The chief executive officer of the fallen retail giant Nakumatt, Atul Shah, has withdrawn a suit challenging Bank of Africa from auctioning his personal property worth Sh2 billion over unpaid loans offered to the Supermarket chain.
Mr Shah, through his company Collogne Investments, last month quietly sought the nod of the Registrar of the Court of Appeal to withdraw the suit.
This paves the way for Bank of Africa to auction the prime property that three other banks, including KCB Group, are seeking to auction, setting stage for a fight among the lenders.
In August, Bank of Africa got the court’s nod to auction Mr Shah’s personal property over loans offered to the collapsed retailer, but the former Nakumatt boss blocked the sale at the Court of Appeal.
The Court of Appeal judges noted that parties in a suit are at liberty to withdraw their application.
“In those circumstances, and the respondents not having written to object to the request, we allow the informal application and order that the application be and is hereby marked as withdrawn with costs to the respondents,” Justices William Ouko, Asike Makhandandia and Fatuma Sichale said.
Nakumatt owes StanChart and DTB Bank a combined Sh4.5 billion and court documents show that they are also eyeing the Sh2 billion property.
The banks offered Nakumatt billions of shillings on the strength of the retail chain’s cash flow.
But Mr Shah used Collogne Investments, which owned the Sh2 billion property in Nairobi, as Nakumatt’s guarantor to offer additional comfort to the multiple bank loans.
The banks are racing to seize assets linked to Mr Shah and his family to recover the billions of shillings lent to Nakumatt.
Nakumatt closed shop in January with debts estimated at Sh30 billion — including Sh18 billion to suppliers, Sh4 billion to commercial paper holders and the rest to banks, who are more aggressive in pursuing their unpaid loans.
Regulatory filings indicate that Nakumatt owed DTB Bank Sh3.6 billion, Standard Chartered Sh900 million, KCB Sh1.9 billion, Bank of Africa Sh328 million, UBA Sh126 million and GT Bank Sh104 million.
Mr Shah says in court papers that some lenders offered Nakumatt loans with an eye on his properties, arguing that the banks were reluctant to support its rescue plan.
Creditors of the supermarket chain on January 7 voted to wind it up after it failed to repay debts following a failed rescue attempt.
After the vote, the banks started to identify properties and bank accounts linked to Mr Shah, especially outside Kenya, with a view to seizing and recovering the billions of shillings owed to them.
The local assets include shopping malls, office blocks and prime land in Nairobi, Mombasa and Nakuru — where Atul’s father started Nakumatt as a retail shop.
The properties are owned by third parties linked to the Shah family, which holds the bulk of Nakumatt shares, according to a document prepared by the retail chain’s court-appointed administrator.
The Directorate of Criminal Investigations’ Anti-Banking Fraud Unit is also investigating Nakumatt for alleged theft and money laundering.
In its heyday, the company, which began life as Nakuru Mattresses, had more than 60 outlets across Kenya, Uganda, Tanzania and Rwanda, before it was brought down by poor management and debt-fuelled rapid expansion.
However, its financial problems led to empty shelves and store closures that eventually culminated in the demise of the once leading supermarket chain.
Foreign investors could have helped to overhaul management and inject cash, but despite a swarm of suitors, no deal was made in the end.