MILIMANI LAW COURTS: Two former executive directors of Trust Bank
Limited have been ordered to pay the bank over Sh1.5 billion for breach
of trust. PHOTO/FILE
By PAUL OGEMBA
In Summary
- The judge said it was established at the time of winding up of the bank that its business was carried out with intent to defraud the creditors and for other fraudulent purposes and that the two former directors were parties to the scheme.
- He said the directors misrepresented to the creditors and to the court that the withdrawals were made to offset a loan agreement between Trust Capital Services and Trust Bank Limited when they knew all along that the transactions were not sanctioned through a proper channel.
Two former executive directors of Trust Bank Limited have been ordered to pay the bank over Sh1.5 billion for breach of trust.
Justice Eric Ogola found Ajay Shah and Praful Shah
guilty of misfeasance, failing to discharge their duties diligently,
transparently and non-fraudulently leading to the bank’s closure in
1999.
“The incident happened at a time when banks just
used to go under and depositors losing their life long savings without a
soul on earth caring. The managers had a responsibility to the
depositors and despite being their trustees, they failed to act
responsibly and became liable,” said Ogola.
The judge also declared that Mr Ajay and Mr Praful
while acting as executive directors of Trust Bank, now in liquidation,
breached their “fiduciary duties” to the company by allowing Trust
Capital Services Limited in which they had personal interest to withdraw
from the bank Sh241.4 million in 1998 without proper security.
Fraudulent actions
The judge said it was established at the time of
winding up of the bank that its business was carried out with intent to
defraud the creditors and for other fraudulent purposes and that the two
former directors were parties to the scheme.
According to the liquidator, Trust Bank lost the
sum of Sh241,442,376 within a span of 7 days in September 1998 through
an account not registered in the bank but which was being operated by Mr
Ajay and Mr Praful.
“It is evident that money was withdrawn from the
Bank through Trust Capital Services without sanction of the bank through
an account which did not exist in its accounts. What worries most is
how the massive withdrawals were done within a space of seven days,”
said Ogola.
He ruled that the two directors owe an explanation
to depositors of Trust Bank since they participated in the withdrawal
and siphoning of millions of shillings when they were aware the bank was
about to collapse.
“Despite admitting that Trust Capital Services
owed the bank over Sh246.6 million, they have not provided any evidence
to show that they have refunded a single coin which brings into question
their loyalty and trust to the bank’s depositors,” ruled Ogola.
He said the directors misrepresented to the
creditors and to the court that the withdrawals were made to offset a
loan agreement between Trust Capital Services and Trust Bank Limited
when they knew all along that the transactions were not sanctioned
through a proper channel.
Law flouted
He ruled that the directors’ actions offended
Section 11 of the Banking Act since they knowingly participated in
carrying out their duties with clear intent to defraud customers of
Trust Bank Limited.
“After considering all factors, I thus order that
Mr Ajay and Mr Praful are liable to make good and pay Deposit Protection
Fund Board as Liquidator of Trust Bank Limited Sh1,549,591,424 being
the amount due in the account of Trust Capital Services as at February
2010,” ruled Ogola
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