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Fund’s bid to recover Sh258m from CBK flops

BUSINESS
By | October 29th 2009

by Evelyn Kwamboka

National Social Security Fund’s (NSSF) bid to recover from Central Bank of Kenya (CBK) Sh258 million invested in Treasury Bills has flopped.

The move flopped following the High Court decision that the bank was not liable for the loss of the money.

Justice Festus Azangalala said CBK rediscounted the bill on invalid instructions and finally remitted the proceeds of the rediscounted bill to a designated account in the name of NSSF at the National Bank of Kenya.

"NSSF proceeded to operate the same as if the rediscounting was valid," he said.

The judge said this in a case in which NSSF had filed a claim against the bank on breach of contract and negligence.

NSSF had claimed it expected the bills to mature on August 26, 2002, but that did not happen because the bank rediscounted the same on instruction received from the then fund’s Managing Trustee Ben Mutweta.

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Justice Azangalala said in his judgement that the bank breached its contract with NSSF by taking instructions from Mutweta.

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The judge held that Mutweta and a Mr Chemngorem, who were the signatories to the NBK account, are the ones who caused the transfer of the proceeds from the designated account to a non-designated one.

"In my view, CBK cannot be held liable for the transfer," he said.

The proceeds were later on moved to Shah Munge and Partners Ltd’s account, which the judge said should pay NSSF the Sh258 million.

The company received a cheque of Sh251 million from the parastatal, but did not purchase Treasury Bonds in the secondary market with a higher yield as it had indicated to NSSF.

Instead, the company deposited the cheque in its office Fixed Deposit Account that was to mature on August 28, 2002 with an interest of 17.52 per cent.

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