The National Assembly opposed a petition by the owners of Nairobi’s 14 Riverside complex, Cape Holdings Limited, which questioned the constitutionality of Section 44A (4) of the Banking Act, which excludes judgment debtors and court decrees from the protection of the in duplum principle. This rule generally limits recoverable interest on a debt to the outstanding principal.
The law is at the centre of a petition by Cape Holdings Limited, which wants the High Court to determine whether it is unconstitutional for allowing interest on court-awarded debts to grow beyond the principal amount and expose borrowers to potentially disproportionate financial claims.
“The formulation, scope and reach of a statutory interest cap, including any question whether and how it should extend to Categories of debt beyond non-performing bank loans, is a matter of legislative policy squarely within the constitutional mandate of Parliament under Articles 94, and 109 to 113 of the Constitution, and this honourable court lacks the necessary to question policy decisions,” Parliament said.
In an affidavit, National Assembly Deputy Clerk Jeremiah Ndombi said Section 44A was never intended to operate as a general law governing all categories of debt, execution proceedings or decretal interest.
He said those matters are addressed under other legislation, including the Civil Procedure Act, Civil Procedure Rules, Arbitration Act and Auctioneers Act and Rules.
Parliament argues that the distinction created by Section 44A (4) is based on a material difference between contractual interest on non-performing bank loans and interest accruing under court orders or decrees.
According to Ndombi, the in duplum rule was introduced to address the ‘unrestrained’ accumulation of contractual interest by licensed financial institutions against borrowers in continuing lender-borrower relationships.
Section 44A(1) and (2) limit the amount recoverable by a licensed institution from a borrower in respect of a non-performing loan to the principal outstanding when the loan became non-performing, contractual interest not exceeding that principal, and reasonable recovery expenses.
Parliament says the rule was intended to address situations in which loan balances could escalate to multiples of the original principal without independent adjudication.
Section 44A(4), however, provides that the section ‘shall not apply to limit any interest under a court order accruing after the order is made.’
Read: 14 Riverside owners seek to block Sh10.6bn debt claim
Parliament argues that such interest is fundamentally different from contractual interest imposed by a bank. Interest under a court order is either determined by a court or arbitral tribunal after the parties have been heard, or continues to accrue on a debt that has already been judicially determined.
It therefore maintains that excluding decretal interest from the in duplum rule was a deliberate legislative choice rather than arbitrary discrimination.
Parliament also argues that extending the rule to court decrees would effectively require the High Court to rewrite the Banking Act and expand a statutory scheme that was deliberately confined to licensed banking business.
It maintains that determining the scope of any statutory interest cap beyond non-performing bank loans is a matter of legislative policy within Parliament’s constitutional mandate.
Parliament wants the court to dismiss the petition, arguing that Cape Holdings has not demonstrated that Section 44A(4) is unconstitutional.
In the petition, the company said it was not asking the court to reopen the underlying arbitration dispute, set aside the arbitral award or overturn previous decisions of the Court of Appeal.
‘The petition does not seek to reopen the merits of the arbitration, set aside the award, reverse the Court of Appeal judgment or invite this court to exercise appellate or supervisory jurisdiction over any superior court,’ the company said.
The dispute stems from a long-running commercial disagreement between Cape Holdings and Synergy Industrial Credit Limited over an aborted transaction involving a block within the 14 Riverside Drive development in Nairobi.
Cape Holdings wants the High Court to determine whether the continued accumulation and enforcement of interest on the decretal amount violates constitutional protections, including the rights to equality, dignity and property.
The company says the claimed amount has grown substantially beyond the original arbitration award.
According to court documents, an arbitrator awarded Synergy Sh1.666 billion. However, fresh warrants of sale and a notification of sale issued on March 16, 2026, put the amount allegedly due at Sh10.679 billion.
Cape Holdings told the court that about Sh9.013 billion of the claim comprises compound interest, accounting for roughly 84 per cent of the total.
The company argues that the interest has therefore overtaken the original award by a significant margin.
The company said it was not challenging Synergy’s status as a decree-holder, but asking the court to examine whether the manner in which the decree had been calculated and enforced was constitutionally permissible.
It also argued that attempts to enforce the Sh10.679 billion claim against the entirety of 14 Riverside, and potentially against property belonging to its directors and third parties, amounted to a disproportionate interference with property rights.
The company further raised Article 27 of the Constitution, which guarantees equality and freedom from discrimination, arguing that the statutory exclusion creates an unjustifiable distinction between judgment debts and other debts protected by the in duplum principle.
Synergy Industrial Credit has opposed the petition and wants it struck out.