A court has denied the government and UBA Bank Kenya permission to take over and auction a property owned by Uchumi Supermarkets Ltd in Lang'ata, Nairobi to recover a combined debt of Sh1.3 billion after plans of compulsory acquisition by the military collapsed.
This comes even as it emerged that the Kenya Defence Forces had sought allocation of Sh6.6 billion to offset the retailer's debts tied to the property's title in order to unlock a smooth takeover of the 3.7 acre land and buildings for military use.
The land is at a strategic location being adjacent to Wilson Airport and the military-controlled Uhuru Gardens National Monument and Museum.
Justice Francis Gikonyo declined the applications and instead ordered Uchumi Supermarkets Ltd, its monitor and supervisor Owen Koimburi to furnish the court and all creditors with information and details on the status of the company and its affairs, assets, income, debts and payments made so far.
The judge also ordered them to provide information concerning any funding received since the appointment of a monitor and supervisor, creditors meetings, any Company Voluntary Arrangement (CVA) and the way forward. The CVA is to guide the compensation of creditors who are staring at major losses in the wake of the retailer’s collapse.
"This order is informed of the role of the court in insolvency laws and the averments by the company, UBA and National Treasury," said the judge in a decision dated May 26.
The judge also rejected arguments by the National Treasury that public interest lied in the government recovering its debt as it was a chargee of the subject property having advanced Uchumi a loan of Sh1.2 billion.
The once-giant retailer had used the land's title as collateral for the bank loan. Upon becoming insolvent other creditors, including the National Treasury, registered encumbrances on the land restricting its sale.
The government, through the National Treasury, together with the bank wanted the court to allow them exercise their statutory power of sale over all the land, known as LR.No.209/12593. The National Treasury had pleaded for an order of joint valuation of the property and appointment of a receiver of the income over the property while the bank asked for an express order allowing auction of the same.
The government is among creditors of the retailer and is owed Sh1.2 billion advanced in 2016 through approval of the Cabinet. The government, through the Cabinet Secretary to the Treasury, in 2017 also registered a charge against the land parcel.
For its part, UBA Bank is claiming Sh172 million debt and it also registered a charge on the land in March 2016. Another creditor whose debt was charged against the land is ICDC (now Kenya Development Corporation -KDC).
In its court filings, the Treasury stated that the Ministry of Defence had expressed interest in the acquisition of the suit property.
The National Treasury indicated acceptance to the proposal for the acquisition of the property by the military and had submitted to the National Lands Commission’s legal process.
The court heard that the Ministry of Defence had sought Sh6.614 billion to offset the outstanding encumbrances although the National Treasury had indicated that it was not in a position to provide additional funding due to the tight fiscal framework.
It had however advised the Defence Ministry to prioritize the proposed expenditure.
However, UBA bank Kenya informed the court that the process of compulsory acquisition of the land by the Military had collapsed, hence it was necessary for the court to allow the auction.
The planned forced sale by the financial lender had been suspended by Justice Alfred Mabeya on May 19 2022. The government had commenced the process of compulsorily acquiring the property for the Military.
In the renewed bid for the auction, the bank wanted the High Court to set aside the 2022 and allow the forced sale so that the lender can recover the debt.
UBA Head of Legal, Micky Matheka told court that the grounds for review of the ruling was that the Company Voluntary Arrangement (CVA) had not been implemented as per the court order and secondly, the compulsory acquisition process had collapsed. The court said the public interest will not be harmed by denying Treasury its wishes.
"There is no threat to the public interest intimated by the National Treasury given the consent between UBA and the company. Further, through the orders of February 27, 2025, this court set aside the ruling dated November 3, 2023 by Justice Mabeya which permitted UBA to exercise its statutory power of sale and enforce its security over the land. Completely eliminating the threat," said Justice Gikonyo.
He explained that the greatest danger lied in the uncertainty of the status of the company and its affairs, assets, income, debts, payments made so far and any funding received since the appointment of a monitor and supervisor.
"The risk of injecting more public funds in the company is a major concern to the public. Accordingly, the company, the monitor and supervisor shall within 30 days furnish the court and all creditors, information and details on the status of the company and its affairs," he ordered.
Uchumi director and chief executive officer, Lawrence Ngao, had opposed the intended auction stating that UBA had not obtained consent to sell the property from other secured creditors.
He said the value of the charged property was Sh1.4 billion as at 2018 as per a report by Clayton Valuers.
He said if the bank was allowed to sell the property at an open market value of Sh600 million and a forced sale value of Sh450 million, the property would have been sold at a loss and the funds from the sale would not be sufficient for the secured creditors.
