Relief for depositors in Imperial Bank row

One of the branches of the collapsed Imperial Bank.

Large depositors of collapsed Imperial Bank have been spared losses of millions of shillings after the High Court stopped disbursement of funds by the Kenya Deposit Insurance Protection.

Justice Alfred Mabeya issued the order following an application by billionaire businessman Ashok Doshi claiming the Kenya Deposit Insurance Protection has begun disbursing funds to depositors with less than Sh500,000 while leaving out large depositors.

"The court hereby issues an order of temporary injunction restraining the Kenya Deposit Insurance Protection either directly or through its agents from paying out protected deposits to depositors of Imperial Bank (in liquidation) pending hearing and determination of the application," ruled Mabeya.

Doshi in his suit filed through Oluga and Company Advocates claimed depositors with high amount exceeding Sh500,000 were going to lose their money unless the court intervenes and stops payment until liquidation of the collapsed bank is concluded.

According to the law firm, the agency has effectively locked out depositors with deposits above the protected amount of Sh500,000 from making claims to recover their money while imposing an illegal condition stopping them from making future claims.

"The payments as being undertaken is illegal because the agency has imposed an unlawful condition requiring those claiming their deposits to commit and bind themselves that they will not have future claims against the agency and the bank," said the lawyers.

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The lawyers submitted that the move to pay out small depositors is contrary to Section 28 (2) of the Kenya Deposit Insurance Act which provides that payment of protected deposits can only be made within six months or any other period after conclusion of liquidation of the collapsed institution.

Doshi in his affidavit stated that he was one of the high depositors at the bank with six accounts and stands to lose his savings and investments should the payments be made to other depositors.

He swore that after the Central Bank of Kenya appointed Kenya Deposit Insurance Protection as the liquidator of the collapsed bank in December 2021, he filed a suit at the High Court and got an order stopping the liquidation process until the agency gives him assurance that they will pay him his dues.

The orders were however discharged by the Court of Appeal on May 26 which cleared the way for the collapsed bank to be placed in liquidation.

"Instead of complying with the court order to commence liquidation, the Kenya Deposit Insurance Protection has commenced the process of paying out protected deposits by putting up a notice inviting depositors with less than Sh500,000 to lodge claims," said Doshi.

According to Doshi, the requirement that depositors who take the maximum statutory amount of Sh500,000 must give an undertaking that they will not make future claims amounts to blackmail to defraud those who had deposited high amounts in the collapsed bank.

"My deposits are way above the statutory maximum and by requiring me to forfeit my right to make further claims, the agency has effectively denied me access to the rest of my deposits which are my rightful properties and thereby violating my constitutional right to property," swore Doshi.