Relief for Gupta firms over Baroda

Gupta-owned companies have been given a reprieve as the closing of their Bank of Baroda accounts has been postponed. The Bank of Baroda was set to close the business and loan accounts of 20 companies on September 30.

Gupta-owned companies have been given a reprieve as the closure of their Bank of Baroda accounts has been postponed.

The Bank of Baroda was set to close the business and loan accounts of 20 companies on September 30.

The companies approached the High Court in Pretoria last week to have the main application, meant to be heard in December interdicting the bank from closing their accounts, heard before the deadline for the closure of the accounts.

Judge Tati Makgoka reserved judgment in the matter on Friday, but with conditions.

Makgoka ordered the Bank of Baroda to keep the 20 applicants’ accounts “open and operational” pending the handing down of the judgment.

Makgoka said he would hand down judgment no later than October 9.

The Gupta companies argue that if the main application is heard only in December, after the accounts have already been closed, it is clear the court will not be in a position to grant an effective remedy, or any at all.

They are also arguing that they have a right to “reasonable notice in the circumstances prior to their bank accounts being terminated”. The bank gave them three months’ notice.

The companies are arguing that a 24-month notice period from July 31 2017 is reasonable. In September, the same court dismissed an application for an interim-interim interdict stopping the Bank of Baroda from closing the accounts of the Gupta companies.

In his judgment at the time, Judge Hans Fabricius said he believed the companies had very little prospect of success in their main application because of the ramifications it would have on the bank.

Bank of Baroda has been closely linked to the Gupta family even after four domestic and two international banks including the Bank of China, cut ties, and has been accused of helping the family to launder money.

Fabricius said in his judgment, the Guptas would still be able to pay staff as they had acknowledged themselves that they were doing this through a third-party pay agent.

However, the companies in their main application are still arguing that without banking facilities, about 7,652 people will probably lose their jobs and, if not, will not be paid their salaries or wages for a long time.

A large number of customers and suppliers would also be affected negatively, they said. “The applicants [companies] have no alternative remedy available to them.

“If their bank accounts are closed, their businesses will be brought to a swift and definitive end and it will also put paid to any of the restructuring transactions that are currently underway or being negotiated,” the companies said.

Since the closure of their bank accounts by the country’s big-four banks, the Gupta companies have said they have no access to alternative banking facilities.

They said pay agents were not a “suitable or meaningful substitute” for having banking facilities and the only option for them was to restructure their businesses. The companies said a number of these processes were already under way or being negotiated, but they would be unable to pursue or finalise these transactions if they were left without banking facilities in the interim.

In September, the Bank of Baroda told the court it had flagged about 36 suspicious transactions to the value of R4.2bn on accounts linked to the Guptas in 10 months.

The bank said it was unable to cope with the work as it had to review every transaction with a small staff and could face legal liabilities if it failed to monitor the accounts.

The Gupta companies are now arguing that the bank itself acknowledged that the reporting provisions of the Financial Intelligence Centre Act “operate on a hair trigger”.

“The logical conclusion is that some, if not all, of these transactions will be benign and will not warrant further investigation or sanction,” they said.

The Bank of Baroda has also argued that it needs to sever ties with the Gupta companies because it is causing harm to the bank’s reputation.

The companies argued that the only prejudice the bank could make out was “speculative and unsubstantiated claims” of reputational harm.

“The bank has failed to establish that it will suffer any tangible prejudice should the status quo be ordered to remain,” the companies argued.

THE LOGICAL CONCLUSION IS THAT SOME, IF NOT ALL, OF THESE TRANSACTIONS WILL BE BENIGN