Chaponda sues FDH bank over breach of loan contract: Malawi court reinstates injunction

Blantyre-based businessman, Richard Chaponda has dragged to court FDH Bank for breaching loan contract and the High Court has since reinstated an injunction that was vacated last month restraining the commercial bank from confiscating and selling property used as surety in the loan deal amounting to K224.3 million.

On Thursday (12th March, 2015) Justice Rowland Mbvundula reinstated the injunction Justice Dunstan Mwaungulu had vacated on 10th February, 2015, allowing Chaponda to proceed with his case in which he is accusing the bank of breach loan contract and acting unprofessionally when trying to realize his property- a house, private secondary school and a Hotel.

FDH Bank wants to realize and sell Chaponda’s property for allegedly defaulting loan repayment, arguing the mortgagor has been failing to repay the K224.3 million loan facility approved in March 2012.

The bank changed the repayment period of approved loan from the agreed 120 months (10 years) to one year and some months after the mortgagor had refused to provide additional security.

Case File

According to documents filed at the court and correspondences between the two parties which Nyasa Times has obtained, Chaponda was persuaded to obtain a loan facility of K188 million from FDH Bank in January 2012 after the bank had offered to repay on his behalf another loan he had obtained from Standard Bank.

FDH Bank persuaded Chaponda to obtain the loan after seeing that the project, Dika hotel, which he was constructing was viable business and offered a ‘tempting’ repayment condition of 120 months (10 years from 2012-2022).

Chaponda only accessed 50 percent of the K188 million approved loan and the other 50 percent was withdrawn from his personal and business accounts held at FDH Bank Limbe branch by the bank as loan repayment.

In February, 2012 Chaponda applied for additional loan of K36, 280,000.00 which the bank approved on 9^th March and was added to the earlier existing loan, increasing the facility to K224, 298, 288. 43.

And based on Mortgage arrangement, Chaponda was to repay the K224.3 million in 120 equal monthly installments amounting to K4, 712, 772. 63. The loan facility was to expire on 8th February, 2022.

However, Chaponda was denied to fully access the approved mortgage facility after he refused to provide his Rose Garden Private Schools, which the bank had identified, as additional security.

In one of the letters from the bank dated May 25th, 2012, signed by Head of Corporate Banking Chaponda was told could only access his mortgage facility of K224.3 million if he provided the private school as additional security, and was accused of not repaying the loan.

“You have an approved mortgage of K224.3 million which you have not fully drawn. One of the conditions for drawdown on this facility is that you provide additional security i.e. Rose Garden Schools. Please note that once you provide the security you will be allowed to draw from your account,” reads the letter in part.

In the letter, the bank argued that the loan repayments were not on schedule and that the loan has accrued K8, 706,742.34 in arrears as of May 2012.

But Chaponda dismissed the bank’s claims, arguing he has been repaying the loan, accusing the bank of being unprofessional in the manner it has been handling the loan issue.

Chaponda said was perplexed by the bank’s decision to change the loan repayment period from 10 years to one year and some months on accusations that he was defaulting repayments, adding the bank was wrong to demand repayment of K224.3 million when it actually refused him to ‘fully access’ the loan facility, especially the K36, 280,000.00 additional loan.

“If truth be told I have never refused nor defaulted repayment of the said loan as per bank statements from FDH Limbe branch and 5 cheques amounting to K10 million from International Commercial Bank in your custody,” argues Chaponda in one of the letters copied to Reserve Bank of Malawi, Anti-Corruption Bureau, Financial Intelligence Unit and Malawi police.

He argued that the bank’s behavior by advertising the sale of his property in newspapers affected his business, adding: “I made my position very clear in writing that I shall continue to repayment of the loan as per conditions agreed and upon surrender of my house property title deed currently illegally under your custody.”

Two weeks ago the bank officials stormed Chaponda’s Dika Hotel demanding employees to evacuate the premises as they wanted to evaluate the property to facilitate disposal. And the reinstated injunction means FDH Bank cannot proceed with its plans of realizing and evaluating Chaponda’s property before it is up for sale until the judicial review on the matter is concluded.

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