Collapsed Chase Bank outlet in Nairobi. FILE PHOTO | NMG
Mauritius-based Afrasia Bank has sued SBM Bank (Kenya), seeking
to recover $7.5 million (Sh765 million) it had deposited in Chase Bank
on March 18, 2016.
The money was placed in a one-month fixed deposit account earning interest of 2.35 per annum.
Chase
Bank, however, collapsed and was placed under receivership on April 7,
2016. This was before Afrasia’s short-term investment was due to mature
on April 18, 2016.
The lender was on August 17, 2018, acquired by SBM Bank, which Afrasia says has inherited the liability.
Afrasia
says SBM is on the hook because it did not publish notices in the Kenya
Gazette and national newspapers for two months stating whether it is
assuming all the liabilities of Chase bank.
“The plaintiff avers that the defendant has failed to publish
the said mandatory notice and as such is now fully and directly liable
to the plaintiff in the sum claimed of $7,500,000 together with interest
accrued thereon,” said Afrasia in court papers.
The
plaintiff said the requirement to make the publications is based on
provisions of Section 3(1) of the Transfer of Business Act and as read
together with Section 4 of the said Act.
Afrasia wrote
to SBM demanding to be paid on January 15, 2019. SBM’s law firm (Walter
Kontos) has responded to the suit, saying the demand was time-barred and
that its client was under no obligations to make the publications as
claimed by Afrasia.
The law firm added that the transaction was approved under different laws — the Banking Act and the Kenya Deposit Insurance Act.
“The
defendant denies that it received within the period required by law,
any demand from the plaintiff, as alleged in Paragraph 12 of the plaint,
and avers that in any event, it was under no obligation to settle the
same,” the law firm said.
“With regard to paragraph 10
of the plaint, the defendant avers that it was not required to publish
such notice as alleged by the plaintiff and denies any liability in any
manner whatsoever, to the Plaintiff, and reiterates the contents of
Paragraph 9 of this defence.”
The law firm added that
Afrasia’s deposit was among Chase Bank’s assets and liabilities that
remained with Kenya Deposit Insurance Corporation.
The
Central Bank of Kenya (CBK) had announced that 75 per cent of the value
of Chase Bank’s deposits would be transferred to SBM.
“Following
the completion of the acquisition and assumption process, CBK and the
Kenya Deposit Insurance Corporation will continue working to recover and
realise the assets that remain in Chase Bank, in order to enhance the
recovery for Chase Bank stakeholders,” said the CBK in the August 20,
2018 press release announcing the transaction.
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