The Grand Regency Hotel is unable to operate after a former receiver transferred Sh150 million to the Central Bank, it was claimed yesterday.

Lawyer Patrick Lubanga Mutuli, for Uhuru Highway Development Limited and businessman Kamlesh Pattni, told High Court Judge Johnstone Mitey that Mr Joseph Kittony transferred the money to the Central Bank of Kenya in defiance of a court order when he ceased being the hotel's receiver. The lawyer says Mr Kittony colluded with the CBK in making the transfer.

Mr Mutuli was making submissions in an application seeking to have the court order that CBK returns the money to the hotel. Mr Justice Mitey certified the suit as urgent and further directed that it be heard on June 16 before Mr Justice Samuel Oguk, who last May 11 granted leave for the court to appoint a receiver.

"On April 21, the court made orders terminating the services of Mr Kittony as the receiver and it stopped him from acting as receiver and also put him out of possession of any movable property of the Grand Regency Hotel.

"Later on April 29, the third defendant, Mr Kittony, purported to transfer Sh150 million to the CBK. It is the current receiver's case that the transfer was unlawful and illegal, and calculated to defeat orders of this court and embarrass the current receiver, Mr Popangipalli Venkata Ramana Rao," Mr Mutuli told the judge.

He added that the money Mr Kittony paid out to CBK was for certain projects and formed the working capital of the hotel. He recalled that the former receiver had approved the scheme but now the hotel was unable to operate as a first class establishment.

The lawyer produced an affidavit sworn by the new receiver, who recalls that he was appointed to replace a Mr Abdul Zahir Sheikh as the hotel receiver following a court order, and took up duty last May 11.

"Upon my taking up my duties at the hotel, I was informed by my financial controller that on April 29, a very substantial transfer of funds amounting to Sh150 million, property of the hotel, had been made by the third defendant, Mr Joseph Kittony, to the Central Bank of Kenya after Mr Kittony ceased to be the Receiver of Grand Regency Hotel," Mr Rao states.

He adds that the payments were made from funds held by the hotel in two Certificates of Deposit. These were under receipt number 157733 for Sh26,207,133/30 and number 157789 for Sh90,685,822/10. The other payments for Sh40 million on face value was in form of Treasury Bills CDS in account number 09-30-00725-3, he explained.

"I have perused with due diligence report prepared by Mr Sheikh exhibited to his May 5 affidavit. I confirm that the business of the Grand Regency Hotel does have a negative cash-flow which will be exacerbated unless the sums transferred out of the hotel's account are returned forthwith," Mr Rao says in his affidavit.

He has also attached several letters exchanged between different lawyers, the Central Bank of Kenya and the hotel.

He then says that having failed to receive any substantive response from the CBK over his concern regarding the projects and capital equipment purchases put in hand by Mr Kittony, he had written to his advocates urging them to bring the matter before the High Court.

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