Fidelity Commercial Bank Limited v Mahendrakumar Chandulal Shah & 3 others
The bottom line
#Kenya's Court of Appeal voided a bank's private-treaty sale of mortgaged land, ruling charged property must be sold by public auction through a licensed auctioneer.
What this practically means
#Executive summary
#Key legal issues
#Award of general damages of Kshs. 3 million to the Guarantors
The award was set aside because the Guarantors neither pleaded nor proved any damages and the trial court provided its remedy by nullifying the sale.
The Court restated the settled principle that general damages are not recoverable for breach of contract because such damages are quantifiable and not at large. Having nullified the sale, the trial court had already granted the Guarantors their remedy. The Guarantors did not plead or prove special damages and no basis for the Kshs. 3 million award was shown; the award therefore could not stand.
Deprivation of the Bank's contractual interest between the abortive auction and judgment
The trial court erred; that holding was set aside as an unwarranted re-writing of the contract raised suo motu without pleading or evidence.
The legal charge and guarantee expressly reserved interest to the Bank. The Judge's rationale - inequity, non-performing-loan guidelines - was raised by the court on its own motion, was not pleaded, canvassed or supported by evidence. The charge had been restored and the Bank's power of sale had accrued, so there was no basis to deny it contractually agreed interest.
Validity of the sale by private treaty and its knock-on transactions
The Judge's nullification of the sale and transfer, and of all subsequent dealings, was upheld.
Section 77(1) of the repealed Registered Land Act mandated sale by public auction through a licensed auctioneer. The auction having aborted for want of the reserve price, the Bank's subsequent private treaty sale to Aryan was a violation of the statute and no sale at all. Consequently every transaction founded on it, including the loan and charge over Aryan's property, was invalid.
Legal principles established
#- Under Section 77(1) of the repealed Registered Land Act, realisation of charged security in exercise of the statutory power of sale must be by public auction conducted by a licensed auctioneer; a sale by private treaty is a nullity.
- General damages are not awardable for breach of contract; where damages can be quantified they cease to be general, and an unpleaded, unproven award of general damages in a contract suit must be set aside.
- It is not the province of courts to re-write contract terms for parties, however onerous those terms may be to one of them; a court cannot deprive a chargee of contractually agreed interest absent a plea and evidence.
Court orders
#- 1.The award of general damages of Kshs. 3 million in favour of the 1st and 2nd respondents is set aside
- 2.The holding that the appellant is not entitled to charge interest for the period between the date of the abortive auction and the date of judgment of the High Court is set aside
- 3.The finding that there was never a valid sale to Aryan, and that all transactions on the title flowing from the invalid sale are null and void, is upheld
- 4.The Bank is awarded half costs of the appeal, payable by the 1st and 2nd respondents
- On appeal from
- High Court of Kenya at Mombasa
- Civil Case No. 212 of 2011 (consolidated with Civil Suit No. 130 of 2012)
- Jurisdiction invoked
- First appeal to the Court of Appeal under Rule 33 of the Court of Appeal Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Fidelity Commercial Bank Limited v Mahendrakumar Chandulal Shah & 3 others", Case Analysis (2025). Civil Appeal (Mombasa) - judgment delivered 21st November 2025. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2025/1943/eng@2025-11-21
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.