Court backs Bank of Baroda’s closure
• Gupta-linked firms left high and dry by Baroda’s decision to quit SA
The High Court in Pretoria says it cannot compel the Bank of Baroda to go “belly crawling” to Nedbank to ask it to reinstall its relationship just for a group of Gupta-linked companies.
The High Court in Pretoria says it cannot compel the Bank of Baroda to go “belly crawling” to Nedbank to ask it to reinstall its relationship just for a group of Gupta-linked companies.
Nedbank provides banking facilities to the Bank of Baroda, which is not a clearing bank and cannot participate in the National Payments System.
Baroda is the only bank left in SA that was providing services to the Gupta-linked companies, but in February the bank announced it planned to close its office in the country, after instructions from its headquarters in India.
The decision to move out of SA came after Nedbank terminated its relationship with Baroda. This meant it was impossible for Baroda to provide transactional banking facilities to its customers.
On Monday, the court dismissed an application by 13 companies to have the Bank of Baroda interdicted from closing their South African operation at the end of March 2018.
It is not clear what the Gupta companies will do from April 1 when the relationship with the Bank of Baroda ends.
Initially, 19 Gupta-linked companies had approached the court but this was reduced to 13 since six had already been placed under business rescue.
Judge Ntendeya Mavundla said the Bank of Baroda could not be expected to service the companies’ accounts without the Nedbank infrastructure.
The other banks in the country had turned their backs on the Guptas and their companies.
“In my view, the respondent has the right to trade, which is protected by the Constitution,” said Mavundla.
“This right entails, inter alia, the liberty to choose to or not to exercise it within the confines of its whims or means.
“The decision by the respondent to exit the South African banking sector cannot, in my view, be interfered with by the courts… the courts cannot compel the respondent to keep the doors of its business open for whatever duration,” he said.
The Bank of Baroda had every right to terminate any of its business contracts including that of the companies.
The Gupta entities had insisted that the closure of the Baroda branch in SA was in contempt of court following an interim order that was handed down by high court Judge Tati Makgoka in October 2017, stopping Baroda from “deactivating and/or closing” the companies’ accounts or from terminating the bankercustomer relationship.
Makgoka ordered Baroda to continue providing banking services to the Gupta-family companies to shield about 7‚000 staff in their employ.
The final application in the matter of the closing of the bank accounts still needed to be heard, but with Baroda closing its operations this matter will in all likelihood fall away.
Mavundla, however, found that Makgoka’s order had nothing to do with Baroda’s exit from SA and that the decision had been based on a commercial consideration. He said Makgoka’s order specifically restrained the bank from interfering with the companies’ accounts.
Mavundla said it could not be said that the closing of its South African branch was “mala fide [bad faith] and calculated to frustrate” the Makgoka order, or in contempt of it.
“In the circumstances of this case, I therefore conclude that the respondent’s right to or not to trade supersedes whatever right, if any, the applicants might have,” Mavundla said.
He also said the balance of convenience by far outweighed that of the companies and tilted in favour of Baroda.
The Gupta-linked companies had argued that they had no other remedies besides seeking the court interdict.
However, Mavundla said that this was not so and that the companies had the option of claiming damages from Baroda as a remedy.
“In my view, the applicants certainly do have a remedy, and that would be a damages claim against the respondent were they to prove that they have suffered damages as the result of the respondent’s action to close their operations in South Africa,” he said.
He dismissed the Guptalinked companies’ application with costs.
IT IS NOT CLEAR WHAT THE GUPTA COMPANIES WILL DO WHEN THE RELATIONSHIP ENDS
THE APPLICANTS DO HAVE A REMEDY, AND THAT WOULD BE A CLAIM AGAINST THE RESPONDENT