Court of Appeal Overturns High Court Ruling in Notorious Bad Loan Case Between State Oil and Equity Bank

The Court of Appeal has overturned a High Court ruling by the Commercial Division in one of the most high-profile bad loan cases involving State Oil and Equity Bank. The initial ruling by the High Court, presided over by Judge Magoiga, had favored State Oil, which had borrowed $18 million (over TZS 45 billion) and subsequently refused to repay, seeking relief from the courts.

The appellate court, consisting of Justices Rehema Mkuye, Abraham Mwampashi, and Zainab Muruke, identified several procedural errors in the handling of the case by the Commercial Division of the High Court. The case, filed by State Oil, sought an order from the court to exempt the company from repaying the TZS 45 billion borrowed from Lamar of Dubai, which was guaranteed by Equity Bank.

In their judgment, a copy of which has been obtained by this publication, the judges exercised their legal authority to nullify the previous judgment and the entire case proceedings. They directed that the case be retried in the Commercial Division of the High Court, citing significant errors such as the failure to include Equity Bank of Kenya, a crucial party in the matter.

"The loan amount of USD 18,640,000.00 was issued by LAMAR to SOT (State Oil Tanzania) through an escrow account opened by EBK (Equity Bank Kenya) in its name. Subsequently, EBK settled all of SOT's debts to EBT and other banks. EBK also paid itself a commission of USD 372,800.00, USD 750,000.00 to NISK for advisory and brokerage services, and USD 74,560.00 to the Kenyan government as excise duty, leaving a remaining balance of USD 736,899.74 for SOT," the judgment reads.

This decision mandates a fresh hearing of the case in the Commercial Division of the High Court, ensuring that all relevant parties, including Equity Bank of Kenya, are properly included in the proceedings.