Author: Kenya Insights Team

High Court Exposes NCBA’s Legal Breaches in Sh109.5 Million Loan Dispute, Grants Reprieve to Struggling Entrepreneur.

In a scathing rebuke to one of Kenya’s largest financial institutions, the High Court has temporarily barred NCBA Bank from auctioning properties belonging to prominent Kisumu businessman George Otieno Otwal, exposing what critics are calling a pattern of predatory lending and ruthless recovery practices by the bank.

Justice David Kemei’s ruling on February 28 laid bare NCBA’s failure to adhere to basic legal safeguards, granting Otwal a 90-day injunction after the bank allegedly ignored statutory requirements to notify him before seizing assets tied to a Sh109.5 million loan.

The decision has reignited debates over corporate accountability in Kenya’s banking sector, with NCBA cast as a villain prioritizing profit over people.

A Bank’s Heavy Hand

Otwal, who traded under Asembo Soko Limited, detailed a harrowing sequence of events in court filings: after Kisumu County Government demolitions crippled his hardware business in 2023, he claims NCBA Bank abandoned negotiations to restructure his loan and instead moved swiftly to auction his properties—including his family home—without proper notice.

“The statutory notices were never served. The bank unilaterally increased interest rates and listed my properties for sale at undervalued prices,” Otwal told the court, accusing NCBA of exploiting his misfortune to seize assets. “They showed no mercy, even as my livelihood collapsed.”

Court documents reveal Otwal’s business, which had serviced the loan reliably until the county’s evictions, was shuttered for nearly a year. His attempts to renegotiate terms were met with silence, he alleges, before discovering his properties—used as collateral—were quietly listed for auction.

Court Exposes NCBA’s “Procedural Arrogance”

Justice Kemei’s ruling struck at the heart of NCBA’s defense, emphasizing the bank’s “failure to serve mandatory 90-day statutory notices” and its opaque handling of interest rate hikes.

In a ruling that Kenya Insights has access to, the judge highlighted the omission of a crucial step by NCBA—a legal requirement intended to safeguard borrowers—which raised “serious concerns” regarding its recovery strategies.

“The statutory notice is not a triviality. It is a shield for borrowers against high-handed actions,” Justice Kemei stated, lambasting the bank for attempting to bypass due process.

While acknowledging NCBA’s right to recover debts, he condemned its “haste to auction” without transparency, particularly the lack of a reserve price—a move critics argue could have allowed NCBA to acquire Otwal’s properties at fire-sale rates.

NCBA defended its actions, insisting it followed “all legal steps” and accusing Otwal of “delaying tactics.” But the court rejected this narrative, highlighting the bank’s refusal to engage with Otwal’s restructuring pleas and its glaring procedural lapses.

Broken System, Broken Lives

Otwal’s case underscores a broader crisis for small businesses in Kenya, where lenders often face accusations of exploiting legal loopholes to dispossess borrowers facing temporary hardships. Banking sector advocates, however, argue that NCBA’s conduct exemplifies a troubling trend.

“This isn’t just about one loan—it’s about a system that allows banks to act as judge, jury, and executioner,” said financial rights activist Miriam Awuor. “When institutions like NCBA ignore statutory notices and manipulate interest rates, they’re not just violating laws—they’re destroying families.”

The court’s injunction offers Otwal a fleeting lifeline, but Justice Kemei warned that the reprieve is conditional: the businessman must resolve the case within 90 days or lose protection. For now, his family home remains intact, but the emotional toll is indelible.

The ruling deals a blow to NCBA’s public image, already under scrutiny following recent customer disputes over hidden fees and aggressive recoveries. While the bank retains the right to appeal, civil society groups are seizing on the case to demand stricter oversight of lending practices.

As Otwal fights to salvage his assets, his story has become a rallying cry for reform. “Banks cannot operate above the law,” he told reporters outside the courtroom. “NCBA tried to break me, but the court has shown that even the powerful can be held accountable.”

For NCBA, the verdict is a stark reminder: in the court of public opinion, procedural arrogance carries a steep cost.

A court case has revealed how a rogue Equity Bank employee siphoned Sh386.5 million in one month through unauthorized transfers to eight companies.

The illegal cash transfers to Ubahashi Traders Limited, Calabash Adventures Limited, Jahnur Investment, Kariye Investment, Flowerish International, Kariye Salah Ali, Hotho Investments, and Sasa Pay Trust took place between May and June 2024 but have only now been disclosed.

In court filings, Equity Bank stated that the employee, who has since been dismissed, illegally transferred Sh386,500,320 between May 17, 2024, and June 14, 2024.

Upon discovering the fraud, the bank reported the matter to the Banking Fraud Investigation Unit of the Directorate of Criminal Investigations (DCI) and rushed to court to freeze the accounts of the eight firms as investigations began.

