Troubled Uchumi Supermarkets has lost a court battle over a long-running land ownership dispute with the Kenya Defence Forces (KDF), dealing a blow to the retailer’s financial turnaround plans.
The High Court has allowed the military to take over a 17-acre prime parcel of land in Kasarani, near the Thika Superhighway, which had been central to the recovery of the retailer fighting off a winding up petition.
Uchumi had sold three acres of the 20 acres valued at Sh2.8 billion it had intended to dispose of in Kasarani.
The transaction was valued at Sh401 million leaving it with net proceeds of Sh351 million.
Justice Oguttu Mboya, in a ruling delivered on May 19, observed that the disputed property L.R No. 5875/2, which measures about 17.16 acres, was compulsorily acquired for use by the Department of Defence and that under the law, it means the military is the de-facto and de jure owner of the suit property.
“Flowing from the foregoing analysis, it is apparent that the plaintiffs (Kasarani Mall Ltd and Supermarkets Plc) herein have neither proved their claim to the requisite standard of proof,” he said.
“On the contrary, it is evident that the plaintiffs’ claim is devoid and bereft of merits.”
Kasarani Mall Ltd is a subsidiary of Uchumi Supermarkets through which the retail chain owns the land in question.
Consequently, the court ruled in favour of KDF.
“The plaintiffs’ suit be and is hereby dismissed (ii) The costs of the suit be and are hereby awarded to the first defendant (Defence PS) and the second interested party (KCB) only,” reads part of the ruling.
According to the ruling, the Attorney General and the Registrar of Titles were complicit in the issuance of the disputed certificate of title and that they were not entitled to any costs.
The court ruled that Sidhi Investments Ltd was not pleaded by the plaintiffs and merely sought a joinder to espouse a counterclaim and are not entitled to costs.
Sidhi Investments Ltd had sought to be enjoined in the case and sought various reliefs, including a declaration that it is the bona fide purchaser of the land and entitled to the disputed property.
The firm also sought an order to compel the Kasarani Mall to conclude the transaction in respect of the property and have it transferred to and in its favour.
“The counterclaim by the fifth defendant (Sidhi Investments Ltd) be and is hereby dismissed. Costs of the counterclaim be and are hereby awarded to the plaintiffs’ [defendants’ to the counterclaim] only,” the court ruled.
“For the avoidance of doubt and taking into account the provisions of Section 13[7] of the Environment and Land Court Act, 2011, the certificate of title in respect of L.R No. 5875/2 [the suit property] be and is hereby cancelled.”
The court ordered Kasarani Mall Ltd and Supermarkets Ltd and by extension, KCB and interested party to submit the said certificate of title for cancellation within 60 days.
“The charge vide memorandum of charge held by the second (KCB) interested party over the suit property, namely, L.R No. 5875/2 be and is hereby cancelled and/or nullified. Any other reliefs not expressly granted is hereby declined,” said the ruling.
Kasarani Mall and Supermarkets Plc had sought a declaration from the court that the trespass and/or occupation by the Kenya Defence Forces is illegal, the Ministry of Defence does not own the land, and the property belongs to Kasarani Mall Ltd and Supermarkets Plc.
Uchumi had bought the land in 2001 from Solio Construction Company Ltd for Sh85 million and the retailer has been banking on selling the land to turn around its dwindling fortunes.
The retailer had already signed a sale agreement with a church group Jewel Complex Ltd to buy the land for Sh2.8 billion.
The transaction with the church group suffered a setback after the High Court refused to strike out a case that Sidhi Investments had filed against Uchumi in 2005, claiming that the retailer reneged on a sale deal after receiving a 10 percent payment for the land.
Declining sales and rising amounts of debt had taken a toll on Uchumi’s financial health thereby limiting its ability to continue operating effectively as a going concern.
Uchumi and its creditors in 2020 passed a company voluntary agreement (CVA) plan that was aimed at restructuring the company’s debts and recapitalizing the business.
Under the agreement, a company makes a proposal to its creditors to offset debts and picks a supervisor for the plan. The CVA was to be financed with the sale of 20 acres of land in Kasarani for Sh2.8 billion but the row with the KDF over the ownership of the property forced it to draw a revised plan.
More than 21 suppliers and banks owned Sh4.2 billion, which would be settled under the CVA.
