A legal battle over a Sh54 million loan, which triggered the forced sale of a prime 25-acre property worth Sh295 million in Karen, Nairobi, has been escalated to the Supreme Court, setting the stage for a landmark ruling on the powers banks hold in the sale of assets presented as collateral.

Nyanja Holdings, a company linked to former Limuru MP George Nyanja, is challenging a Court of Appeal decision that upheld the sale of its land despite findings that the loan had been overpaid and the auction process was flawed.

The company seeks to overturn the sale, arguing that illegal or irregular transactions should not confer valid ownership, leaving borrowers with only damages as recourse.

The dispute stems from a loan agreement with City Finance (now Kingdom Bank) in the early 1990s.

Borrowers claim they repaid over Sh54 million—far exceeding the initial Sh8 million overdraft limit—yet still lost multiple properties, including the Karen estate, through the bank’s statutory power of sale.

The land was later sold privately to Redmars Holdings for Sh60 million, a fraction of its alleged market value of Sh295 million, while litigation over the loan was still pending.

In January 2026, the Court of Appeal overturned a High Court ruling that had nullified the sale and restored the property to Nyanja Holdings.

The appellate court held that completed sales under a bank’s statutory power are irreversible unless buyer fraud is proven, restricting borrowers to compensation claims.

Dissatisfied, the borrowers have filed an urgent application to appeal to the Supreme Court, warning that Redmars could sell or subdivide the land before the case is heard.

Their lawyer, Dudley Ochiel, contends that the ruling exposes borrowers to unfair losses even when lenders act unlawfully.

“The court upheld the sale despite the loan being overpaid and the statutory power of sale being illegally exercised,” Mr Ochiel stated.

“This creates uncertainty in mortgage law, affecting lenders, borrowers, and property buyers alike.”

The case hinges on whether courts can invalidate bank sales tainted by illegality or procedural breaches, a question that has divided judicial opinion.

Nyanja Holdings argues that conflicting appellate rulings have muddled mortgage enforcement, necessitating the Supreme Court’s intervention.

However, Kingdom Bank opposes the appeal, insisting the law is settled. Jackson Kimathi, the bank’s legal head, maintains that borrowers cannot reclaim sold properties and must instead seek damages.

“The applicants have not shown exceptional circumstances to justify reopening this matter,” he argued in court filings.

At the heart of the dispute is a long-running legal question that has split courts, especially on whether an illegal or irregular sale of charged property can still confer a valid title to a buyer, leaving the borrower with damages as the only remedy.

The applicants argue that conflicting decisions by the Court of Appeal have created uncertainty in mortgage law, affecting lenders, borrowers, and property buyers.

They want the Supreme Court to determine whether courts can overturn such sales, especially where there are allegations of illegality, undervaluation, or procedural breaches.

“Due to the class interest in this matter, the prevalence of land securitization, and the jurisprudential split at the Court of Appeal, the issues in this appeal are prone to recur and will continually engage the workings of Kenyan courts,” says Mr Ochiel.

The Supreme Court’s decision, expected after hearings on April 21, 2026, could clarify the extent of buyer protections in bank sales and could reshape Kenya’s property lending landscape.

The ruling could also influence future disputes over alleged undervaluation and procedural breaches in secured transactions, setting a precedent for balancing borrower rights against the finality of commercial deals.

→ jwangui@ke.nationmedia.com

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