School gets reprieve in loan dispute with bank
A judge has stopped a local bank from auctioning property worth millions of shillings, belonging to a learning institution in Nairobi’s South C estate over a loan dispute.
High Court Judge Wilfrida Okwany has suspended orders obtained by Gulf African Bank to auction the property owned by Beyruha Academy and its guarantor, Sagal Investment Ltd.
Bank demanded
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Gulf African Bank had advertised for sale by public auction the property known as L.R No.209/12221/333 (I.R No .81080) Five Star Estate, Phase 1 South C, belonging to Sagal Investment in a local daily on August 17. The property is valued at Sh177 million.
Leakey’s Auctioneers Ltd on behalf of the bank demanded as a total of Sh83 million as debt accrued as at February 20 this year.
However, a dispute between the two parties arose after the school accused the bank, of charging a 20 per cent interest which is against the Islamic Sharia banking rules.
The facility offered by the bank to the school was for Sh66.5 million.
Beyruha Academy, through its lawyer Hassan Lakicha maintains it had already paid a sum of Sh30 million by October, 2019 towards settling of the loan facility.
As at June this year, the school had paid Sh45 million against its quarterly installments of Sh3 million.
However, the school has remained closed since March following government directives towards curbing coronavirus, thus unable to raise any money as no school fees has been paid to the institution in the past six months.
Despite this, the bank had on June 8 , however, advertised the planned auction of the school’s property.
“The relationship between the Beyruha Academy Limited and the Gulf African Bank limited according to the principles governing the Diminishing Musharaka Property Finance, operate as a partnership between the borrowers and the lender,” the petition by Hassan Lakicha and Company advocates reads in part.
Islamic facilities
“The Gulf African Bank limited charged interest of 20 per cent going against the Islamic Shariah Banking,” it continues.
“Beyruha Academy Limited and Gulf African Bank Limited under the letters of offer and the charge document agreed that the facilities offered were to be Islamic facilities and governed under Sharia and hence Sharia –Compliant, that no interest was to be charged on the facilities,” it adds.
Under Islamic law, Musharaka refers to a joint partnership where two or more persons combine either their capital or labour, forming a business in which all partners share profit, according to a specific ratio while loss is shared according to the ratio of the contribution.
