Abdikadir Arab Mohamud & another v First Community Bank Limited
The bottom line
#If you owe money on secured property, the bank can sell it, but they must follow strict land sale rules and protect innocent third-party buyers.
What this practically means
#Executive summary
#Key legal issues
#Whether the First Community Bank Sharia Supervisory Board opinion constituted a binding arbitral award
It was not an arbitral award; at most it was an agreement to restructure debt repayment, which cannot override the valid charge and mortgage contracts
The court found no arbitration agreement, no appointment of an arbitral tribunal, no rules of arbitration, and no statement of claim as required by Sections 4(2), 12, 20, 24 and 26(1) of the Arbitration Act 1995. The SSB's own mandate was to determine each party's share in the project to enable remedial steps. Hence the opinion merely restructured repayment and did not extinguish the debt or vitiate the charge.
Whether the plaintiffs established a prima facie case for an injunction
No - the plaintiffs admitted receipt of loan facilities and did not produce documents showing repayment or rent remittances offsetting the debt
The contracts (indenture of conveyance, letter of offer, mortgage and further charge) were uncontested. The plaintiffs admitted financial challenges in 2014 and did not contest receipt of funds. No payment documents were produced; the 10 units sold to third parties were not remitted to offset the loan. The debt stood at Ksh 100,033,202.83 as at 24th April 2018.
Protection of third-party purchasers' interests in the charged property
The statutory power of sale must exclude the ten flats purchased by bona fide purchasers who were not served with statutory notice
The third parties were bona fide purchasers for value without notice of defective title with proprietary interests to be protected; they cannot be condemned unheard. They were not served with the statutory notice under Section 96(3) Land Act, whose object is that persons with an interest in the charged property have notice of the intended sale.
Legal principles established
#- A Sharia Supervisory Board advisory opinion restructuring a debt is not an arbitral award under the Arbitration Act and cannot subrogate valid charge and mortgage contracts
- A secured creditor may exercise statutory power of sale upon default and failure of redemption, subject to compliance with the Land Act and Auctioneers Rules
- Third-party purchasers of portions of charged property who were not served with statutory notice under Section 96(3) Land Act must have their proprietary interests protected before sale
Court orders
#- 1.Declaration that the plaintiffs/Applicants have not established prima facie case to warrant grant of temporary injunction to stop the sale of the suit property LR 36/11/318
- 2.Dismissal of the application of 18th April 2018 with costs to the Respondent
- 3.The Defendant may exercise statutory power of sale over the suit property 36/11/318 except the 3rd parties' interests, subject to: parties meeting within 30 days to agree on the debt due; the Defendant providing a Comprehensive Statement of Accounts; and compliance with Sections 90, 96 & 97 of the Land Act and Rule 15 of the Auctioneers Rules
- 4.The statutory power of sale shall exclude Flats numbers 101,201,104,202,301,304,403,303,301 & 302 purchased by 3rd Parties bona fide purchasers who were not served with statutory notice or heard
- 5.The interim injunction granted on 20th April 2018 and extended by Consent on 23rd April 2019 shall vacate after 30 days on the rest of the suit property save for the flats held by 3rd Parties bona fide purchasers
- Jurisdiction invoked
- Original civil jurisdiction of the High Court over mortgage/charge dispute (Civil Procedure Rules, Order 8 Rule 1(1) amended plaint)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Abdikadir Arab Mohamud & another v First Community Bank Limited", Case Analysis (2020). . Source:
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.