ABC Bank has been given the green light by the High Court to recover Sh36 million from three directors of City Gas Limited, a liquefied petroleum gas company that defaulted on a loan despite partial recovery from auctioned property.

In a ruling delivered by Justice Rhoda Rutto, the court found that the directors—Mohamed Adan Bare, Hamdi Abdi Nur, and Abdikadir Abdi Sheikh—had validly signed as guarantors of a Sh30 million facility extended to the company in 2012, and were therefore liable for the unpaid balance.

The loan was secured using a title deed belonging to Bare, and all three directors provided personal guarantees for its repayment.

However, after the company defaulted, the bank sold the land through a private arrangement in 2016 for Sh16.5 million, leaving a shortfall.

The court noted that the sale was conducted with Bare’s consent and at his request.

Justice Rutto ruled that the personal guarantees signed by the directors were binding and enforceable, allowing the bank to proceed with efforts to recover the outstanding amount directly from them.

“Based on the pleadings, evidence, and submissions, the court finds that the Deeds of Guarantee executed by the three defendants constitute valid and enforceable continuing security for the outstanding liabilities of City Gas Limited,” said the judge.

She held that the guarantees provided ongoing cover for the company’s obligations until the debt was fully settled or the guarantees were properly terminated.

While the directors contested the validity of the guarantees, the judge said their challenge lacked solid legal footing. She observed that the trio had only made general denials without presenting clear arguments or evidence to disprove the enforceability of the agreements.

“They failed to plead specific grounds of invalidity or present substantive evidence beyond the issue of late stamping and whether they were of a continuing nature upon restructure of the initial loan. This court finds that the guarantees were duly executed and produced in evidence and are valid and enforceable,” said Justice Rutto.

The court also pointed out that the directors’ defence failed to highlight or explain any concrete inaccuracies in the bank’s statements, weakening their position further.

With this decision, ABC Bank now has the legal backing to pursue the directors individually for the balance of the loan that remained unpaid after the land sale, marking a significant step in the bank’s efforts to recover the full amount.