CBK fights court rul­ing on Dubai Bank wind up

By the time the bank was go­ing un­der, it had below the Sh1 bil­lion in terms of cash, says reg­u­la­tor’s lawyer Oduol

The Star (Kenya) - - News - PETER NG’ETICH @pet­kich

The Cen­tral Bank yes­ter­day said the High Court erred in stop­ping the liq­ui­da­tion of Dubai Bank, which was placed un­der re­ceiver­ship in Au­gust last year.

The reg­u­la­tor through lawyer Ochieng Oduol fur­ther said there is no law which al­lows an in­di­vid­ual share­holder to own more than 25 per cent in a bank which was al­lowed by judge Eric Ogola in his judge­ment.

Oduol made sub­mis­sions be­fore Court of Ap­peal judges GBM Kariuki, Eras­tus Githinji and Sankale ole Kan­tai.

He said the judge mis­in­ter­preted the law on bank­ing by ac­cept­ing Sov­er­eign Fi­nan­cial Hold­ing to in­ject Sh2.2 bil­lion in a bid to re­vive the col­lapsed bank.

Oduol said by the time the bank was go­ing un­der, it had below the rec­om­mended Sh1 bil­lion in terms of cash and af­ter re­ceiver man­agers car­ried out an in depth au­dit, the in­sti­tu­tion’s only av­enue was liq­ui­da­tion.

“No judge has au­thor­ity to is­sue or­ders stop­ping wind­ing up of a bank once the process has started. When you are crit­i­cally sick, you are taken to the In­ten­sive Care Unit and once you die, you are taken to the mor­tu­ary, not ward,” the lawyer said.

Liq­ui­da­tion is the process by which a com­pany is wound up and as­sets and prop­erty of the com­pany are re­dis­tributed. Ogola in his judge­ment gave the bank 60 days to seeks ways of re­viv­ing the bank in which Sov­er­eign Fi­nan­cial Hold­ings came in. Oduol said as per the con­sti­tu­tion, CBK is an au­ton­o­mous in­sti­tu­tion.

Af­ter the bank was placed un­der re­ceiver­ship on Au­gust 14 last year, the reg­u­la­tor ap­pointed the Kenya De­posit In­sur­ance Cor­po­ra­tion to over­see ac­tiv­i­ties of the bank in which di­rec­tors were ac­cused of money laun­der­ing.

“Un­der KDIC Act no in­junc­tion can be is­sued against the in­sti­tu­tion once it has as­sumed con­trol of a trou­bled bank,” he said.

Oduol said there were strong grounds to wind up Dubai Bank as leases for the bank’s Nairobi, Nakuru and Mom­basa branches had been ter­mi­nated. He said CBK wants a suit filed by Richard­son and David Lim­ited dis­missed ar­gu­ing that they can sue for dam­ages if it feels ag­grieved by Dubai Bank’s liq­ui­da­tion.

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