Court halts disputed liquidation of collapsed Imperial Bank
The High Court has temporarily stopped the Central Bank of Kenya (CBK) from proceeding with the liquidation process of Imperial Bank Ltd.
The High Court has temporarily stopped the Central Bank of Kenya (CBK) from proceeding with the liquidation process of Imperial Bank Ltd.
Justice Gregory Mutai issued the order pending a hearing of an application for injunctive orders against CBK filed by Mombasa billionaire businessman Ashok Doshi.
Mr Doshi is challenging the appointment of Kenya Deposit Insurance Corporation (KDIC) as the liquidator of the bank claiming that it was done illegally and irregularly.
The order is likely to affect a notice put out by KDIC on Monday on the payment of Sh2 billion protected deposits in Imperial Bank Limited (In Liquidation) as it undertakes the validation of the claims.
Through lawyer Willis Oluga, Mr Doshi argues that under Section 53 (2) of the Kenya Deposit Insurance (KDI) Act, CBK is authorized to appoint the liquidator only in the course of receivership (of the bank).
“When the defendant appointed KDIC as the liquidator of Imperial Bank, the period of receivership had long expired. The appointment of KDIC as liquidator (on December 8, 2021) was therefore illegal and unlawful because it was not done in the course of receivership,” argues Mr Oluga.
According to the plaintiff, under the KDI Act, CBK could only appoint the liquidator on the recommendation of KDIC which he says was not done thus rendering the appointment illegal and unlawful.
“The defendant deliberately appointed KDIC as the liquidator of Imperial Bank without following the law with the malicious aim of winding up the bank without regard to the law and procedure,” part of the suit documents.
Gazette Notice
The businessman is seeking a declaration that on December 8, 2021, when CBK purported to appoint KDIC as the liquidator of Imperial Bank, the term of the corporation had already lapsed and the bank was no longer in receivership.
He is also seeking a declaration that the appointment of KDIC as liquidator of the bank through a Gazette Notice is illegal, null, and void and of no legal effect.
In his affidavit, Mr Doshi says that upon being served with case documents and seeing the legality to appoint the liquidator was being challenged, CBK through the liquidation agent quickly published notices in the newspapers indicating an intention to pay out deposits to protected depositors.
“The publication of the notices is a clear indication that CBK through the liquidation agent is keen on proceeding with and executing the process so that in the event the court finds the appointment of the liquidator is illegal, the process shall have been completed with nothing to reverse,” says Mr Doshi.
The businessman also says that the urgency with which CBK is moving to liquidate the bank is intended to evade questions that have been raised on the legality of the appointment of the liquidator.
Mr Doshi says that together with his wife Amit filed a case against CBK in 2016, which is still pending but relates to the recovery of their deposits and does not challenge the legality of the appointment of KDIC as liquidator as it is the current case.
CBK, through an affidavit of its General Counsel Kennedy Abuga, says that the receivership of Imperial Bank and the moratorium declared had not expired as of December 8 2021 when it was placed under liquidation.
Mr Abuga, says that on December 7, 2021, CBK received from KDIC, the receiver of the bank (then in receivership), a recommendation that the bank be placed under liquidation.
CBK says that in the 2016 case by Mr Doshi, the Court of Appeal has in its ruling of last month suspended an order stopping the liquidation of the bank.
“In doing so, the Court of Appeal in effect allowed the liquidation of Imperial Bank to continue and also stayed (suspended) the proceedings in the High Court matter,” says Mr Abuga.
The hearing of the application by Mr Doshi will be on April 12.
