The owners of Nairobi’s 14 Riverside complex, which houses the DusitD2 hotel, have filed a fresh petition that seeks to stop hire purchase lender Synergy Industrial Credit from enforcing a Sh10.6 billion debt linked to an arbitration award.
Cape Holdings is also asking the High Court to declare part of the Banking Act that excludes judgment debtors from protection against runaway interest as unconstitutional, and to determine whether compound interest could lawfully accrue when the arbitral award had been set aside.
The petition stems from a 2015 arbitrator's decision ordering Cape Holdings to pay Synergy Industrial Credit Sh1.6 billion, plus compound interest at 18 percent annually until payment in full, following a failed property transaction.
The High Court had set aside the arbitral award in 2016, but the Court of Appeal reinstated it in 2020, paving the way for Synergy's Sh10.6 billion claim.
The new petition also asks the court to determine whether enforcing the debt in its current form disproportionately breaches constitutional property rights and whether interest continued to accrue despite there being no enforceable arbitral award between 2016 and 2020.
The outcome of the petition could extend beyond the high-profile property dispute by reshaping how courts treat judgment debts, compound interest and the enforcement of arbitral awards.
Cape Holdings, together with its directors Vinay Bipinchandra Sanghrajka and Bipinchandra Bhaichand Sanghrajka, filed the petition against Synergy Industrial Credit and the Attorney-General. The directors are concerned because Synergy intends to auction part of their personal properties in recovery of the debt.
Jaysukhlal Bhaichand Sanghrajka has been joined as an interested party because he jointly owns one of the properties affected by the enforcement proceedings.
The petition argues that the current decretal sum of Sh10.68 billion includes about Sh9.01 billion in compound interest. It contends that interest was wrongly charged between March 11, 2016 and November 6, 2020, when the arbitral award had been set aside by the High Court and was therefore incapable of enforcement.
"The Petitioners’ central complaint is that the decretal sum as currently computed and escalating daily purely on account of interest has led to grave, disproportionate, and an unlawful violation of several of the petitioners’ constitutional rights as specified in the petition," says the advocates of Cape Holdings.
Cape Holdings also challenges Section 44A (4) of the Banking Act, which excludes judgment debtors from the protection of the in duplum principle.
The company argues the exclusion discriminates against judgment debtors and violates constitutional guarantees on equality and protection of property.
The petition further claims enforcement has gone beyond the company's assets after Synergy obtained prohibitory orders over property jointly owned by the two directors and the interested party in Nairobi's Spring Valley. It says they have been locked out of the property.
In court papers, Cape says the escalating debt now threatens its Riverside Drive property and raises broader constitutional questions about proportionality, fairness and the limits of debt recovery. The building complex is facing an auction and a separate litigation over the intended sale.
"This case raises several issues that we believe are of significant public interest," Cape Holdings said.
Most pertinent is the question of whether the legal protection that stops interest from spiralling out of control should extend to all claims for money due, including those enforced through court orders.
The company added: "We fully acknowledge our legal obligations, but the sum being enforced raises serious questions of proportionality and fairness that no court has ever determined on the merits."
The case is scheduled for directions on June 29, and Cape Holdings wants the case heard on a priority basis.
The dispute traces its roots to a failed agreement for Synergy to buy one block in the 14 Riverside development.
An arbitrator awarded Synergy Sh1.6 billion plus compound interest in January 2015.
Although the High Court initially set aside the award in 2016, the Court of Appeal reinstated it in November 2020 after proceedings that reached the Supreme Court, triggering years of enforcement litigation over the landmark property.
The petitioners' advocates want the court to determine three novel constitutional questions arising from the enforcement of the decree.
They want the court to decide whether interest could lawfully accrue while the arbitral award had been set aside, whether Section 44A(4) of the Banking Act unconstitutionally excludes judgment debtors from the in duplum rule, and whether enforcing the Sh10.6 billion debt disproportionately limits the petitioners' constitutional property rights.
