A businessman and his company intend to appeal at the Court of Appeal a ruling by the High Court striking out their petition which sought to restrain Premier Bank Ltd from selling by public auction or interfering with properties charged to a KES 631.5 million loan.
Through a Notice of Appeal filed in court, Mr Ibrahim Mahadi, an oil and gas businessman and his company Mahadi Energy Limited say that being dissatisfied with the ruling, intend to appeal.
“Take notice that the petitioners, being dissatisfied with the ruling delivered on June 26, 2026, intend to appeal against the whole ruling,” part of the Notice of Appeal states.
In its ruling, the High Court struck out the petition by Mr Mahadi and his company saying that as long as their (petitioners) property rights are traceable to a contract, those rights can only be enforced as between the parties to the contract through an ordinary suit and not by way of a constitutional petition.
The court ruled that although the petitioners had argued that the gravamen of their petition was “constitutionality of Islamic banking in Kenya” it (court) could not ignore the fact that they (petitioners) and the bank were in a contractual relationship.
“There is no doubt from the pleadings that although the prayers for reliefs that would ordinarily be sought in a constitutional petition have been thrown into the petition, it is not difficult to see what the petitioners are seeking is what they would have sought in a civil commercial dispute,” the court ruled.
The court, noted in its ruling, that there was a contract or several contracts between the petitioners and the bank and which for all intents and purposes were the basis upon which the petition was founded.
In their petition, Mr Mahadi and his company also wanted an order issued, pending hearing and determination of the case, directing the Central Bank of Kenya (CBK) to produce in court the authority in law under which Premier Bank (formerly First Community Bank) is undertaking Islamic banking business in the country.
They argued that the Islamic banking model is contra the provisions of the Banking Act which prohibit a bank from trading and acquiring property, puts a cap on the interest that a bank can charge and the in-duplum rule which puts a cap on what the bank can recover.
The petitioners claimed that from 2011 to 2017, Premier Bank advanced to it the loan which were in the nature of murabaha and musharakah concepts of financing that follow the Islamic Law.
According to the petitioners, the loans were secured through charges on their properties and that they (petitioners) substantially settled the loan.
They argued that despite making payments, they were not reflected in the statements received from the bank.
The petitioners had claimed that sometime in 2020, the bank compelled the company and its sister companies to sign a deed of settlement for alleged credit facilities which were never advanced but which the bank seeks to recover.
“The deed of the settlement the petitioner aver are in violation of the constitution as the first respondent (bank) did not advance any monies on account of the deed settlement to entitle the bank to exercise a statutory power of sale,” part of the case documents stated.
The petitioners wanted a declaration that banks operating in the country cannot offer Islamic banking facilities until a legal framework is set by law regulating the manner in which such facilities are to operate and the calculation of profits.
They also wanted a declaration that CBK had violated the constitution by allowing Premier Bank to operate Islamic banking business in the country without statutory framework or regulations guiding such operations.
The petitioners also sought a declaration that banks offering Islamic banking facilities shall be obligated by law to file a case in court to obtain a decree before commencement of the process of sale of the security whether immovable or movable for any loans already given.
They also wanted an order issued directing the Attorney General and the Kenya Bankers Association to take steps to ensure that a statutory/regulatory framework is put in place to regulate the manner in which the operations or lending is to be undertaken by banks offering Islamic banking facilities.
The court had directed parties to address it, as a preliminary point, why the case was filed as a constitutional petition rather than an ordinary suit before it delivered the ruling.
