The High Court of Kenya has ruled in favor of Mauritius Commercial Bank (MCB), allowing it to recover a $6.5 million (Sh841.7 million) debt from Jade Petroleum Limited, a Kenyan petroleum company. The court found that MCB had paid the money to South Africa's FirstRand Bank on behalf of Jade Petroleum when it called guarantees issued to secure the debt. The dispute, which has lasted for over a decade, is linked to the collapse of Imperial Bank.
Imperial Bank, Jade's banker and intermediary, collapsed into receivership on October 13, 2015, after suspected fraud and misrepresented financial statements were discovered. The court, however, ruled that the bank's receivership did not extinguish Jade's debt to MCB. The judge stated that Imperial Bank was only an intermediary and that its collapse did not make Jade's repayment obligation impossible or radically different.
The financing arrangement began in June 2007, when FirstRand, through Rand Merchant Bank (RMB), extended facilities worth $10 million (Sh1.29 billion) to Jade, later increased to $14 million (Sh1.81 billion). In 2009, FirstRand required additional security, leading MCB to issue five standby letters of credit worth $6.5 million for Jade's obligations. When Imperial Bank's receivership was announced, FirstRand demanded repayment or extension of the guarantees, which Jade claimed it could not fulfill due to liquidity constraints.
In November 2015, FirstRand declared an event of default and demanded immediate repayment. Jade did not pay, prompting FirstRand to call the MCB guarantees. MCB paid FirstRand $6.5 million between December 4 and 31, 2015, and later sued Jade and three guarantors – Pankaj Vrajlal Vallabh Somaia, Amar Mahendra Chandra Pandya, and Raj Harikrishna Mohanlal Devani – in June 2016. The court ultimately ruled in favor of MCB, finding that Jade had defaulted on its loan.
The court rejected Jade's argument that Imperial Bank's receivership had frustrated the financing arrangement and that a 2010 amendment had materially changed the facility. The judge also found that the 2010 second amendment of the facility was not proved to be unconscionable or void for duress, as Jade continued to utilize the facility on the amended terms for several years.
However, the court dismissed MCB's claim against the three guarantors, citing a lack of evidence that demand letters had been dispatched or served. The court entered judgment against Jade alone for $6.5 million, with interest awarded at LIBOR plus 3.5 percent until filing, then 14 percent until payment.
The judgment, delivered on September 17, 2026, brings to an end a lengthy dispute involving Jade Petroleum, Imperial Bank, FirstRand's Rand Merchant Bank, and Mauritius Commercial Bank. The case highlights the complexities of international financing arrangements and the importance of clear contractual terms in such transactions.
Key points
- The High Court of Kenya has ruled in favor of Mauritius Commercial Bank, allowing it to recover a $6.5 million debt from Jade Petroleum Limited.
- The dispute, which lasted over a decade, was linked to the collapse of Imperial Bank and involved complex financing arrangements between Jade, Imperial Bank, FirstRand, and MCB.
- The court dismissed MCB's claim against three guarantors due to lack of evidence that demand letters had been dispatched or served.
