The National Bank of Kenya(NBK) is set to face difficult times ahead as the court of appeal has ordered the lender to pay former Taita Taveta legislator Basil Criticos Kshs2.2 billion for illegally auctioning his farm more than a decade ago.

Three judges from the appellate court came to this decision after establishing that the parcel of land approximately 15,994.5 acres in Taita Taveta was unlawfully auctioned in 2007 after the MP defaulted on a loan.

Justices Roselyn Nambuye, Wanjiru Karanja, and Patrick Kiage said that the bank undervalued the parcel of land by selling it at Kshs 55 million given that there were buildings, sisal, quarry, and road network on the land, and rushed to dispose of it to recover Kshs 20 million that the former legislator is said to have owed the bank.

This was not in consideration of the value of the crop plantation and the infrastructure on the land, which hence should have bumped the price of the farm.

“In the result, subject to what we shall shortly state with regard to the crops, we find the appellant's valuation report to be solid in content and uncontroverted. It was not to be merely wished away. And we are on balance persuaded by the appellant’s contention that the suit property was sold at an undervalue,” the judges said.

"Damages of Ksh2,284,101,000 for the unauthorized, improper and irregular sale assessed at the market value of property LRNo 5865/2 together with interest at court rates thereon from the date of this judgment until payment in full," directed the three-judge bench.

This spells doom for the bank, as it has been facing a dip in its profits recording a net income of only Kshs1.1 billion by December 2021. Despite the acquisition by the KCB Group, it will still be difficult to pay back the landowner as billions of funds received from the bank are channeled into the recapitalization of the lender.

Further, the court ordered that the legislator be paid the surplus Kshs35 million made from the sale of the land and dismissed any other liabilities from the loan.

The court also found that the bank conducted the auction illegally as it did not have any jurisdiction, as it noted that Criticos had obtained temporary conservatory orders barring the auction.

"The defendant did not have any legal right to exercise the statutory power of the sale in respect of the land and that the agreement for sale and transfer dated September 5, 2007, was executed in contempt of injunctive orders issued in Milimani HCCC N. 270 of 2007," the ruling read in part.

Criticos had acquired the Kshs 20 million loan in 1991 and was put down as the guarantor by the Kenya National Capital Corporation, a subsidiary of NBK. After six years, the bank started demanding Kshs 66.5 million with an accrued interest at a rate of 35 percent per month and was given three months to repay the loan.

He was given three months to repay the amount, but his efforts to sell the land and offset the loan were frustrated by several court cases. It was then that he sought an injunction to block the auction but the bank moved forward with it.

The bank then sold the land to Settlement Fund Trustees (SFT) for Kshs 55 million while the case was pending in court. The bank also demanded a further Kshs 106 million from Criticos.

The judges hence faulted the bank for charging Criticos what they termed excessive interest rates at a rate of 35 percent per month, declining his offers to redeem the debt, and then proceeding to sell the property at less than the amount he offered, especially after giving him a short repayment period which made it impossible to pay back the loan.

“Our foregoing analysis leads to the inescapable conclusion that the appellant was treated by the respondents in a shabby and wholly unacceptable, if not tyrannous, the manner of the entire transaction,” the judges said.