In its application, Equity Bank sought to freeze the accounts of Ubahashi Traders Limited (up to Sh207,720,020), Kariye Investment Limited (Sh85,740,300), Calabash Adventures Limited (Sh32,000), Flowerish International Limited (Sh11 million), Kariye Salah Ali (Sh6 million), Hotho Investments Limited (Sh93.04 million), and Jahnur Investments Limited (Sh18.5 million). The bank also revealed that Sasa Pay Trust had requested a lien over Sh26.5 million, but the amount transferred to the company was Sh88 million.

The companies that received the funds, however, opposed Equity Bank’s application to freeze their accounts, attempting to present their side of the story.

In affidavits sworn by Mohammed Hashi Adan, Kariye Salah Ali, Mohamud Mohamed Arab, Abdirashid Mohammed Hassan, and Mohammed Sahil, the companies claimed they were primarily engaged in the import business and often collaborated to raise required amounts in US dollars.

They stated that they were approached by a man named Geoffrey Kiragu, who identified himself as a property agent and claimed to have significant funds to convert into US dollars. The companies were to receive the funds in their accounts, remit them to Geoffrey, and earn a commission.

In their defense, the companies said they only later discovered the money was stolen from Equity Bank and claimed they were unaware of its origin. They argued that they were innocent parties to the case and that freezing their accounts would unjustly harm their businesses. They also noted that they had assisted the police in arresting Geoffrey and should not be penalized.

Additionally, the companies clarified that the money did not come directly to their accounts but passed through various entities before reaching them.

Equity Bank urged the court to grant the freezing orders, arguing that the companies had refused to return the Sh386,500,320 transferred to their accounts. The bank also pointed out that the companies were not licensed to transact in foreign exchange, as required by the Central Bank of Kenya, and warned of a significant risk of losing the funds if the orders were not granted.

High Court Judge Alfred Mabeya ruled in favor of Equity Bank, noting that the defendants had not denied receiving the funds from Geoffrey. The court applied the doctrine of tracing, which establishes that even though the money was not transferred directly from the bank to the defendants’ accounts, it passed through other entities and ultimately ended up in their possession.

“In the present case, at a prima facie level, the record demonstrates that the plaintiff’s funds were successfully traced to the defendants’ accounts. This, combined with the defendants’ admission of receiving the money, establishes an arguable case,” the judge said.

“Regarding the risk of dissipation of funds, there is no assurance that the defendants will refrain from withdrawing or depleting the funds once the freezing orders are lifted. Money is a fluid commodity that can disappear by the stroke of a pen. The court finds that the plaintiff faces a significant risk of losing the money if the orders sought are not granted,” Justice Mabeya added.

Lawmakers have launched an investigation into the proposed Sh6 billion deal between the National Oil Corporation (NOC) and French energy giant Rubis Energies Kenya (REK), which would see Rubis take over the state agency’s operations as a non-equity strategic partner.

The deal, aimed at revitalizing NOC’s struggling downstream business, has raised eyebrows among members of the Energy Committee, who are demanding transparency and accountability.

During a tense meeting with NOC officials, Energy Committee members, led by Nyatike MP Tom Odege, directed the corporation to convene a retreat within two weeks to discuss the deal with all stakeholders, including the Attorney General and Rubis representatives.

“We are asking NOC and all the companies under them to organize a retreat in the next two weeks so that we can discuss this matter. We also want the Attorney General to be present in the meeting so that we can know everything,” Odege stated.

Committee Vice Chairperson and Narok East MP Lemanken Aramat echoed these concerns, emphasizing the gravity of the issue. “The issues with this contract are very weighty and cannot be discussed in one meeting. We need a retreat where all the parties can attend, and we are able to get details,” Aramat said.

The probe comes after NOC CEO Leparan ole Morintat tabled documents outlining the partnership, which would see Rubis inject Sh6 billion into NOC for capital expenditure, including the renovation and expansion of retail stations, and working capital to finance stocks. The deal, structured as an eight-year non-equity partnership renewable once, aims to boost NOC’s profitability and market share through enhanced sales, modernized infrastructure, and improved internal controls.

According to the documents, Rubis will also deploy a fully encrypted enterprise resource planning (ERP) system and implement staff training and exchange programs to foster operational excellence.

Morintat clarified that the partnership aligns with a Cabinet decision to revive and commercialize NOC, emphasizing that the deal does not equate to privatization. “The Cabinet approved the onboarding of a strategic partner on a profit-sharing basis and NOT the privatization of the corporation,” he stated.

However, the deal has been overshadowed by NOC’s dire financial situation.

The corporation’s total debt stands at Sh7.98 billion, including Sh5 billion owed to Kenya Commercial Bank (KCB) and Stanbic Bank. NOC reported a cumulative loss of Sh6.7 billion in the 2022/23 financial year, with shareholder equity eroded to negative Sh2.6 billion.