Court orders SBM to settle Sh892m Chase Bank debt


Court orders SBM to settle Sh892m Chase Bank debt

People walk past an SBM bank branch on Mama Ngina Street in Nairobi. PICTURES | NJAU SALATON | NMG

SBM Bank (Kenya) was ordered to pay Afrasia Bank more than $7.5 million (892 million shillings), which the Mauritian lender deposited in Chase Bank in April 2016.

Judge Wilfrida Okwany ruled that SBM was guilty of all liabilities of Chase Bank – which it acquired in 2018 – including monies deposited by Afrasia Bank.

The judge said the transfer of business law applied to the agreement and because SBM failed to issue the required notice under the law, it is liable for all Chase Bank assessments.

“I therefore conclude that the respondent is liable for all debts of Chase Bank, including the appellant’s claim here,” the judge said.

The money was placed in a one-month fixed deposit account earning 2.35% per annum interest, but Chase Bank relented and went into receivership on April 7, 2016. This was before the Afrasia’s short-term investment only matures on April 18. 2016.

Chase Bank was acquired by SBM Bank on August 17, 2018, and Afrasia argued that it inherited the liability.

Indeed, he failed to publish a notice in the Kenya Gazette and national newspapers for two months, as required by the provisions of section 3(1) of the Transfer of Business Act and read in conjunction with Section 4 of said Act, stating whether he assumed all debts of Chase Bank.

The court heard that failure to publish the mandatory notice meant that SBM was fully and directly liable for payment of the amount plus interest.

Judge Okwany said depositors had the right to be informed of the transfer of assets and liabilities, as required by law.

SBM objected to this claim, saying that the general public was told which assets were to be taken over by SBM and which would remain under Chase Bank (in escrow).

The case was referred to an arbitrator who rejected the request on the grounds that it was contrary to public order. Afrasia appealed the decision to the High Court.

The judge criticized the court for saying it erred in choosing laws that the parties had to follow while leaving out the transfer of business law.

“In this case, I have already found that the court erred in excluding the applicability of a law that was intended to protect the general public by preventing fraudulent transfers of businesses,” the judge said.

SBM claimed that the Afrasia deposit was among the assets and liabilities of Chase Bank that remained with the Kenya Deposit Insurance Corporation.

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John A. Bogar