Consolidated Bank has been dealt another blow in its long-running dispute with MFI Technology Solutions Ltd after the High Court declined to stop enforcement of a Sh203.5 million award against the lender.
The court ruled that the bank had not demonstrated that paying the award would expose it to substantial loss or leave it unable to recover the money if its appeal succeeds.
The decision gives MFI the green light to pursue the award, after deducting the Sh27.5 million that Consolidated Bank had already paid.
The ruling also brings to an end interim orders that had temporarily protected the lender from enforcement of the award as it sought to challenge the earlier judgment.
The case relates to a software licence agreement signed on June 2, 2022, between Consolidated Bank, MFI Technology Solutions Ltd and Intellect Design Arena Limited for the upgrading of the lender’s core banking system.
Under the original deal, the software licence was valued at $1.334 million, equivalent to about Sh172 million, and was to be settled in two instalments.
The bank later requested that the payment be spread across four instalments, a proposal that MFI agreed to.
Intellect subsequently started work on the project. However, the court was told that Consolidated Bank did not keep up with the revised payment arrangement.
By April 2023, the lender had paid $213,375 before Intellect stopped further deployment of the system.
The disagreement escalated when Consolidated Bank called in a $243,600 performance guarantee, accusing MFI of failing to meet its contractual obligations.
The bank also raised questions about the agreements governing the project, including who had been properly identified as the software licensor.
It accused the companies involved of failing to perform their obligations and of misrepresentation.
MFI responded by filing a suit in June 2023. It argued that the suspension of the software deployment was directly linked to Consolidated Bank’s failure to pay the licence fees as agreed.
The company also challenged the bank’s decision to call up the performance guarantee, saying the move was unjustified.
Consolidated Bank denied responsibility and filed a counterclaim against MFI.
The lender alleged that MFI had misrepresented the identity of the company licensing the software and had failed to deliver the promised core banking upgrade.
According to the bank, the earlier agreements named Intellect Design Arena FZ LLC in Dubai, while later documents referred to Intellect Design Arena Limited in India.
The lender further disputed whether the proposed upgrade could satisfy its operational requirements.
It told the court that only five out of 74 critical items had been demonstrated, which it said showed that the system had not been delivered as expected.
Consolidated Bank maintained that the licence fees were not due and that it had been entitled to terminate the agreement.
It also argued that calling up the performance guarantee was lawful.
The lender sought to recover the $213,375 it had already paid and an additional Sh982,500 in expenses.
MFI rejected the claims and maintained that it was the bank’s failure to honour the revised payment terms that brought the project to a halt.
It also argued that Consolidated Bank had knowingly signed documents which identified Intellect Design Arena Limited as the licensor.
In a judgment delivered on December 11, 2025, the court found that Consolidated Bank had fundamentally failed to honour its contractual obligations.
"I therefore find on the evidence that the first defendant was in fundamental breach of its contractual obligations" the court said.
The judge dismissed the bank’s argument concerning the identity of the software licensor, pointing out that the agreements carried Consolidated Bank’s seal and the signature of its chairman.
The court found that the agreements changing the payment arrangements were valid and enforceable.
The bank also lost its challenge over the performance guarantee.
The court held that the guarantee was called after the software work had been suspended because Consolidated Bank had failed to make the required payments.
"A beneficiary cannot rely on the consequences of its own breach to justify a call on a guarantee," the judge said.
MFI was awarded $1.334 million, less the $213,375 already paid by the bank, amounting to about Sh27.5 million.
The court further awarded the company $243,600, equivalent to about Sh30.2 million, in connection with the performance guarantee.
Both amounts were ordered to attract interest at court rates from the date the suit was filed until they are fully paid.
Following the dismissal of its counterclaim, Consolidated Bank moved to the Court of Appeal to challenge the decision.
It then returned to the High Court seeking an order to stop implementation of the award while the appeal is pending.
The bank said it was ready to provide security and argued that being forced to make payment before the appeal was heard could have financial consequences.
MFI opposed the application, arguing that its financial position was strong enough to refund the money if the bank eventually won its appeal.
The company relied on its audited accounts, which it said showed adequate turnover, profits and net assets to meet any repayment obligation.
The High Court accepted the evidence on MFI’s financial position and found that the company had the means to make restitution if required.
It consequently rejected the bank’s claim that payment of the award would result in substantial loss.
The court said the lender had failed to demonstrate that the money would be beyond its reach if the appeal eventually succeeded.
The judge stated that it was "not persuaded that substantial loss has been established", rejecting the argument that the possibility of financial consequences alone was enough to justify a stay.
Consolidated Bank had also offered to provide security for the award as part of its application.
However, the court held that offering security did not remove the need for the bank to prove that it faced substantial loss.
"Security, however, is not a substitute for proof of substantial loss," the court said, adding that the lender had not shown that payment would make recovery impossible if it won the appeal.
The latest decision leaves MFI free to pursue the award while Consolidated Bank continues with its challenge before the Court of Appeal.