It’s too late to block Dubai Bank liquidation, Central Bank tells court

The Central Bank of Kenya (CBK) has ruled out stopping the ongoing Dubai Bank liquidation process. The banking industry regulator in its response to a case filed by a depositor to stop liquidation of the collapsed bank told the court that no intervention could be made as it was already late.

Richardson and David Ltd, who claimed to be a depositor, moved to court last week on Friday seeking to stop the process and further block CBK’s subsidiary Kenya Deposit Insurance Corporation from dismantling the bank’s ICT system.

But the liquidator through lawyer Njoroge Regeru told Justice Erick Ogola that the application had been overtaken by time as the process of paying protected depositors had already started. “The application is late in the day as the liquidation process is at advanced stage and orders sought have been overtaken,” the court heard yesterday.

Justice Ogola heard that the banking law shields KDIC from any court injunctions once it has assumed control of an institution.

Lawyer Regeru also argued that the engineering firm (Richardson and David Ltd) could be compensated if the court found that the liquidator was in error when winding up the financial institution. The application by the engineering firm added a new twist to the case filed by KDIC seeking to freeze former Dubai bank’s chairman Hassan Zubedi’s assets.

The corporation claimed that six title deeds out of 344, all worth Sh650 million were missing and there was risk that some of the properties could be disposed of.

The court heard that Mr Zubedi’s lawyers or four other companies allegedly linked to him hold documents associated with his properties. Zubedi, who managed the collapsed financial institution as chairman, is said to own Africa Energy Ltd, Suleiman Enterprises Ltd, Kamp General Engineering, KEMU Salt Parkers and Maestro Properties Company, which have been sued alongside him.

According to court records, Dubai Bank owes depositors and creditors more than Sh1 billion. KDIC in its application told the court that it was apprehensive that if the properties were not secured it would be impossible to pay outstanding dues. “The stated properties constitute the only viable assets on security for bank depositors and creditors and if not secured the plaintiff will be unable to execute its mandate to recover bank assets and pay depositors and creditors amounts of monies running to Sh1,650,926,230.70,” the judge was told.

 

Dubai Bank went under liquidation on August 24 and according to KDIC, it owes Bank of Africa Sh480 million. Its deposits amount to Sh1.355 billion, while a suit by Universal Metal Coating Company Ltdmited is demanding SAR 42,000 (Sh420 million).

Yesterday, Mr Regeru told the court: “There are strong grounds that existed for placing Dubai Bank Ltd under receivership and subsequently under liquidation including lack of the statutory minimum requirement of five directors and its capital below statutory minimum of Sh1 billion.”

According to the liquidator, Dubai Bank’s cash balances were also overstated and its liabilities, running over Sh3 billion, had not been indicated in its records. The bank also had Sh4.16 billion non-performing portfolio and there were incidents of parallel banking transactions that were not in the official records of the bank.

“Several insider lending transactions were noted comprising overdrafts, guarantees and loans advanced without securities to the defendants and to companies associated with the first defendant (Zubedi) who had not been approved by the bank’s shareholders,” the court was told.

The titles in question have not been charged in favour of Dubai Bank though they had been submitted to be held as security for loans to various individuals who had ties with board members. Moreover, the institution had three directors instead the five as required by the law, the court heard.

“The bank held unsecured securities in respect of the defendants for credits running into hundreds of millions of shillings,” the court heard. The case will continue today.