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Small ClaimsAllowedKitale SCC CC. No. E088 of 2024· [2024] SCC 19 (KLR)

Faulu Microfinance Bank Ltd v Akutu (Commercial Case E108 of 2024) [2024] SCC 19 (KLR)

Small Claims Court
30 September 2024
TOT.O. Omono
778 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~3 min to read original · ~4 min brief

The bottom line

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A Kitale court ruled a lender can recover Kshs 345,822 on a defaulted personal loan, confirming Kenya's in duplum rule caps interest but doesn't erase debts.

What this practically means

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Executive summary

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By a Statement of Claim dated 30th May 2024, the Claimant sought judgment of Kshs. 345,822.29/=, costs and interest, alleging that on 26th May 2021 it advanced the Respondent a personal loan facility of Kshs. 294,100/= at 20.53% per annum repayable within 84 months through monthly instalments of Kshs. 6,732.00/=. The loan became non-performing on 15th March 2024. Despite due service, the Respondent neither entered appearance nor filed a response, and the claim proceeded by formal proof. The sole issue framed was whether the Claimant had proved its claim to the required standard. Relying on the Personal Loans Verification Form dated 07th May 2021, the Loan Statement dated 23rd January 2024 and the Demand Letter dated 04th April 2024, all uncontroverted, the court found the facility and default proved. CW1 Fredrick Nyabuti, the Claimant's Legal Officer, testified that Kshs. 115,221.20/= had been repaid, with outstanding principal of Kshs. 275,590/= and interest of Kshs. 222,430/= at default. The court noted an internal inconsistency in those figures but applied the in duplum rule under Section 44A of the Banking Act, as explained in Mugure & 2 others v Higher Education Loans Board, computing a maximum allowable claim of Kshs. 551,180/=. Since the claim of Kshs. 345,822.29/= fell below that ceiling, the court held the claim did not offend the in duplum rule and entered judgment for Kshs. 345,822.29/= with interest at court rates from filing, assessed costs at Kshs. 30,000/=, and ordered decree and certificate of costs to issue.

Key legal issues

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01

Whether the Claimant proved the loan claim on formal proof

Holding

The court found that the Claimant advanced a personal loan of Kshs. 294,100/= which the Respondent defaulted in repaying

Reasoning

The Statement of Claim was supported by the Personal Loans Verification Form, the Loan Statement and the Demand Letter. With no contrary evidence from the Respondent, who did not enter appearance or file a response, the documents stood uncontroverted and proved the facility and the default.

p. 2
02

Whether the claimed amount offends the in duplum rule under Section 44A of the Banking Act

Holding

The claim of Kshs. 345,822.29/= is below the statutory maximum of Kshs. 551,180/= and therefore does not offend the in duplum rule

Reasoning

Section 44A of the Banking Act limits recovery on a non-performing loan to principal owing at default plus interest not exceeding that principal plus recovery expenses. The court computed the maximum allowable claim at Kshs. 551,180/=, which exceeds the Kshs. 345,822.29/= claimed.

p. 3

Legal principles established

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  • The in duplum rule applies to loans advanced by banks and other money lenders, capping recoverable interest on a non-performing loan at the principal owing when the loan becomes non-performing

Court orders

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  1. 1.Judgment is entered against the Respondent for the sum of Kshs. 345,822.29/=
  2. 2.The sum of Kshs. 345,822.29/= shall earn interest at court rate from the date of filing the claim until payment in full
  3. 3.The costs due to the Claimant are assessed at Kshs. 30,000/=
  4. 4.Decree and Certificate of Costs to issue forthwith
Jurisdiction invoked
Small Claims Court jurisdiction (Kitale SCC CC. No. E088 of 2024)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Faulu Microfinance Bank Ltd v Akutu (Commercial Case E108 of 2024) [2024] SCC 19 (KLR)", Case Analysis (2024). Kitale SCC CC. No. E088 of 2024. Source: https://new.kenyalaw.org/akn/ke/judgment/scc/2024/19/eng@2024-09-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.