SBM Bank fights back against rival's Sh900m deposits claim

SBM Bank on Prudential Building along Mama Ngina Street. [Wilberforce Okwiri, Standard]

SBM Bank Kenya is fighting back against a $7.5 million (Sh904.5 million) debt claim by Mauritius-based lender Afrasia Bank that is threatening to trigger a liquidation process.

Afrasia Bank, in a demand notice dated September 19, wants SBM to pay the money within 21 days, failure to which it will apply for a liquation order against the Kenyan lender that acquired Chase Bank in 2018.

But SBM is contesting Afrasia’s notice, which comes after the High Court on August 13 ordered SBM to pay the sum, ruling that it was responsible for all liabilities of Chase Bank.

Afrasia had placed the sum in Chase Bank’s fixed deposit account, earning annual interest of about 2.35 per cent.

Chase Bank sank into receivership on April 7, 2016, days before the investment by Afrasia was to mature on April 18, 2016.

SBM, which cherry-picked certain assets and liabilities in Chase Bank, had argued in court that the general public was informed about what was retained under Chase.

Afrasia in 2019 took the matter to court but the case was referred to arbitration and was ruled in favour of SBM in April 2021.

However, Afrasia appealed to the High Court, which ruled in its favour in August this year.

While Afrasia is pushing for the money, SBM Holdings, the parent company of SBM Bank Kenya, says they has obtained a stay of execution in respect of the judgment and is in the process of filing an appeal.

“SBM Kenya has since obtained a stay of execution in respect of the judgment and is in the process of filing an appeal,” says SBM Holdings in its half year report filed in Mauritius.

“No provision in relation to this claim has been recognised in these financial statements (of SBM Holdings) as the directors have been advised by the lawyers that the probability of a liability arising is remote.”

This means the legal tussle is far from over even as the Mauritius-based lender wants the Sh904 million to be accompanied with $16,645 (Sh2 million) as accrued interest.

“Further, take notice that failure to pay the afore-stated amount shall result in Afrasia Bank Ltd filing for a liquidation order against the company,” reads the demand notice.

Afrasia is relying on section 384 (1) of the Insolvency Act 2015 which says that a company is considered unable to pay its debts if a creditor to whom the company owes Sh100,000 or more sends a demand notice to pay the debt but the company fails to do so after 21 days.

High Court judge Wilfrida Okwany said the Transfer of Business Act was applicable in the deal and since SBM did not publish the mandatory notice under the law, it was liable for all Chase Bank dues.

“I, therefore, find that the respondent is liable for all liabilities of Chase Bank including the appellant’s (Afrasia) claim herein,” ruled the judge last month.

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