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KDCI’s bid to block three law firms from Imperial Bank case flops
KDIC alleged that the creation of the new holding company known as Imperial Securities Ltd was to enable the bank to invite a strategic investor to overcome its financial shortcomings caused by massive fraud on its depositors’ funds.
The Kenya Deposit Insurance Corporation (KDIC) has lost an appeal in which it had sought to block three law firms from representing directors and shareholders of collapsed lender Imperial Bank Ltd (IBL).
The Court of Appeal rejected the appeal saying it was not enough to make ‘vague unsubstantiated allegations’ on such matters and the mere fact that the lender instructed an advocate or that an advocate was in its panel of advocates, was not a sufficient ground to disqualify them from the case.
KDIC wanted the law firms; Ahmednasir Abdullahi Advocates LLP, Coulson Harney Advocates, and Muriu Mungai & Co Advocates blocked from representing the directors and shareholders or the collapsed lender, arguing that the firms had advised the lender, acted on behalf of the bank or gave legal advice to IBL and their representation would be in conflict of interest.
Justices Wanjiru Karanja, Lydia Achode, and George Odunga, however, dismissed the appeal in a May 30,2025 decision saying that the claims of the existence of conflict of interest appeared weak at best.
“In this case, although it was alleged that the respondent firms are privy to pertinent facts relating to the instant suit which may be used in the matter to the detriment of the 1st appellant (IBL), the nature and source of the alleged facts and how they may have come into the possession of the respondent firm, is not disclosed,” said the judges.
The lender was placed under receivership on allegations that the directors including Alnashir Popat, Anwar Hajee, Jinit Shah, and Hanif Mohamed acted contrary to their statutory and regulatory obligations and fiduciary duty by allegedly allowing systemic fraud, false accounting, and money laundering among other allegations.
Directors were also accused of colluding with several companies where they held shares, to commit fraudulent declaration of dividends and acquisition of the bank’s properties.
KDIC further alleged that due to the multiple breaches of fiduciary duty, negligence, gross negligence, fraud, and breach of statute, the directors and shareholders caused the loss of Sh42.4 billion constituting the bank’s assets and depositors’ funds.
The corporation has listed several companies in which it was alleged the directors held shares directly or indirectly and had sought the transfer of the shares to IBL as part of the recovery of the loss suffered by the bank.
The receiver wanted Ahmednasir Abdullahi Advocates LLP out of the case stating that the bank sought legal advice in 2007 from the law firm on corporate governance and the law firm rendered an opinion on the composition of the bank’s Islamic board membership.
As for Coulson Harney Advocates, it was contended that in September 2014, the firm received instructions from IBL on the proposed restructuring of the shareholding of the lender, dubbed “Project Crown”.
KDIC alleged that the creation of the new holding company known as Imperial Securities Ltd was to enable the bank to invite a strategic investor to overcome its financial shortcomings caused by massive fraud on its depositors’ funds.
The move was allegedly motivated by fraud since the shareholders were putting themselves into a holding company.
As regards the firm of Muriu Mungai & Co Advocates, it was submitted that the firm was placed in a conflict when it rendered an opinion for the collapsed lender on the regularisation and stamping of guarantees and indemnities.
KDIC stated that some of the advocates might be called as witnesses but the judges rejected the argument saying apart from mere averment, the court was not informed of the steps, if any, that have been taken to show the intention and the specifics of their intended testimonies.
