Dubai Bank claims Sh1bn from ex-owner

Former Dubai Bank chairman Hassan Zubeidi. PHOTO | FILE 

By BRIAN WASUNA, bwasuna@ke.nationmedia.com

In Summary

• The lender has moved to court claiming ownership of the money that Hassan Zubeidi is pursuing as compensation for a botched electrification project.

Collapsed lender Dubai Bank has filed a suit claiming the $11 million (Sh1.1 billion) its founder and former chairman, Hassan Zubeidi, is demanding from Khartoum-based contractor Active Partners Group.

The move opens a new front in the battle for the bank’s assets. Through its receiver manager, the Kenya Deposit Insurance Corporation (KDIC), the bank has moved to court claiming ownership of the money that Mr Zubeidi is pursuing as compensation for a botched electrification project.

In an application filed last Wednesday, KDIC is seeking to be enjoined in a suit Mr Zubeidi filed against Active Partners Group (APG) demanding the Sh1.1 billion.

Mr Zubeidi reckons that APG was to pay him the sum in return for financing a tender that the Sudanese firm won in South Sudan.

KDIC now says Mr Zubeidi entered into the financing agreement with APG in his capacity as Dubai Bank chairman, hence any funds that were to mature from the deal are payable only to the collapsed lender.

“Mr Zubeidi entered into the said agreements with APG in his capacity as the chairman of Dubai Bank and the facilities offered to APG were advance payment guarantees and performance guarantees by the bank. The monies that are the subject of the dispute in the sum of $11 million (Sh1.1 billion) herein are due and payable to Dubai Bank,” KDIC says in its application.

APG was to undertake an electrification project in South Sudan after winning a $197 million (Sh19.7 billion) tender.

The firm secured financing from Dubai Bank through Mr Zubeidi, but the project failed to take off after the government of South Sudan fell into liquidity problems in 2010.

The Khartoum firm successfully sued for $44 million (Sh4.4 billion) compensation from South Sudan and has since last year managed to recover Sh3.6 billion.

Mr Zubeidi last month filed a suit claiming that he is entitled to Sh1.1 billion of the proceeds, arguing that he secured financing for the botched project hence should also be compensated.

READ: Dubai Bank’s Zubeidi accused of blackmail in Sh1.1bn suit

But KDIC now says that while APG should release the Sh1.1 billion, the funds belong to Dubai Bank, as the guarantees were issued in the name of the collapsed lender.

The KDIC was appointed Dubai Bank’s receiver manager in August last year after the Central Bank of Kenya cited the lender for breaching several banking regulations that exposed it to a Sh1.3 billion loss.

It has since set out to liquidate Dubai Bank and has already auctioned most of the collapsed lender’s assets. The liquidation process, however, has been frozen following a suit filed by Dubai Bank’s second largest depositor—Richardson & David—and Mr Zubeidi.

“I believe Dubai Bank (In Liquidation) should be enjoined in the suit as the third defendant with utmost urgency to protect the interests of the depositors to recover the sum of $11 million (Sh1.1 billion). From the agreements, the cost of finance and commissions on the advance payment guarantees are monies that are legally due and payable to Dubai Bank (In Liquidation),” receiver manager Adam Boru added.

APG has denied Mr Zubeidi’s claim, arguing that it entered into the financing agreements under duress as the Dubai Bank chairman threatened to hold onto funds intended for the project if its officials did not agree to channel Sh1.1 billion to the collapsed lender’s chairman.

It has also faulted the former Dubai Bank chairman for filing the suit in Nairobi, as the agreement provided that any dispute could only be settled by Khartoum courts.

“The said agreement was made in the then Sudan, the subject matter of the agreement was based in the then Sudan and all the parties to the agreement are based in Khartoum and Dubai. This suit and all the applications made by Mr Zubeidi in view of the agreement on jurisdiction of courts are therefore bad in law and should be dismissed with costs,” says Khalid Ahmed, a director of APG.

Justice Francis Tuiyott has issued a temporary order barring APG or its lawyers from accessing the funds it has so far recovered from the government of South Sudan.

Another judge—Grace Nzioka—last month allowed Citi Bank and CfC Stanbic to release Sh177 million from South Sudan’s accounts to APG’s lawyers. Following Justice Tuiyott’s orders, the funds are now frozen in a client account owned by APG’s lawyers.