The saga surrounding the placement in receivership of Imperial Bank Ltd has taken a new twist after its shareholders moved to court to have Central Bank of Kenya and Kenya Depositors Insurance Corporation cited for contempt of court.
This follows failure by the two to comply with the judgement of Justice George Odunga issued on November 4, 2016 that directed them, jointly and/or severally whether by themselves, their servants,agents, officers, successors and/or assigns not to take steps that would cumulatively or otherwise result in the liquidation of the bank unless and until the legal provisions are complied with.
An order of mandamus was also granted compelling CBK and KIDC to provide the Imperial Bank shareholders together with other stakeholders or their servants, agents, representatives and/or their appointees, including financial and legal advisors, with information relating to the process of receivership as long as such information is not prejudicial to the investigations being undertaken.
Bondholders
Further, the judge compelled the two to provide the Imperial Bank shareholders together with other stakeholders including bondholders and depositors with information relating to arrangements entered into with all or any of the following: Diamond Trust Bank Ltd, Kenya Commercial Bank Ltd, Kogweno Associates, and NIC Bank Ltd and the manner in which the depositors are to be dealt with.
In addition, the respondents were supposed to formally engage the Imperial Bank shareholders and other stakeholders including bondholders and depositors to jointly, and to the extent permissible by law, finding a workable legal framework for an outcome that is in the interests of the bank and all its stakeholders.
Penal Notice
In their suit, the shereholders say that despite the judgement and the orders being delivered in the presence of counsel representing CBK and KDIC and subsequently a Penal Notice being served on all the respondents, they in blatant breach and utter contempt issued a press release on Tuesday, November 8, 2016, indicating that they would “continue with the processes that were suspended by the Court and in particular, NIC’s due diligence and contact review, which is expected to lead to structured access to the remaining deposits.”
The CBK had in a press release issued on June 21, 2016 indicated that the process was to lead to KDIC disposing of, and NIC assuming, a portion of the remaining verifiable deposits along certain other assets and liabilities.
Through the same press release, CBK had further indicated that it was expected that depositors will be granted access in a structured manner to about 40 percent of the remaining amount of verified deposits above Ksh2.5 million which was to bring the cumulative pay-out ratio of all verified deposits to an estimated 59 per cent.
However, this contemplated transfer to NIC was stopped by the court on June 29, 2016 and further barred by the judgement by Justice Odunga. The Judge also clarified the same in a ruling delivered on January 9, 2017.
The court ruled that the respondents were “under an obligation to consider any reasonable and viable proposals on recovery plans put forward by the applicants towards the revival of the normal business of the bank.”
Further, they were directed not to drive the bank into liquidation unless and until all options of reviving the bank have been considered.
However, the shareholders claim all these orders have been ignored.
They say their requests to be provided with information as directed by the court with a view to engaging the responds and other stakeholders with a view to enabling a legally and commercially feasible solution to the bank’s situation have been neglected or refused, which they view as being in contempt of the court.
Liquidation
They fear that by refusing to respond to their requests or engage them, while at the same time continuing with their arrangements with NIC Bank, the bank will inevitably go into liquidation come the end of the statutory management on April 14, 2017.
“Effectively, these are steps being undertaken by the Respondents which cumulatively will result in the liquidation of the bank, in breach of the relevant legal provisions in brazen disobedience and utter contempt of Order (b) of the Judgement,” the depositors say.
In court papers filed by Wandabwa Advocates for judicial review Tuesday, the shareholders also want CBK chairman Mohammed Nyaoga, Governor Patrick Njoroge, KDIC acting chairman Julius Kipmgetich and acting CEO Mohamud Mohamud as well as members of their respective boards found to be jointly and severally liable for the neglect, failure or refusal to comply with the judgement and orders of the court.
Also named as a respondent is Attorney General Prof Githu Muigai.
The contempt suit was filed by seven shareholders, namely, Imaran Ltd, Reynolds and Company Limited, East African Motor Industries (Sales and Service) Limited, Momentum Holdings Limited, Abdulmal Investments Limited and Kenblest Limited.
The shareholders want the case certified as urgent and the court to issue a 30 day notice to the respondents to make a personal appearance in court to show cause why contempt of court proceedings should not be commenced against them.
Six-month jail term
In their pleadings, the shareholders want the respondents to be committed to a six-month jail term or be fined accordingly.
They say that compliance with the judgement and orders will go a long way in saving the bank from imminent liquidation and would be in tandem with the ruling delivered by Justice Odunga on January 9, 2017 directing the CBK and KDIC not to drive the bank into liquidation unless and until all options to revive the bank have been considered.
“That as a result of the willful disobedience by the respondents of the judgement and court orders aforesaid, and the blatant contempt with the respondents have treated the same, the authority and dignity of this Honourable Court have been gravely undermined and will continue to be so undermined unless the court punishes the Respondents accordingly and enforces the Orders,” the suit papers further state, adding that the respondents are bound by Articles 10 and 47 of the Constitution.
The shareholders aver the conduct of the respondents in failing to respect the court’s orders is both unconstitutional and against the law.
They further argue that they have no means of enforcing the judgement and the orders except having recourse to the court.
