Kenyan court clears KCB to auction Korara Highlands Tea Factory assets over debt

KENYA – The High Court of Kenya has allowed KCB Bank to proceed with the auction of assets belonging to Korara Highlands Tea Factory, a Kericho-based tea processor, over an outstanding debt exceeding Kes 1 billion (US$7.75M).  

The company, which produces the Cyrus Premium Tea brand, had sought to stop the sale, arguing it had secured a potential investor willing to buy the business in a deal valued at up to Kes 1.29 billion (US$10M). 

Korara and two of its directors, Titus Kigen and Victor Kipkosgei Kigen, asked the court to issue an injunction restraining KCB from exercising its statutory power of sale over seven properties charged as security for the loans.  

However, the court ruled that anticipated transactions could not override a lender’s accrued rights and dismissed the application. 

The dispute arose from credit facilities extended by KCB in June 2023, including an overdraft, term loan, asset-based finance and insurance premium finance. The facilities totalled Kes 128.1 million (US$993.02K) and Kes 345.5 million (US$2.67 million) and were secured by properties located in Kajiado and Kericho. 

Korara moved to court after KCB issued a statutory notice demanding Kes 281 million and showing an outstanding balance of more than Kes 1.05 billion as of March 6, 2025, followed by a redemption notice issued through auctioneers. 

The tea processor claimed it had continued servicing the loans and accused the bank of issuing defective statutory notices, charging “illegal, unconscionable, and usurious” interest, and frustrating a proposed sale to an investor valued at about US$10 million. 

Korara said the transaction would allow it to clear its debt and warned that auctioning the properties would cause irreparable harm. 

KCB opposed the application, stating that Korara had persistently defaulted despite repeated restructuring talks. The bank said all notices required under the Land Act were lawfully issued, served and acknowledged, and accused the borrower of using court action to delay recovery. 

In its ruling, the court found that Korara had failed to meet the legal threshold for an injunction. “It is not in dispute that the applicant obtained the loan facilities from the interested party (KCB) and charged the suit properties as security,” the court said. “It is equally not contested that the loan accounts are in arrears.” 

On the challenge to statutory notices, the judge ruled: “The court is not persuaded that the applicants have demonstrated any patent or fundamental non-compliance sufficient to invalidate the statutory power of sale.” 

The court also dismissed allegations of illegal interest, noting that Korara had not produced evidence. It added that disputes over loan accounts are compensable through damages and cannot stop a lender from realising its security. 

Rejecting claims of irreparable harm, the court said: “Once land is offered as security for commercial borrowing, it becomes a commodity for sale,” and added that “courts cannot rewrite contracts for parties or suspend contractual rights based on hoped-for future arrangements.” 

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