The Supreme Court of Kenya is set to deliver a ruling on whether to suspend ongoing proceedings at the High Court in a high-stakes dispute involving Standard Chartered Financial Services Limited and companies owned by business mogul Mohan Galot. At the heart of the matter is a claim for Sh33 billion in damages, which Galot’s companies are seeking from Standard Chartered, stemming from a loan advanced in the 1980s.
Standard Chartered, represented by senior counsel George Oraro, has argued for a suspension of the High Court proceedings, citing the significant financial implications of the damages sought. The bank contends that the Sh33 billion claim is so substantial that it could severely impact any financial institution operating in Kenya, including Standard Chartered. The lender has emphasized that a suspension would allow it to pursue an appeal at the Supreme Court, arguing that the assessment of such colossal damages could destabilize its financial stability.
“The Sh33 billion is so colossal that it would draw any financial institution in Kenya and certainly any enterprise to its knees,” stated Oraro on behalf of Standard Chartered. He further noted that the suspension is crucial to prevent the finalization of the damages assessment, which commenced in October 2023 and was set to conclude on June 3, 2024. The bank fears that without a stay, the High Court might proceed to judgment and execution, potentially causing irreversible financial harm.
However, Galot, through his lawyer Philip Nyachoti, has opposed the suspension request, arguing that the damages have not yet been determined and that the mere possibility of a high damages award should not be grounds to halt the proceedings. Nyachoti contends that it is only fair for the assessment to continue as planned, given the lengthy duration the dispute has already taken in court.
“The figure, which has not been ascertained, should not be a ground to seek a stay of proceedings in the High Court case,” Nyachoti argued, adding that the bank had not demonstrated any significant loss it would suffer if the assessment proceeded as scheduled. He also accused Standard Chartered of acting in bad faith, suggesting that the application for suspension was a tactic to delay and further prolong the resolution of the dispute, which has been ongoing for decades.
The conflict dates back to March 1982 when King Woolen Mills Limited, previously known as Manchester Outfitters Ltd, borrowed a loan of 1,300,000 Deutsche Marks and 1,050,000 Swiss Francs from Standard Chartered. The loan was secured against property belonging to Galot Industries Ltd., another company owned by Galot. According to Standard Chartered, the companies defaulted on their repayments, forcing the lender to appoint receiver managers—a move Galot challenged in court, alleging bad faith and mismanagement by the appointed receivers.
Galot’s legal team has argued that the appointment of receiver managers led to the closure of the company’s business in Athi River and caused substantial losses in machinery and raw materials. They maintain that once the Euro currency loan was localized, it superseded all previous agreements, including a prior debenture from April 1982, under which the bank had appointed the receivers.
In December 2022, the matter was remitted to the High Court for the assessment of damages. Galot claims that Standard Chartered’s current appeal to the Supreme Court is an attempt to frustrate his companies from realizing the benefits of the previous judgment. Nyachoti has urged the court to dismiss the bank’s application, arguing that the prolonged litigation should finally come to a conclusion.
As the Supreme Court prepares to rule on whether to suspend the High Court proceedings, its decision will have significant implications for how financial institutions manage high-value disputes and discharge securities tied to loans. Both sides await the outcome, which could set a precedent for future financial litigation in Kenya.
