Equity Bank Kenya is contesting a case by tea exporter Swafi Foods that stopped its attempt to place the company under joint administration.
The bank has filed a notice of preliminary objection, seeking to have the lawsuit dismissed, arguing that the matter falls within an insolvency proceeding it already initiated.
Swafi Foods filed a suit against Equity, administrators Kamal Anatroy Bhatt and Jamal Kamal Bhatt, and Anant Bhatt LLP, claiming that the appointment notices were issued improperly.
Equity counters that all questions about the appointment of Kamal Anatroy Bhatt should be addressed in the ongoing insolvency petition, not in a separate case.
Following the lawsuit, the High Court temporarily halted the execution of the appointment notices, preventing administrators from taking control of the tea exporter’s operations.
Administrators Kamal Anatroy Bhatt, Jamal Kamal Bhatt and Anant Bhatt LLP insist that Swafi Foods is under administration and must indicate this status on all official documents.
Kamal Bhatt stated in an affidavit that Swafi Foods had created securities in favor of Equity Bank, including a $1 million (Sh130 million) debenture issued on March 2, 2018, and a $450,000 (Sh58.1 million) debenture in January 2020, both registered against all company assets.
“It was an express term of the debentures executed by both the company and the bank that in the event of default in repayment of the borrowed money, the bank would be entitled to exercise its rights under the debentures, including the right to appoint an administrator over all the assets of the company,” said Kamal in response to Swafi Foods’ claims.
Swafi Foods, however, maintains it has met all obligations on its loans and overdraft facilities, arguing that it has never defaulted.
The company said it entered financial arrangements with Equity on January 23, 2018, May 17, 2021, and June 29, 2022, secured by debentures and corporate guarantees.
According to Swafi, the loans were meant to fund working capital for buying, packaging, and exporting teas, with repayments drawn from revenue generated from exports. The company argues that the appointment notices were issued arbitrarily in August while its loans were still performing.
“The plaintiff avers that no event has arisen or occurred to warrant the appointment of administrators and no notices were issued in accordance with the law,” Swafi Foods stated in court documents.
