Court Upholds DTB’s Right to Recover Debt Through Auction of Tuskys Property

The High Court has ruled in favor of Diamond Trust Bank (DTB) Kenya, allowing it to auction Tusker Mattresses Limited’s 2.49-acre property in Athi River to recover a Sh320 million loan. The property was part of the security pledged by Tuskys to secure loans exceeding Sh2.5 billion before the supermarket chain went under in 2020.

Justice ruled that the liquidation process does not prevent a secured creditor from exercising its statutory right to sell charged property, as long as it follows proper legal procedures. The court emphasized that DTB, being a secured creditor, holds priority over the asset and may proceed with the sale unless a specific court order stops it.

The interim liquidator had opposed the bank’s move, insisting that any sale without court authorization would interfere with the liquidation process and breach the court’s supervisory powers. The liquidator referred to a May 2023 order that halted dealings with Tuskys’ assets and warned that the sale could undermine ongoing forensic audits meant to establish the retailer’s actual financial position.

In its ruling, however, the court dismissed those concerns, stating that Kenyan law “expressly recognizes” the rights of secured creditors to recover debts independently of the insolvency process. It reaffirmed that a bank’s statutory power of sale stands outside collective insolvency proceedings and cannot be blocked without valid legal grounds.

The ruling effectively clears DTB to proceed with the auction, marking a significant milestone in the lender’s efforts to recover part of the massive debts owed by the collapsed retail chain.