How a KSh450 Million I&M Bank Loan Swelled to KSh2.5 Billion Debt

Businessman Divyesh Indubhai Patel and his companies say they have already paid more than KSh1 billion towards a commercial loan that originally stood at KSh450 million.

Yet, despite those repayments exceeding the original borrowing, they now face a debt claim that I&M Bank says has grown to more than KSh2.5 billion, and the Court of Appeal has declined to stop the lender from auctioning their properties.

In a ruling delivered in late July, the appellate court dismissed an application by Equip Agencies Limited, Unicom Limited, Interactor Company Limited and directors Divyesh Indubhai Patel, Vinesh Indubhai Patel and Grishma Kumar Indubhai Patel, who had sought to block I&M Bank and Phillips International Auctioneers from selling four charged properties while their appeal is pending.

The borrowers insist they repaid well over KSh1 billion and accuse the bank of unlawfully consolidating separate loan facilities, creating what they describe as an inflated debt before moving to auction their properties.

They maintain the figures claimed by the bank do not reflect the true amount owed.

Court papers show the dispute took another turn in June 2021, when the parties signed a Deed of Settlement.

The agreement stated the outstanding debt stood at KSh1.936 billion, but I&M Bank agreed to accept KSh875 million if it was paid in three instalments within 180 days.

The deal also required the borrowers to withdraw pending court cases and appeals.

The applicants later claimed they signed the agreement under pressure, believing their properties faced imminent auction.

In Duplum Rule

They also argued that the alleged debt violated Kenya’s in duplum rule, which limits recoverable interest in certain banking transactions, and accused the bank of advertising the properties for sale without issuing fresh statutory notices.

I&M Bank disputed those claims, telling the Court the borrowers voluntarily entered the settlement before failing to honour its terms.

The bank further argued that years of litigation had only increased the outstanding debt, which it now says exceeds KSh2.5 billion because of accumulated interest.

The Court of Appeal agreed that the borrowers had raised an arguable question over the amount allegedly owed.

However, it ruled that the argument alone was insufficient to stop the auction because the applicants failed to prove their appeal would be rendered worthless if the sales proceeded.

The judges noted that the properties have known values and that I&M Bank could compensate the borrowers through damages if they eventually win the appeal.