutory power of sale’ and whether courts can reverse completed auction transactions.
‘Whether a court of law, faced with a statutory power of sale marred with proven fraud, collusion, illegality, or irregularity, or other impropriety, is barred from impeaching such a sale or ordering a restoration of the property, but is limited to the remedy of damages,’ the court stated.
The judges said the dispute raises weighty legal and practical questions deserving determination by the apex court.
‘The questions above, in our view, are of general public importance, as they transcend beyond the interest of the applicants and are of significance to other borrowers, financial institutions exercising the statutory power of sale, and potential purchasers,’ the judges ruled.
The dispute stems from lending transactions dating back to the early 1990s involving City Finance Limited, now Kingdom Bank, and Nyanja Holdings, a company linked to Mr Nyanja.
The facilities, initially capped at about Sh8 million, were secured using several properties, including a 25-acre Karen property registered in the names of George Nyanja and his wife Enid Nyanja.
Court records show disagreements later emerged over interest charges, the amount owed and the bank’s accounting practices.
The borrowers maintain they repaid more than Sh54 million but still lost several properties, including the Karen land known as L.R. No. 7583/1. The bank also sold three other properties in Langata Southlands, Parklands and Nairobi West.
The Karen property, described as the Nyanjas’ matrimonial home and last major asset, was sold by private treaty to Redmars Holdings Limited for Sh60 million, though Nyanja claims its market value exceeded Sh295 million.
Nyanja Holdings argued that the transaction was conducted while court proceedings were ongoing and despite earlier orders barring the transfer of the property.
In 2020, the High Court ruled in favour of the borrowers, finding that the bank had charged illegal and excessive interest, and that the loan account had been overpaid. The court declared the sale unlawful, nullified the transaction and ordered the property returned to the Nyanjas.
However, the Court of Appeal overturned that decision in January 2026, holding that once a statutory sale is completed, a borrower’s equity of redemption is extinguished and the remedy ordinarily lies in damages.
‘The respondents’ remedies, if any, arising from alleged irregularities in the exercise of the statutory power of sale lie in damages and/or accounting against the chargee, City Finance Bank Limited, and not in the setting aside of the transfer to the purchaser,’ the court ruled.
The appellate court further held that completed sales cannot be reversed unless fraud or collusion involving the purchaser is proved.
That decision triggered the Nyanjas’ application seeking permission to move the matter to the Supreme Court.
Through lawyer Dudley Ochiel, the applicants argued that the ruling creates a dangerous precedent by allowing lenders to retain property obtained through unlawful processes as long as compensation is paid later.
Kingdom Bank and Redmars had opposed the move to the Supreme Court, insisting the law on statutory sales is already settled.