Ex-IBL bosses’ relief in duel with the CBK
Justice George Odunga says the CBK and KDCI are under obligation to consider reasonable proposals by shareholders
The High Court has prohibited the Central Bank of Kenya and the Kenya Deposit Insurance Corporation from initiating the process of liquidating the collapsed Imperial Bank until they exhaust revival options.
Justice George Odunga said the CBK and KDCI should consider reasonable proposals made by the shareholders. If the proposals are not viable, the regulator should explain to the shareholders the reasons for rejecting them, Odunga said.
“Liquidation, in my view are the ‘last rights’ of a company and the high priest of liquidation, otherwise known in the company law as ‘the liquidator’, ought only to be summoned by the doctor (the receiver) where all else have failed and the patient’s life (the bank) is hopelessly irredeemable,” the judge ruled on Friday.
The proposals made by the share- holders should be “reasonable and tangible”, he said.
The beleaguered shareholders had on October 29 last year presented to the CBK and the KDIC a revised restructuring and recovery plan for the bank, run down by loan-related fraud.
The court heard that the regulator and the receiver manager refused to consider their “recovery plan and dismissed it without any consideration”.
CBK argued that the proposals by the shareholders were not made in good faith, and were intended to hoodwink them that the shortfall was not going to result in insolvency.
The KDIC said it was not obliged under the law to accept any recovery plan from the shareholders, or the board of directors.
The KDIC had argued that the said proposals were designed to divert attention from the non-executive directors associated with the shareholders, and draw the CBK into an elaborate cover-up scheme, focused on the late managing director Abdulmalek Janmohamed and associated entities. This would have prevented directors from being investigated.
Judge Odunga, however, said the CBK’s decision not to accede to the proposals and recovery plan was not right. He said the two offices are under constitutional and legal obligation to inform the shareholders of their actions.
The court compelled the CBK and the KDIC to provide the shareholders, bondholders and depositors with the information concerning the arrangements entered into with any of the interested parties, and the manner in which the depositors are to be dealt with.
The CBK was, however, opposed to the orders sought by the shareholders on grounds that it would leave the bank under the control of the shareholders who are under investigations, and consequently without a statutory custodian for the protection of the creditors and depositors.
The KDIC said the suit is a blatant attempt to stop the forensic investigation into the alleged theft of Sh38 billion.
Eighty five-yearold Imperial Bank depositor Sarikas Ion displays a placard outside the bank’s headquarters in Westlands on May 31