Pattni company sues CBK over Sh55m deposits in failed bank

Mr Kamlesh Pattni. PHOTO | FILE 

By BRIAN WASUNA bwasuna@ke.nationmedia.com

In Summary

• Uhuru Highway Development Limited says it was unable to collect its Pan African Bank deposits from the collapsed lender’s liquidator owing to a court case that EACC had filed against it.
• EACC was then trying to recover Sh13.5 billion Mr Pattni had allegedly stolen from the government in a complex forex and export compensation scam.
• UHDL says it has enjoined the CBK and EACC to verify the truth of the matter as regards the out-of-court settlement between Mr Pattni’s 17 firms and the government.

Uhuru Highway Development Limited (UHDL), a company associated with billionaire businessman Kamlesh Pattni, has sued the Kenya Deposit Insurance Corporation (KDIC) seeking to recover deposits it had in the collapsed Pan African Bank.

UHDL claims in a fresh suit filed in the High Court that the KDIC has refused to honour promises to pay it Sh55 million it had in Pan African Bank, yet all other depositors have been paid nearly all their savings.

The firm says it was unable to collect its Pan African Bank deposits from the collapsed lender’s liquidator — the KDIC— owing to a court case that the Ethics and Anti-Corruption Commission (EACC) had filed against UHDL and 16 other firms associated with Mr Pattni. It has now asked the High Court to add a 12 per cent annual interest on deposits beginning April 2012 to date – a move that would raise the total claims to about Sh97 million.

The EACC was then trying to recover Sh13.5 billion Mr Pattni had allegedly stolen from the government in a complex forex and export compensation scam.

UHDL says that for the duration of the suit, the Deposit Protection Fund Board, which was succeeded by the KDIC, held the Sh55 million on behalf of the Pattni-associated firm.

Mr Pattni agreed to relinquish several of his properties to the EACC, including the UHDL-owned Grand Regency - which was sold to Libyan investors who renamed it the LAICO Regency. The deal saw EACC drop its cases against Mr Pattni’s 17 firms, including UHDL.

UHDL now says the KDIC had promised to pay it the Sh55 million held at Pan African Bank by mid-January last year, having resolved its dispute with the EACC.

“Indeed, the last response received from the KDIC on December 16, 2015 acknowledged that there was no more cause for the KDIC to withhold payment anymore, but requested for time to formally have the payment sanctioned by mid-January, 2016.”

“More than seven additional months have further lapsed since this undertaking was given by the KDIC, thereby necessitating this suit for the court’s intervention,” UHDL says.

The KDIC is yet to respond to the suit. UHDL has also enjoined the CBK and EACC as interested parties in the suit.
Mr Pattni in 2008 reached an out-of-court settlement with the EACC that saw him relinquish several properties he owned through 17 firms with the anti-graft agency in turn dropping its suit. The EACC negotiated the settlement on behalf of the CBK and the government.

The Central Bank of Kenya (CBK) had paid Sh13.5 billion to the Mr Pattni-owned Exchange Bank for $210 million. The transaction was intended to fix a foreign exchange crisis the government was going through and which saw the World Bank place aid embargoes on Kenya.

Despite remitting Sh13.5 billion to Mr Pattni’s Exchange Bank, the CBK never received the $210 million.

EACC consequently sought to recover the money by filing petitions for attachment of companies and assets owned by Mr Pattni, including UHDL which owned the Grand Regency Hotel until 2008.

The CBK has filed an application seeking to be removed from the suit. The banking industry regulator argues that it is not involved in the management of collapsed banks, as that is a role exclusively for the KDIC.

UHDL says it has enjoined the CBK and EACC to verify the truth of the matter as regards the out-of-court settlement between Mr Pattni’s 17 firms and the government. “The claim relates to an institution which is under liquidation, and the CBK therefore has no statutory mandate over the said institution or disputes arising therefrom. The suit as filed discloses no cause of action against the CBK, neither have any orders or declarations been sought against or in respect of the CBK,” the regulator holds.

Justice Francis Tuiyott has allowed the KDIC 30 days to respond to the suit and ordered the parties to appear before him on March 16 for further directions.

The Pattni-associated firm holds that most Pan African Bank depositors who had almost similar savings at the collapsed lender have been refunded in full, and that it is illegal for the KDIC to continue holding its funds.

UHDL says it should be allowed to seek contempt of court proceedings against the relevant KDIC managers if the agency fails to pay it within 30 days of Justice Tuiyott’s judgment.