The Commercial Bank of Africa Limited (CBA) is set to appeal a ruling regarding a court case that has seen three Kenyan banks entangled in a land title fraud initiated by their mutual customers.
“[CBA, Equity Bank, and Co-operative Bank] are staring at a possibility of losing hundreds of millions of shillings of customer funds. The syndicate, we are told, has also hit other banks in the country, and it is perplexing that none of the perpetrators has been subjected to the criminal process,” CBA’s appeal application reads.
The Conspiracy
The perpetrators, Patrick Njuguna, Edward Njuguna, George James Kireru Kangethe, Gladys Njeri Kangethe, and Margaret Wambui Kangethe, used three original titles of the same piece of land (land parcel No. Dagoretti/Riruta/2289) to obtain three different loans from the three banks. They also used different companies to acquire the loans.
The first loan of Sh160 million was received from Co-op Bank in 2010, the second loan of about Sh100 million was borrowed from CBA in 2013, and the third loan of Sh200 million was obtained from Equity in 2014. The borrowers did not repay any of the three loans.
Each time the loans were given, due process was carried out including obtaining searches for the land used as collateral and registering a legal charge against the title deed. The banks also retained the original documents of the land.
According to the trial court, “all the loans that were advanced on the security of plot 2289 were advanced to people who knew each other or were related and were working together in pursuit of the said loans.”
The Ruling
Co-op Bank initiated the sale of the land in 2016 to recover its funds when the loan was not repaid. Consequently, Patrick, Edward, and George attempted to block the sale through an injunction but failed. As a result, the sale of the land was re-advertised.
At this point, the other two banks discovered that the land which was acting as a collateral against the loans they had disbursed was being sold. In response, the two banks went to court in order to prevent Co-op Bank from selling the land.
However, the court ruled in favour of Co-op Bank as follows:
“Having carefully considered the evidence before me, I am not persuaded that Commercial Bank and Equity have a prima facie case with a probability of success against Coop Bank. I am unable to see any reason why Coop Bank should be stopped or delayed from exercising its statutory power of sale which has arisen. […] there is a high likelihood that the persons mentioned above fraudulently with collusion of the Land Registrar created parallel title deeds for the suit property which they used to defraud Commercial Bank and Equity of hundreds of millions of shillings, there is no evidence that the transaction between Coop Bank and Patrick Njuguna was affected by the alleged fraud or that Coop Bank was involved.”
The Appeal
CBA has now filed an injunction preventing any of the involved persons, banks, and companies from selling the land as it waits for the hearing and ruling of the appeal it intends to make.
CBA’s appeal will be based on the argument that it deserved the same protection as Co-op Bank. Additionally, CBA is of the opinion that the ruling that Co-op’s charge was first in time is wrong because all three charges held by the three banks were based on three different original titles.
CBA hopes to get have its injunction granted so that its intended appeal can be successful. According to the bank’s counsel Mr William Kibaiku, all three banks “should have an equal opportunity of mitigating the possible loss.”
